Portugal’s property sector continues to be a safe investment
In the current climate of growing economic uncertainty and unpredictability because of geopolitical shocks and rising inflation, Portugal’s property sector is one sector of Portugal’s economy that seems impervious. With average house prices rising 18.7% in 2022.
According to Paulo Caiado, president of the Portuguese Association of Estate Agencies and Professionals (APEMIP) “The increase in property prices has to do with lack of product on the market and I don’t see any significant change that would bring prices down, so our members don’t see any relevant change. Despite the increases we’ve seen, the truth is that, in overall terms, house prices are a lot less than those in other European countries. Prices in Lisbon and Porto are much lower than in other European cities.”
The build up: In 2012, after the country’s credit rating was labelled ‘junk’ status by international ratings agencies, Portugal’s housing market reached a stand- still. That same year, the then centre-right coalition PSD/CDS-PP government led by Pedro Passos Coelho launched ARI -what we have come to know as The Golden Visa Programme – an investment attraction programme, with various investment options, that offered residency status for non-EU nationals. The hope was that it would attract entrepreneurs to open businesses, invest in Portuguese businesses and employ staff as jobless figures hit 17%.
Unfortunately, that did not have as much popularity as one of the other options of the programme, which required a more reasonable €500,000 property investment. While symbolic – the programme has attracted just over €6 billion over 10 years , triggering a momentum of overseas relocators. Without a doubt, the Golden Visa programme kick-started a moribund housing market.
The scheme inadvertently began the regeneration of many of Portugal’s run down cities, improving Portugal’s international image , and boosting Portugal’s residential housing market.
But there have been predictable, albeit unintended side-effects. Urban housing stocks, which hadn’t grown significantly since the late 1980s and early 1990s, ran out, scarcity fueled demand, and demand drove up prices. The result was an aggravated lack of affordable housing in urban centers throughout the country, leaving many locals with extreme difficulties in finding affordable habitation. The pressure from the locals has lead the government to impose their controversial Housing Pact, abruptly ending the residency by investment scheme. Apart from tenants’ associations, the measures proposed please very few.
However, house prices continue to rise in sunny Portugal, when in the UK and in Northern European countries like Sweden, the winter Arctic winds of war and inflation have frozen the market. But is the sector that helped save the Portuguese economy from 2012 now about to come tumbling down from over-speculation? Paulo Caiado thinks it highly unlikely.