Since Portugal emerged from the crisis in 2014, its real estate sector has undergone significant changes. A recent study by CaixaBank shows that Portugal’s residential property prices, after falling in nominal terms by 16.3 percent between 2007 and 2013 (22 percent in real terms), have grown by an average of 5.3 percent per year since the beginning of 2014 and are now returning to pre-crisis levels.
According to CaixaBank, improved economic prospects and a good situation in the labor market contributed to higher household yields and increased consumer confidence. Along with improving financial conditions stemming from the ECB’s monetary policy, this is helping to restore demand for Portuguese residential real estate from the local population.
This trend is supported by data on new mortgages, which have grown by more than 30 percent per year since 2015. On the other hand, non-resident housing demand is also having a very positive impact on the sector’s recovery. The increase in external demand can be partly explained by the introduction of the favorable NHR tax regime in 2009 and the introduction of the Golden visa program in 2012, which are described above.
According to a recent IMF report, residential property prices in Portugal continue to rise. But there are no prerequisites for a significant revaluation of such assets. The report of the financial institution said that the development of the real estate market was stimulated by strong demand from non-residents and the growth of tourism, exerting upward pressure on prices. This trend is particularly clear from the second half of 2017 and, in particular, in the residential segment of the real estate market.
After declining by 18 percent in real terms during 2010-13, residential property prices in Portugal have since risen by about 20 percent in real terms (7.9 percent in 2017). Growth was particularly strong in Lisbon, Porto and the Algarve region.
While the growth was driven mainly by transactions involving non-resident buyers purchasing existing housing, the proportion of housing transactions financed by mortgages in Portugal has been rising since 2015 (reaching 41 percent in the last quarter of 2017).