Portuguese Developers Welcome Stabilizing Housing Sector With Open Arms
News Posted On: 13 July 2014
Potential investors of the Portuguese property market have genuine cause for optimism if the latest report from the RICS/CI is to be believed. Despite the fact that the Portuguese property market was one of the least affected within the European Union, during the previous economic crisis, real estate values still plummeted significantly, with forecasts causing little encouragement. However, the latest report suggests that the property landscape within the country may finally be changing for the better, with property values beginning to show signs of increasing at sustainable levels of growth.
The Portuguese Housing Market Survey conducted by RICS/CI looks more promising for property developers within the country than real estate agents. Prices of newly constructed housing have shown to have been steadily rising over the course of 2014. However, with regard to the property resale sector, only the region of Algarve has experienced positive increases in housing prices, with prices in Porto moving the opposite way. RICS/CI has warned that this contradiction across regions indicates that following volatile month on month data may be ill-advised.
National Confidence Index figures setting records
The report further elucidates the gradual and steady increase in buyer interest and property sales that has been taking place since the commencement of 2014. Moreover, while sales forecasts continue to stay positive, what is most notable is the positive price expectation figure for 2014. This has been the first time positive price expectation figures have been recorded since the burst of the property bubble in 2010. The sales and price expectations are calculated using the National Confidence Index.
The NCI figure for the month of June stood at +15, a single point under the previous month’s. Moreover, this is the seventh straight month that the NCI has recorded a positive monthly figure, thereby offering a clear indication of increased optimism among property buyers.
However, one particular cause for concern among rising property prices is the downward trend of rent. Demand for tenants has remained considerably high among landlords, causing rent figures to fall significantly, despite Portugal’s real estate market suffering less than other European countries’ markets. Experts have suggested that the downward trend in rents could be attributed to a discrepancy between the type of housing options supplied within the market and those in demand. Naturally, affordability has also been touted as a contributory factor.
Increased yet sustainable investment
The Portuguese government, in the quest to spur investment from internationals and foreign nationals, launched a program in 2012 known as the ‘Golden Visa’ program. Foreign investors are granted five year residency and work permits into Portugal, if they have purchased Portuguese properties valued in excess of 500,000 euros. As the scheme was made public, property prices on luxury homes began to rise.
Since October 2012, the government has issued approximately 1000 Golden Visas resulting in a total foreign investment accumulation of 556 million euros, as per statistics from the SEF. What is notable is that over 80 percent of these Golden Visas have been issued to Chinese nationals. Other prominent Golden Visa nationalities include Russians, South Africans and Brazilians. Despite not being the first to launch the Golden Visa scheme, Portugal has encountered the most success among all European nations. The scheme has worked successfully to increase property transactions, suggesting that the continued growth in the property sector may in fact be sustainable.
Written by Les Calvert
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