The Portugal property market seems to be defying the expectations of some pundits. Could excess demand result in further price rises in 2022?
The Portugal property market enjoyed an incredibly strong year in 2021, with double digit price increases. Figures for the final quarter, recently released by Portugal’s statistics institute (the Instituto Nacional de Estatística), showed a 14.1% year-on-year increase.
Some regions exceeded that average by a considerable margin. Prices in the Algarve rose by 15.8%, and the island of Madeira saw increases of 20.3%.
Despite such strong performance, many people wondered if increasing living costs and other global factors would cause a slowdown in 2022. However, other recent statistics call that into question, as we see below.
Is it worth accelerating your plans if you wish move to Portugal, and jumping in before further price increases? Let’s consider the factors.
More increases in 2022
In March, house prices in Portugal increased again, with a rise of 1.3% on the previous month (based on bank valuations). This represents a small acceleration compared to February’s figures. There was some regional variation, with a small 0.6% fall in the Algarve. Homes in the Alentejo region (where price rises were relatively subdued in 2021, compared to elsewhere in Portugal) rose in value by 2.8%
Some estate agents believe that various factors could see these increases continue. Mortgages (for now at least) remain widely available, and issues with construction delays mean that new builds are taking longer to arrive on the market. This feeds into an imbalance of supply and demand that may continue to nudge prices upwards.
Supply and demand
The lack of supply is illustrated by recent statistics. Housing stock (the number of properties on the market) has decreased by 13% year-on-year. It’s perhaps no coincidence that the places where supply has been most pinched tally with locations that have seen significant increases. The Faro (Algarve) district has seen a 25% drop. Lisbon housing stock has fallen by 16%.
Then, on the demand side, O Jornal Económino reports an average 8% increase in demand for property in Portugal. In the 45-54 age group, the increase is even larger, at 22%. This is not a year-on-year increase that’s skewed by the pandemic – it’s compared to the previous quarter.
Once again, the usual suspects – the Algarve, Lisbon, Porto and Coimbra – appear at the top of the list of where demand has increased.
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Clearly there are looming factors that could push the Portugal property market in a downward direction. Cost of living increases are only just beginning to bite. Furthermore, if banks need to increase interest rates later this year, as seems likely, the availability and cost of mortgage lending will be affected.
For now, however, there are two simple factors in play: more people are looking to buy property in Portugal, and there’s less of it available. In circumstances like that, prices tend to keep rising, just as is currently happening elsewhere in the world, including the UK.
Rises on the level of 2021 are perhaps unlikely, but if you’re holding out waiting for a crash, you could be waiting a long time.