The real estate market in Portugal

Portuguese real estate market set a record investment volume of the last 5 years in 2018, which came mainly from the commercial segment (3,3 billion euros, a 74% increase from 2017). In the residential segment, the number of properties sold grew by 19% and national prices rose more than 10% (in Lisbon the rise was 20%). The real estate market was very active in all the real estate segments and supply doesn’t keep up with the demand. Foreigners account over 50% of domestic property sales (led by British and French). 2019 will be the year for larger construction projects which will help to supply the continuing increase in demand. New developments coming on the market will increase substantially this year and growth will strengthen in the next, but still, the market is far from the building levels that were registered a decade ago. Portfolios of real estate assets and bad loans held by banks also will affect the market with increasing interest in alternative assets (healthcare, sports, specialised residences etc.).

In the first quarter of 2019 most of the Portuguese regions saw the price increase. Only Central region and the Autonomous Region of the Azores saw a decrease of approx. 6%. Metropolitan Area of Lisbon has been and will be the most expensive region in Portugal where to buy a house (price levels over 2500 euros per sqm). Next, are the regions of the Algarve, where housing prices are slightly below 2100 euros per sqm. Other popular regions Norther region and the Autonomous Region of Madeira have prices levels around 1500 euros per sqm. The cheapest regions are the Autonomous Region of the Azores, the Centre and the Alentejo where price levels are around 900-1000 euros per sqm.

If we look at the cities, then Lisbon is still the Portuguese city where it is most expensive to buy a house, with an average price of over 4000 euros per sqm. The second and third places go to Porto and Faro, over 2500 euros per sqm and over 1500 euros per sqm, respectively. The cheapest capital cities of Portuguese districts with price levels near 700 euros per sqm are Guarda, Castelo Branco and Vila Real.

In conclusion, the Portuguese real estate market has seen substantial growth during the last five years and this expected to continue in coming years. However, the growth pace will be slowing down to 3-5% and this will be the case only in mentioned popular districts. Positive is also that the growth of the construction industry in the next few years will give relief to buyers who want to buy a home or rental property in Portugal, as there should be an increase in housing supply.