Portugal IMF property bubble warning

 In News

The Bank of Portugal and IMF have warned that soaring house prices in Portugal are leading to a hyper-inflated property market which sooner or later could crash.

Citing speculation driven by foreign investment in some regions of the country, the fears are backed up by calculations from the German institute DIW which warns of a speculative bubble in Portugal.

The same trend is also being seem in several other European countries and in the United States. The study, released last week, has analysed the market 10 years on from the collapse of Lehman Brothers (the tipping point of the sub-prime crisis in the United States housing market which precipitated the world economic recession).

Its findings show that Portugal among other markets is once again seeing property price rises capable of causing worrying market imbalances.

The analysis was made partly on statistics provided by the OECD for a number of industrialised countries and examines the relationship between property rental values and house prices. If house prices begin to soar more sharply than rents, departing from a level of balance, the situation is considered unsustainable.

In relation to Portugal, one of the 20 countries in the study, the authors pinpointed a property bubble forming which started in 2016 and continued in 2017 and into this year.

It means that those paying high prices now are essentially speculating on future rent and property rises.

Portugal has only seen one other serious property bubble over the past 20 years which took place between 1998 and 2001.