Moody’s views property price rises as speculative in Lisbon and Porto
The financial ratings agency Moody’s predicts that property prices in Lisbon and Porto will continue to rise over the next 12 to 18 months but cautions that the increases are abnormal.
“We predict that inflation will continue with house prices over the next 12 to 18 months especially in the prime areas of the capital,” states the ratings agency in its report on the property market in Portugal.
Moody’s says that these successive property increases are down to the macroeconomic environment but also strong international investment in national properties.
“In some areas of the country, prices have accelerated fast, especially in some parts of Lisbon and, to a lesser extent in Porto,” states António Tena, Moody’s vice-president and analyst who warns: “The real estate market in these areas is accelerating at an abnormal rate”.
This increase which Moody’s believes to be “abnormal” is based on the income levels of Portuguese families that are “not keeping pace the growth of property prices in these areas.”
“Employment market conditions are improving, which is sustaining internal demand and contributing to higher house prices. The lower unemployment rate means that there are more consumers who are able to take out and pay mortgages and buy, sell and do up houses.”
However, Moody’s says that the rate of property price increases is out of sync with the incomes of families.
In addition to the internal job market, tourism and successive international investments have also contributed towards this property market boom, particularly encouraged by attractive tax regimes for non-habitual residents and the Golden Visa scheme.
“Balance in Portugal’s internal property market will be lost if buyers have unrealistic expectations as to how much further prices will increase.” In other words, Moody’s is warning about a speculative bubble which sooner or later will burst and result in a market readjustment.