Will Portugal’s residential real estate market continue to weather Covid-19?
The Portuguese real estate market performed better than expected in 2020 according to Imovirtual. The big question for 2021, however, is whether the Portuguese housing market will continue to thrive. The reasons that foreign buyers are attracted to Portuguese property, such as great climate, a low cost of living, a rich culture and low levels of crime remain a constant but there are other factors at play which may slow the market.
By Marco Rola
The economic effects of the pandemic are still unfurling. During the first nine months of 2020, Portugal’s turnover, in terms of taxable income, fell by 14.8%.
It is estimated that there are around 37,000 businesses in the hotel, bar and catering sectors that face imminent bankruptcy, and the expectation is that the first quarter of 2021 will continue the contraction of last year. There have, however, been sectors which have thrived during the pandemic: telecommunications, pharmaceuticals, IT and perhaps, most surprisingly, real estate.
2019 had seen a slowdown in the demand for properties by foreign buyers but 2020 saw a huge increase in enquiries and clients from the US Against all expectations, according to data from Imovirtual, an on-line estate agency portal with over 300,000 properties listed, Portugal’s average property prices saw an increase of 11.3% during Portugal’s lockdown in March and April and 7.2% after lockdown. At the start of 2020 there was an increase in the average house price from €318,951 to €344,417 euros and despite lockdown, the average Portuguese house price at the end of the year now stands at €348,223.
There has been a global pandemic trend which has seen people leaving cities and moving to the perceived safety of the country, so one might reasonably expect to see this impact on house prices in Lisbon, but average prices in the capital have held steady and even show a slight increase, rising from €551,607 in December 2019 to €557,595 in December 2020.
The big winner, in terms of average house price increases was Évora which experienced a dramatic jump of 16.9%. Only two areas of Portugal saw a fall in the value of house prices: Portalegre -16.9% and Guarda -14%. All other areas of the country have seen modest increases of between 1% and 7%. Lisbon, Porto and Faro remain the most expensive areas in Portugal and demand for properties there remains high.
The big question for 2021 is whether the Portuguese housing market will continue to thrive. The reasons that foreign buyers are attracted to Portuguese property, such as great climate, a low cost of living, a rich culture and low levels of crime remain a constant but there are other factors at play which may slow the market.
There are fears that the ending of the ‘Golden Visa’ scheme in Lisbon, Porto and the Algarve will slow the property market in these areas. The intention of the government is to encourage the purchase of property in the interior of the country but for many foreign buyers a coastal property, close to one of Portugal’s international airports and a ‘Golden Visa’ was what made property purchase so attractive.
There is evidence to suggest that purchases by foreign buyers in 2020 have been of more modest properties, but sufficiently expensive to qualify their owners for the ‘Golden Visa’ scheme. Another possible obstacle to the continued growth of Portugal’s property market are the travel restrictions which are likely to drag on well into 2021, they making house viewing difficult and the prospect of being locked in or locked out of the country is unappealing.