Rising demand and falling supply boosts recovery of Portuguese property market
Solid demand and falling supply is helping the recovery of the residential property market in Portugal as price rises are seen across all regions.
However, new sales instructions have fallen at a time when demand is growing and there has been a modest upturn in rental values, according to the August 2015 RICS/Ci Portuguese Housing Market Survey.
The report shows the imbalance between rising buyer enquiries and falling new sales listings continues to underpin a steady increase in house prices. Likewise, in the lettings market, solid tenant demand growth has pushed rents up marginally although a relatively flat trend is still projected in the near term.
In the sales market, new buyer demand rose again month on month, with the pace of increase edging up gently relative to the previous month. At the same time, new instructions to sell dropped back modestly for the first time since December 2014.
Despite the solid demand backdrop, sales volumes only recorded the most marginal of increases. Nevertheless, going forward, transactions are expected to pick up at a smart pace in the near term.
The report explains that with demand outstripping supply, house prices continued to recover across all regions. What’s more, the latest data suggest the rate of house price inflation accelerated across each market during August.
Overall, respondents to the survey remain confident that prices will rise further over the next quarter and the next 12 months. Indeed, over the year ahead, contributors forecast national prices will increase by around 3% and on average by roughly 5% per annum over the next five years.
Meanwhile, the national confidence indicator, a composite indicator of three month sales and price expectations, rose to +32 from +28 previously, extending its run in positive territory into a twenty second consecutive month.
In the lettings market, tenant demand increased sharply alongside a steep fall in new landlord instructions. Consequently, rents inched up again following last month’s marginal increase. Notwithstanding this, rents are expected to hold broadly stable in the near term, although expectations for future lettings market activity strengthened notably.
‘In August, the Algarve benefited from strong demand and price dynamics, showing greater improvement in the results compared to Lisbon and Oporto regions in some Algarve cities, there is already a lack of new houses to sell at a time when demand is expected to remain high,’ said Ricardo Guimarães, director of Ci.
According to Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist, employment growth has been encouraging over the past year, driving an increasingly widespread revival in housing market activity.
‘Nonetheless, the labour market recovery still has a way to go and sustained progress is needed to underpin the residential property sector going forward,’ he added.