Based on the information provided by Confidencial Imobiliário (CI), and by its Residential Information System (SIR), with data collected and worked on reported to May 2023, we highlight the main conclusions here:
Sales prices in the housing market continue to grow, albeit at lower rates than in the previous year
The volume of purchase and sale transactions in the housing market, in decline since the 4th quarter of 2021, suffered an inversion in the period Mar-May/2023, compared to the previous quarter
There is a trend towards granting higher discounts on sales made
There is an increase in the number of owners who revised their selling prices
The stock of housing properties on the market is at a minimum, only comparable with values from 15 years ago
The rental market continues to grow rents at a high pace
The supply of residential properties for lease is in decline
Lease rates of return (yields) are on the rise
The first 5 months of 2023 point to a pipeline of new or renovated homes 18% higher than the previous year
# Quantitative data on the housing market in Portugal
Based on information provided by Confidencial Imobiliário and its Residential Information System (SIR), we detail some relevant information on the current state of the residential market in Portugal:
Housing prices: growth of around 0.6% in May
The monthly price change rates in 2023 behaved like this:
jan: + 0,6% | feb: +1,5% | mar: + 2,1%
apr: +0,5% | may: + 0,6%
The year-on-year rates of change in recent months reflect significant growth:
apr: +16,3% | may: +14,1%
And if we compare the year-on-year rate of change in prices in the quarter:
jan-mar: + 17,0%
In other words, a permanent growth in average selling prices is maintained, albeit at lower rates than those seen in the recent past.
With differentiated behavior in terms of the Metropolitan Areas of Lisbon (MAL) and Porto (MAP) in the Mar/23-May/23 quarter:
MAL grew by around 4%, with the average selling price standing at €2,782/m2.
The capital, Lisbon, had an average selling price of €4,179/m2.
MAP grew by around 7%, with an average selling price of €2,152/m2.
Its capital, Porto, grew by 9% and had an average selling price of €2,946/m2.
Housing sales volume: growth of 6.4% from March to May 2023 compared to the previous three months
The volume of transactions carried out in the Mar/23-May/23 quarter was 6.4% higher than the Dec/22-Feb/23 quarter.
This represents a reversal of the cycle of quarterly reductions in sales volume that has been taking place since the first quarter of 2022.
This reversal is mainly due to the sale of used dwellings (92% in the quarter under review), since the sale of new dwellings showed a strong reduction (8%).
Note: the graph above does not show data for the quarter Mar/23-May/23, but for the 1st quarter of the year, the graph serving to illustrate the downward trend in sales volume, whose reversal occurs in the period Mar/ 23-May/23.
Increased discounts on housing sale prices
In 2021 and 2022, the average discount granted (difference between the initial sale price and the final transaction price) stood at 6%.
In the period Mar/23-May/23 this average discount was 7.5%. With different behavior in terms of second-hand homes, as these had an average discount of 7.7% (between 6.5% and 7.1% in 2022), while new homes had an average discount of 5.3% ( 3.0% in 2022).
In other words, there is a trend (which will have to be confirmed in the coming months) by owners granting greater discounts, possibly due to a reaction to a drop in sales volume throughout 2022.
Increase in the number of properties with review of the offer value
In addition to the fact that landlords and real estate promoters have adopted a posture of greater concession of discounts, it can also be seen that 18.5% of the properties on the market (in the period Feb/23-May/23) underwent revisions in the value of offer.
In other words, there is now a greater number of owners lowering the asking price for their properties.
In addition, this decline is greater today (-4.6%) than before, as we saw above.
And there is now a smaller number of real estate developers increasing the price of their properties under construction as they move forward in their phases. In addition, this discount is smaller than before (in the order of 2%, in the period from Feb/23 to May/23).
Number of residential dwellings on offer in the market remains below demand
The strong pressure on supply continues.
On Mar/23-May/23 a minimum stock of properties on offer on the market was reached, only compared to values 15 years ago.
The rental market continues with prices rising at a high pace
In the quarter Feb/23-May/23 the average rent in Lisbon was €18.3/m2, while in Porto it was €14.2/m2.
Contracted rents in the 1st quarter of 2023 compared to the same period of 2022 point to growth in the value of monthly rents of around 29% (Lisbon) and 27% (Porto).
A substantial part of the explanation for this increase in rent values, which occurred successively over the quarters of 2022, is linked to the reaction of landlords to the imposition of maximum limits of 2% on rent increases in 2023. Thus, as they are given the possibility of non-renewal and signing a new lease, this future perspective was anticipated, translating into higher values of contractual monthly rents.
The supply of rental housing is in decline
In the period Mar/23-May/23 supply in Metropolitan Area Of Lisbon fell by around 12% (17% in Lisbon), while in the Metropolitan Area of Porto it fell by around 25% (28% in Porto).
In a context of growth in rent values, where yields are on the rise, how can the decrease in the housing supply on the market be explained?
Simply because of the risk that landlords perceive of instability caused by government measures that began by imposing maximum limits on updating rents, to which were added some measures included in the legislative package of the “Mais Habitação” program. In other words, they follow a “wait and see” logic.
Leasing rates of return – yields – are on the rise
Yields on housing leases have been on the rise for several consecutive quarters, given the trend in the evolution of prices (buying and selling) of housing and rents and the marked difference in the growth of the two.
Added to this is the greater demand from owners in relation to yields, due to the increase in inflation and the cost of capital (interest rates).
The graph above reflects this evolution (albeit only relative to Lisbon, but with the capital being the head engine of the rental market in the country). However, Porto is also showing rising yields, slightly higher than those of Lisbon (but it is also a more volatile market in terms of leases).
What's coming in terms of new homes: pipeline growth of 18% through May
Based on the projected dwellings for 2023, it appears that an average of 4,300 dwellings per month, which represents an increase of around 18% compared to the monthly average of 3,650 projected dwellings in 2022.
Of the 2023 portfolio, around 84% are related to new homes, with the remainder related to rehabilitation projects. This segment (rehabilitation) shows a growth of more than 40% compared to 2022.
New construction, on the other hand, shows a growth of 17% compared to 2022.
So that you can better understand the “pressure” under which the housing market in Portugal finds itself, you can read my article
Do you need professional support for making a good decision regarding your real estate investments?
Contact me and I will be happy to advise and support you:
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