Once again I resort to data from the Residential Information System (SIR) of "Confidencial Imobiliário", to summarize quantitatively what is happening in the real estate market in mainland Portugal (does not include islands of Madeira and Azores). The data used are reported to June 2023 and refer exclusively to housing.
And so what are the major conclusions that reading the available information allows us to obtain? These are:
Clear trend of cooling average selling prices
Significant increase in the average value of rents from new lease agreements
Stabilization of the volume of transactions, but at a level below that recorded in 2021 and 2022
Real estate developers more cautious regarding revisions (additions) to the sale prices of new homes (under construction)
Owners of used homes have slightly increased the revision (downwards) of sales prices, in addition to the fact that a greater number of used homes have had price revisions
Now detailing this information a little more and adding some supporting infographics:
Housing | Buying and Selling | Prices
The average sale price of housing in mainland Portugal, in the 2nd quarter of 2023, increased by around 1.8%.
The 1st quarter of 2023 was the exception to a cooling trend in average selling prices, which has been observed since the 1st quarter of 2022.
However, so far, without showing an effective decline in them.
The average sales prices per transaction, by major regions, in the last three quarters, presented these numbers:
Q4 2022 Q1 2023 Q2 2023
Mainland Portugal € 2,249 /m2 € 2,285 /m2 € 2,236 /m2
North € 1,244 /m2 € 1,278 /m2 € 1,248 /m2
Porto Metropolitan Area € 2,248 /m2 €2,300 /m2 €2,255 /m2
Center € 1,248 /m2 € 1,250 /m2 € 1,292 /m2
Lisbon Metropolitan Area € 2,975 /m2 € 3,041 /m2 € 2,943 /m2
Alentejo € 1,360 /m2 € 1,515 /m2 € 1,481 /m2
Algarve € 2,714 /m2 € 2,738 /m2 € 2,561 /m2
At the level of the municipalities that lead the respective Metropolitan Areas of Lisbon and Porto, it appears that:
Lisbon: stabilizes prices with a quarterly variation of 0.8%, with a year-on-year variation in the 2nd quarter of 6.2%.
Porto: contrary to the national trend, with an increase of around 2.7%, but the year-on-year variation in the 2nd quarter was 9.3%, while in the 1st quarter it had been 13.7%.
And these are the average prices per home, by region, for the last three quarters:
Q4 2022 Q1 2023 Q2 2023
Mainland Portugal € 246,590 € 250,245 € 235,456
North € 151,208 € 160,243 € 157,086
Porto Metropolitan Area € 231,984 € 242,172 € 240,700
Center € 149,438 € 148,166 € 153,580
Lisbon Metropolitan Area € 317,040 € 326,251 € 297,561
Alentejo € 147,738 € 170,470 € 163,225
Algarve € 321,261 € 292,224 € 248,072
Housing | Lease | Prices
After the decrease in the value of rents generated by the impact of the 1st year of the viral pandemic (2020), since mid-2021 there has been an uninterrupted rise in rents, recently aggravated by the measures announced by the Government to limit the increase in rents in the new lease contracts.
This expectation led landlords to seek solutions to anticipate increases in the value of rents, before that measure comes into force. This became evident at the end of 2022 and throughout 2023.
In the 2nd quarter of 2023, the average value of rents in new contracts increased by 5.5% in Lisbon and 4.8% in Porto.
If we compare the average values of rents in homologous periods (2nd quarter of 2023 versus 2nd quarter of 2022), we see that Lisbon saw the average value of rents increase by 29.6% and Porto reached 28.5%.
For the 2nd quarter of 2023 these two municipalities reach these values:
Average rent in Lisbon €18.6 per m2 €1,532 per dwelling
Average rent in Porto €15.2 per m2 €1,247 per dwelling
New Houses | Sales price review
It is common practice in the sale of properties being developed (under design or construction), that they are launched on the market with an 'asking price' that rises as the houses are being built.
In this graph, we see that since the 1st quarter of 2022 there has been a decrease in price revisions for new homes.
Additionally, there is a drop (more notable in the 4th quarter of 2022 and 2nd quarter of 2023) in the number of dwellings subject to (upward) price revision.
This may preconfigure greater caution on the part of real estate developers with regard to the evolution of the purchasing power of buyers (families).
Used Houses | Sales price review
In terms of used dwellings, the usual market practice is towards successive reductions in the sale price as time passes and the property remains on the market. In other words, these are adjustments to price expectations on the part of buyers.
Also in this market, apparently there is a similar concern on the part of the owners, since the quantitative data obtained are as follows:
% with revision (downwards) of prices: 16.8% in Q1 2023
17.8% in Q2 2023
Average price revision: -4.6% in Q1 2023
-5.0% in Q2 2023
Sales volume | New and Used Houses
The volume of house sales in Mainland Portugal seems to have stabilized in the 2nd quarter of 2023 (values very similar to the previous quarter), after successive decreases since the 4th quarter of 2021.
The performance for the 2nd quarter of 2023 was based on 90% of sales of used homes, with the volume of sales of new homes continuing to decline since the 3rd quarter of 2022.
However, property developers do not point to an eventual drop in demand as a major factor for this decrease, but rather placing licensing and bureaucracy at the top of their concerns and reasons for this insufficient performance in terms of sales of new homes.
In the graph on the side, it can be seen that the decrease in the average global selling price, verified in the 2nd quarter, is strongly influenced by the decrease in the average selling price of new homes.
And in this graph on the side, it is visible that in the two quarters of 2023 the discount rate and accumulated revision in new homes has increased.
In the 2nd quarter of 2023, the average selling price of new homes in mainland Portugal stood at €3,402/m2, reflecting a final discount of 4.8% compared to the market entry price (4.8% in AML and 4.5% % in AMP). It is a discount that is only comparable to that seen at the beginning of 2021.
New Houses | Absorption rate
Confirming the fact that real estate developers do not give importance to the lack of demand, we have these data that allow us to analyze the absorption capacity of the new homes launched since 2018 by the market:
In other words, the developments launched up to the year 2000 – around 600, out of a total of 20,000 dwellings – are practically all sold (around 90% of accumulated absorption rate).
And even with regard to launches in 2021 – with 487 developments and 13,000 homes – the absorption rate is high: 89%.
Projects launched in 2022 have a take-up rate of 67%. And, finally, verifying that the developments launched in the 1st half of this year have already reached an absorption rate of 51%, it is easy to conclude that there is no lack of demand for new homes, this being the last obstacle to their activity, according to the survey that "Confidencial Imobiliário" put to real estate developers.
New Houses | Pipeline: Designed vs Licensed vs Completed
The analysis of this graph shows that the number of projected dwellings grows much higher than the number of licensed and completed dwellings.
In other words, compared to the 1st quarter of 2023, it was found that 5,100 homes were completed in Portugal, which means a 4% growth compared to the quarterly average of 2022. Still, far from the 34,500 homes sold in the same period.
In the two main cities of the country, and in relation to the first 4 months of this year, this is true:
In Lisbon, 55 new housing projects were licensed, in a total of 617 dwellings, which means a year-on-year growth (i.e. compared to the first 4 months of 2022) of 4% in the number of dwellings.
In Porto, 105 residential projects were licensed, for a total of 856 new dwellings, that is, an increase of 11% year-on-year.
New Houses | Licensing
In the 1st half of this year, in mainland Portugal, 10,300 new housing projects were submitted to municipal licensing.
In 2022 growth compared to 2021 had already been 17% (but 2021 had a strong contraction due to the viral pandemic). This 1st half of 2023 shows a growth of 7% compared to the 2nd half of 2022 and 29% year-on-year.
Around 84 of these new licenses correspond to new construction, with rehabilitation taking over the remaining 16%. Now the growth in the number of licenses in rehabilitation projects grew by around 70% year-on-year. The growth of new construction grew 23% year-on-year and 7% over the previous half-year period.
Comparing what is happening in Porto and Lisbon, it appears that:
The licensing portfolio in Porto is equivalent to that of Lisbon;
Porto reveals a more consistent growth, since it grows in year-on-year terms and compared to the previous semester;
The municipality of Porto is once again in line with the growth of its entire Metropolitan Area, which was 11% in half-yearly terms and 49% year-on-year.
The graph on the side shows that the municipality of V. N. Gaia continues to lead the residential pipeline, registering significant growth in the 1st half of this year. Soon followed by Porto, which ranks at the same level as Lisbon. Almada and Loures are now the municipalities that follow those three cities more closely.
The municipalities that are located outside the AML and AMP, and which have a greater real estate dynamic, are Braga, Leiria, V. N. Famalicão and Guimarães.
Need additional clarification?
Do not hesitate to contact me:
Marco Moura Marques
+351 967 035 966
marcomouramarques@kwportugal.pt
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