There seems to be a lot of worry about a real estate crisis and potential collapse. I personally do not believe there will be a collapse. There are, without a doubt, concerning factors like the increase of EURIBOR rates, making mortgages much less affordable or attractive. However, over 90% of mortgages in Portugal have an effort rate below 27% and a monthly installment below 470€.
There will be some repossessions, but I will keep my stand that they will not be enough to crash the market.
The buying market is experiencing a lowering trend, as many buyers that were looking to loan are stepping out. Furthermore, the economy is still suffering the after-effects of COVID. I believe that this is a positive thing, the price inflation that took place in the past few years was rather unsustainable. I do not know how long the prices will continue to decrease, but I suspect once Summer months and consequently a rise in Tourism arrive, things might start to pick up again.
Sustainability issues are a big concern right now. The drastic inflation of rental prices and slower but equally steep increase of buying costs is driving locals out of their own city, and even their own country. This is, in part, due to our own governmental policies, but foreigners coming from wealthier economies play a very big part in this equation.
Portuguese people are increasingly more concerned about affording to live in their own cities, and many truly stopped being able to. Culturally, this has a huge impact as well - a lot of cultural traditions are lost with this phenomenon, and cities end up losing the charm the once attracted the foreigners in the first place. It's quite a paradox.
Like everything, there are the pros and cons: cities are being renovated and improved on from an infrastructure and diversity point of view.
But is this a balanced exchange?
I would say, no. It isn’t.
I don’t believe the fault lies with the foreigners. They might be the catalyst but the situation developed the way it did because governmental policies allowed it. The real estate market in Portugal is extremely under regulated and supervision is almost non-existent.
People can price their property however they see fit, not needing to provide any justification or market comparison. Buyers have no access to information on market prices and previous transactions. Real estate agencies operate on commission (which is a perfectly valid and logical model for sales), so they are incentivized to raise prices. It is standard practice for the seller agents to attract and represent the buyers in the transaction, although they are working and getting paid by the seller.
I believe that this unsustainable increase could have been avoided, or at least decreased, with proper market regulation and elimination of the conflict of interest that lies in representing both the buyer and the seller. Lisbon, Algarve & Porto are becoming very clear examples of unsustainable growth in prices fueled by greed, lack of regulation and conflict of interest. A few years ago, the Algarve even had two very clearly separated markets, the one for foreigners, and the one for locals. Now it’s just all inflated, save the rare cases where sellers underprice due to unawareness.
I’m concerned about 2023. Unfortunately I believe this drop will be temporary and things will soon pick up again, and our internal economy isn’t ready. Don’t get me wrong, it’s very good for my business. But I like to look at the big picture. Our minimum wage is going to be 760€ in 2023, we have 8k per square meter average prices in the center of Lisbon, and 5,5k in the center of Porto. Anyone can do the math and realize that is not sustainable…
Overall, I don’t see this situation being fixed any time soon, and as a real estate business owner I’m doing what I can to try and help foreigners make fair and informed purchases. Savvy Cat is too small to control the market, and we can’t make it more sustainable on our own, but we are doing our best to have a positive impact, and to hopefully inspire a change.
The Immigration situation and SEF services also need to be properly addressed by our government. I'm hoping they won’t turn a blind eye to the situation yet another year. I’m sure they understand the impact of immigration in our country, but this situation has been going on for 3 years so it’s hard to say.
Either way, Savvy Cat Realty will continue to offer ethical savvy advice and insight, and in 2023 we are looking to expand our reach and get even more information out there so we can help as many people as possible make an informed and sustainable move and investment in our beautiful country!
See you all in 2023!
Statistics usually come out in Jan/Fev and we make an overview, so make sure to keep an eye out for that report!
Hope this article was helpful, any questions you might have feel free to contact us! We are always available at contact@savvycatrealty.com or savvycat@spartanfx.co.uk if you need any assistance ;)