What are the trends in the Portuguese real estate market in 2022?
The real estate and construction sectors are of the utmost importance to the Portuguese economy. Both sectors account for 10.2% of total employment, and the real estate market in Portugal represents 10.6% of companies in the non-financial sectors.
The Covid-19 pandemic crisis negatively affected the real estate sector in 2020, and for the first time since 2012, there was a decrease in the number of transactions. According to INE, the total number of housing transactions in Portugal decreased in 2020 by 5% year-on-year to 171,800 units, but transactions in value remained almost stable at €18.65 billion. This contrasted with annual growth in housing transactions of 1.6% in 2019, 16.6% in 2018, 20.6% in 2017, 18.5% in 2016, and 27.4% in 2015.
Due to the rapid measures implemented by the Portuguese government to address the impact of the crisis, the Portuguese economy has recovered with an estimated GDP of 4.8% in 2021. Simplified layoff measures, deferral of tax and social security payment, €3.5 billion credit lines to businesses, bank and rent moratorium, and €45 billion of European funding over the next ten years (of which €15 billion are non-refundable transfers), all contributed to this result.
The accommodative monetary policy in place and measures to stimulate the economy fueled the Portuguese economic recovery and real estate market transactions. As a result, total transactions in the sector represented €25.6 billion in 2019, €26.2 billion in 2020 and increased sharply to €33 billion in 2021. In addition, demand from foreign investors (European, American and Brazilian) in the office, residential and new market segments (multi-family housing, co-living, and student housing) contributed to the market growth.
While it is difficult to make forecasts in these unstable times, it seems that the momentum is likely to continue into 2022, differing from one market segment to another. The mismatch between high demand and tight supply should benefit multi-family housing, student housing, and elderly housing. Sales in the residential market should also continue to show resilience. The new set of Covid-19 work-related rules has prompted locals to look for more extensive, open-space homes, especially in the mid-to-high-end price segment. Housing prices that increased 12% in Lisbon and 10,3% in Porto should continue rising, but maybe slower.
In addition to common market segment trends, a critical one is emerging: sustainability. According to a PWC survey, “investors see sustainability affecting property investment here and now, rather than at some vague future date.” More than 61% of respondents say they are concerned about sustainability requirements, up from 49% in last year’s survey.