Since the outbreak of the corona virus, the global economy has been experiencing a crisis unlike anything seen before. The economy and society are in a state of emergency. Investors have difficulty foreseeing where the ride is going!
Only on the housing market has the Corona panic been manageable so far. House and flat prices have so far remained stable in Portugal and its largest urban centers such as Lisbon and Porto, according to the latest figures from the Bank Valuation Index of Portuguese banks for property loans, which rose by 6.8% in March compared to the previous month. This is the biggest increase since August last year.
A clear sign that the Portuguese property market will continue to be popular with investors after Corona is the huge amount of investment in the Portuguese housing market by debt and large international investors.
Last week the Belgian company Krest announced that it will invest another 200 million over the next 4 years, this week Nexity Portugal announced that after investing 120 million last year, it will invest another 250 million over 5 years in housing in Portugal. But also Kronos, which started its activities in Portugal in 2018, continues to focus on a growing and secure real estate market with new projects in Lisbon, Porto and the Algarve.
Unlike the capital markets, economic crises usually have a delayed impact on the real estate market. So it is possible that the slump is yet to come. Some experts even fear that the corona virus could trigger a chain reaction and warn of the bursting of a real estate bubble.
I believe that the pandemic has caused many people to rethink their decisions, and that the quality of life is more important than ever before when deciding where to live. Portugal is one of the European countries with one of the best digital infrastructures, and due to its family-friendly and multilingual inhabitants, it will become more and more a place of relocation for the next generations who will run their business or profession from their home office.
There are currently no signs of a speculative bubble developing in the Portuguese property market. However, the Portuguese population is still facing a difficult test, because with a home ownership rate of about 85% and moratoria ending in September this year, there will certainly be some borrowers who will not be able to meet their obligations after the crisis.
Nevertheless, I believe that the banks have learned from 2008 and that many borrowers will also make agreements with the banks to maintain these loans or to convert them into rental properties.
Since the banks have not granted excessive or high-risk real estate loans and we have observed a moderate construction boom in the past, the question of oversupply does not exist. On the contrary, construction activity has been lagging behind demand for years.
Nevertheless, it cannot be ruled out that private investors may hold back on property purchases for the time being and wait to see how the situation develops. We have already observed this in recent weeks and also last year, but it is manageable. Most interested parties are buying because the Portuguese real estate market, unlike other Southern European real estate markets, is and has been a permanently growing market, which has many reasons for which this article would not suffice.
Autor: Paulo lopes