The biggest question for Real Estate professionals on this day is to know what to tell their clients about what will happen to the prices of real estate in Portugal caused by the Covid-19 pandemic crisis and its consequences?
For many analysts and specialists from the most varied areas, such as professional associations, banks, appraisers, economists and journalists this has been, in a way, the main question these days not only in Portugal, but all over the world. In a way it is yet too early to answer this question conclusively, however some direct and indirect effects can already be seen in the real estate sector.
Somehow it is predicted that there will be some trend to hit the Real Estate market, but it does not mean that there will be a sharp drop. Real Estate has always been a thought-out and planned long-term investment, so we believe that prices will also adapt to the new circumstances and criteria in the search for the property. It is natural that there will be a price correction, but not just yet.
There have always been those who, for reasons of balance, have sold their property for less value, but this will not be a general trend. This is due to the still exixting lack of supply of new properties and construction for new dwellings especially in the largest urban centres in Portugal. A greater price drop will be felt in central areas of the country with less population and less industry, but this is due to the existing lack of demand in these regions, which is not a new issue either. In these less procured regions, the knowledge of many real estate companies can come in handy in exploring their international contacts to attract more foreigners to find a second home at a lower price.
As for the demand for investment properties in Portugal by foreign investors, the engine of the Real Estate boom in Portugal, interest has not slowed down. An economy reviewed and evaluated as a B+ by several rating agencies, renewed and more competitive as ours is today with lower household debt in the last 8 years to levels of 67% of the national GDP, and the Portuguese response to the outbreak of Covid-19 are signs of great interest in the Portuguese market. The international consultant Cushman & Wakefield, in an article from few days ago also referred; as well as did other analysts.
However, there are signs and indicators of change, as revealed by the National Statistics Institute (NSI) last Monday, and for the first time in the last 4 years, there was a decrease in the average price of house valuation in March. On the same line and unrelated to the pandemic, Lisbon is registering lower figures than the national growth, with prices rising 7.9% in the capital city, against 8.5% in the rest of the country.
We are doubtful that the March figures may already be reflecting the effects of the Covid-19 Pandemic, since after December 2019 there was already a trend towards stabilization, even though there were still small increases in the monthly valuation figures.
We also do not believe that statistical data from April can already tell us which way we are going, taking into account the fact that transactions have practically ceased to exist, which makes it difficult to respond exactly to what effect that this unprecedented pandemic may have on prices.
We have to be realistic however, with a world going into recession, with significant falls in our GDP, it will be very likely that our Real Estate market will follow a downward trend in prices. We believe, however, that there will not be an abrupt decline, but rather, as already mentioned, an adjustment to demand and the new reality.
We believe that properties with more space and a larger leisure areas will be the ones to come out of this crisis better. The paradigm of customer demand can already be seen in the online portals and on our website: isolated housing is being the most sought after at the moment. And also condominiums with green spaces and gardens, spacious balconies are more important criteria than ever before.
For this and other factors existing today we do not believe in a scenario of steep price drops, but a gradual adjustment.
Text: Paulo Lopes