Portugal is one of the countries where house prices have risen the most in recent years. And that must maintain that status for the next few years, according to Moody's estimates. Rating agencies predict that the value of residential real estate will increase from 7% to 8% in 2020.
For the European market, Moody expects a moderate increase over the next two years. But in a report released this week, the agency stressed that "Portugal, the Netherlands and Ireland are likely to get the most profits from home price appreciation over the next two years." The Portuguese market is even one with a higher estimated growth rate.
In response to questions from Vivo, the agency set reasons that must continue to drive the real estate market in Portugal. "There are several areas where the gap between demand and supply leads to a strong appreciation of the prices of residential and commercial real estate."
Moody's noted that "house prices have risen since mid-2013 and accelerated in 2017 to levels before 2008." According to the latest data from the National Institute of Statistics (INE), the prices at which homes are sold in Portugal have increased by more than 16% since the start of 2016. In Lisbon and Porto the speed is much higher, with an increase of 47% and 34% respectively.
Moody's shows that the INE price index has experienced an annual increase of above 10%. And note that "there is even a greater increase in other real estate indices." In addition to the lack of supply in some regions, credit rating agencies indicate that "a special tax regime for non-residents increases external demand for residential property in Portugal."
Although Moody's depends on the evolution of home prices, other entities have warned that the value of real estate may be too far away. In the latest Financial Stability Report, the Banco de Portugal pointed out that "after a period of lower prices in the housing segment, some excess price marks of this price appear in the second half of 2017".
Supervisors noted, however, that indications of excessive valuation in the residential real estate market in aggregate were very limited. But he warned that "the duration and speed of price growth could pose a risk to financial stability if these dynamics persist or strengthen."
Among the reasons shown by the Bank of Portugal for price increases are also foreign investor interest and demand for real estate to take advantage of tourism growth. The central bank explained that the era of very low interest rates had an influence on prices. But he argued that "monetary policy normalization in the euro area", which included the withdrawal of stimulus for the economy and gradual increase in interest rates in the coming years, would ultimately help stabilize housing prices.