Housing demand is falling (and will continue to do so)

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The uncertainties generated by the “Mais Habitação” program and high interest rates are leading the Portuguese to slow down their intention to buy a home.

According to the April results of the Portuguese Housing Market Survey (PHMS), a monthly barometer produced in partnership by RICS and Confidencial Imobiliário, which surveys real estate agents and developers on the state of the residential market.

Uncertainty generated by the government’s “More Housing” program and rising interest rates, cited by respondents as the two main factors putting pressure on transactional activity, appear to be behind the drop in sales and contained expectations.

The April survey also shows that, as a result of these two factors, residential demand is beginning to shift towards the rental market, leading to a further rise in rents, which were already naturally trending upwards due to the shortage of supply. As far as prices are concerned, there is no prospect of a fall reflecting a possible demand shock, as the market continues to face a severe shortage of supply.

“For the agents surveyed, the uncertainty resulting from the Mais Habitação package is affecting buyers and investors, exerting pressure on sales, which remain below 2022 levels. Added to this are unfavorable credit market conditions”, explains Ricardo Guimarães, Director of Confidencial Imobiliário.

Tarrant Parsons, Senior Economist at RICS, concurs, pointing out that “interest rate rises continue to have an impact on housing market activity, with short-term expectations reflecting a sense of restraint”. And this in a positive scenario for the economy, since “economic growth should be around 2.5% for Portugal in 2023, which is well above the eurozone average”, added the economist.

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