Summary:
House prices in Portugal increased by 6.5% in early 2024, surpassing the global average of 3.6%.
Recent mortgage interest rate cuts and increased purchasing power are aiding market recovery.
The limited housing supply is contributing to rising prices, with many markets facing a shortage of homes.
Despite rising prices, real house prices have fallen by 0.4% due to inflation.
Sustainable growth in the housing market depends on lower housing credit costs.
Overview of Portugal's Property Market
In 2023, house sales in Portugal saw a decline, mirroring trends across Europe, which led to a slowdown in price increases. However, recent reductions in mortgage interest rates and an increase in purchasing power due to easing inflation are revitalizing the real estate market.
Price Growth and Global Comparison
Despite the slowdown, house prices in Portugal recorded an impressive annual growth of 6.5% at the beginning of 2024, significantly higher than the global average increase of 3.6%. This trend is supported by a limited housing supply, which continues to push prices upward.
According to the latest Knight Frank report, which analyzed 56 countries, the average house price globally increased by 3.6% from the first quarter of 2023 to the same period in 2024. This growth is indicative of a broader acceleration in housing costs worldwide, although it remains below the 20-year average of 5.6%.
Factors Influencing Price Increases
Several factors contribute to this upward trend in Portugal:
- Decreasing debt costs are encouraging buyers, facilitating house price growth in many regions.
- A shortage of homes for sale and a slow pace of new home deliveries have created a competitive market, pushing prices higher.
However, real house prices remain challenged by ongoing inflation, which has resulted in an average decline of 0.4% over the last year when adjusted for inflation. This indicates that while nominal prices are rising, the real growth rate is significantly lower than historical averages.
Conclusion on Future Trends
Experts, including Liam Bailey from Knight Frank, caution that the sustainability of these price increases depends on lower housing credit costs in the long run, as inflation continues to impact market dynamics.
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