House Prices in Portugal in 2021 Anticipating a Downward Trend

After the surge in property prices throughout Portugal in recent years, house prices in Portugal started to decelerate in the second quarter of 2020, and it is expectated that they will fall further in the short term. Due to the Covid-19 pandemic, it is anticipated that a downward trend in house prices on the Portuguese market shall take place, but the strengthening of the supply of new housing constructions should also be contributing to this adjustment phenomenon. This proves, however, the resilience that the housing sector in Portugal has shown during the coronavirus health crisis.

Several factors point to a further deceleration of the housing price growth in the short term. Investment in residential construction continued to increase in the first half of 2020, and the market supply is expected to gradually adjust to the demand. Moreover, the fall in tourism activity will put further downward pressure on prices, as the short-term rental market (Alojamento Local) is unlikely to return to pre-pandemic levels any time soon.

Despite the slowdown in the pace of growth regarding the housing value, in the third half of 2020, in the middle of the Covid-19 pandemic, prices still rose in Portugal: 1% between July and September, when compared with the previous three months, to € 2090 per square metre (m2). In annual terms, when compared with the third quarter of 2019, the increase was of 5.5%.

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