House prices in Portugal 2023: price drops on the horizon (2024)

FAQs

House prices in Portugal 2023: price drops on the horizon? ›

According to Moody's, Portugal will not escape a correction in house prices in the near future, meaning that house prices in Portugal in 2023 could be about to drop. The financial rating agency considers that property prices in the country "exceeded the intrinsic values" of the assets, i.e. they are overvalued.

For Investors Coming to Portugal

Our econometric models show that the Portugal Residential House Price Index will average around 190.98 points in 2023 and 193.27 points in 2024.

House prices will continue to rise in Portugal, warns the European Commission (EC). Credits: envato elements; The rise is expected to slow down compared to recent years, but it is “unlikely” that they will fall sharply any time soon.

Zillow still predicts that the vast majority of regional housing markets will see home values appreciating in 2023. Among the 897 regional housing markets Zillow economists analyzed, 853 markets are predicted to see rising house prices over the next twelve months ending with April 2024.

House sale prices in Portugal (mainland) are up 18.7% in 2022, the highest annual increase in 30 years, according to the Confidencial Imobiliário residential real estate price index (their website, by the way, has many more entertaining factual estate-related findings in an accessible infographic).

Buying property in Portugal in 2022

In general, and when it comes to buying a house in Portugal, most real estate experts believe that, despite the current circ*mstances, now is is a good time.

Portugal is currently grappling with a severe housing crisis, triggered by an increase in foreign investment in property and a lack of affordable new homes.

The Portuguese culture accepts well the negotiation and although the market the place is very heated, the prices of the ads embed more and more fat for negotiation. Don't be afraid to make offers below the asking price. On average a property in Portugal is sold with a discount between 5% and 10% on the price of the ad.

The Portuguese Minister of Finance, Fernando Medina, claimed that the risk of recession in the Portuguese economy is "dismissed". The Minister also noted the macroeconomic forecasts disclosed in Brussels that revise upwards the economic growth and lowered the inflation rate forecast.

Portugal will escape the recession that will affect most of the Euro Zone in 2023 according to economists at Credit Suisse. The country will grow 0.8%, an amount that contrasts with the 0.2% contraction expected for the rest of the Euro Zone economies.

Will 2024 be a good time to buy a house? ›

With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

In my opinion, real estate is one intelligent option to consider in 2023, as it often has excellent returns, tax advantages and provides diversification even in the face of a challenging economic climate. Real estate also has the potential to compound your investment.

If you need to be occupying your home by a certain date to save on rent, it's a much better deal to close at the end of the previous month (for example, January 30) instead of the beginning of the current month (February 1).

High Rental Yields - Great properties with low prices for high quality and high rental returns. According to statistics expected gross rental yields in Portugal are among the highest in Europe, from 5% to 14% is achievable from the right property.

In the third quarter of 2022, Portugal house prices rose 13.1% year-over-year, surpassing eurozone and European Union averages.

Yes, buying property in Portugal is a great investment. Portugal's real estate market offers a variety of good investment opportunities, whether you want a holiday home, a retirement property, or an investment property to rent out.

The Algarve is one of the most popular areas in which to purchase property in Portugal. This region boasts a number of beautiful beaches and plenty of opportunities for golfing and water sports. The area is also known for its historic towns and cities, such as Lagos, Silves, and Sagres.

Acquiring the Portugal Golden Visa

Buying property in Portugal allows you to acquire a Portugal residence permit, as long as you stay in the country for a minimum of 14 days each two years.

Property tax rates range from 0.3% to 0.45%. While properties in rural areas are taxed at 0.8%, properties in more urban areas are taxed within the mentioned range. If a property has been re-valued since 2004, it will fall between 0.2% and 0.5%.

According to Moody's, Portugal will not escape a correction in house prices in the near future, meaning that house prices in Portugal in 2023 could be about to drop. The financial rating agency considers that property prices in the country "exceeded the intrinsic values" of the assets, i.e. they are overvalued.

What is negative about living in Portugal? ›

Con: Some Things are Expensive

Per kilowatt, Portugal is one of the most expensive countries in Europe. It's also one of the most expensive countries for fuel. Rent, particularly in somewhere like Lisbon, can be as expensive as a major Northern European city.

Having savings, a regular income and no debts to pay allows you to take this step and buy a property in Portugal. If all of these conditions are met, buying a property in Portugal, instead of renting, is likely the best option financially.

A 20 percent Deposit. For a Portuguese mortgage, you will generally need a minimum deposit of 20% of the property's price, because the borrowing varies from 60% to 80% of the price or valuation price, depending on the lender, with loans available at a variable rate or fixed rate basis.

The rise in property prices has been caused by growing demand from foreign buyers, who have flocked to Portugal in search of a warm climate, lower costs of living and the so-called “golden visa” program, which ties residency permits to real estate purchases.

United Kingdom. At 75 percent, the United Kingdom has the highest probability of recession in 2023. According to IMF's estimates, the UK is the only other G7 country besides Germany that is expected to face recession in 2023.

The annual inflation rate in Portugal dropped to 4% in May 2023, marking the lowest level since January 2022, and after the exemption of VAT for several essential food items.

In the long-term, the Portugal Interest Rate is projected to trend around 3.50 percent in 2023 and 2.75 percent in 2024, according to our econometric models.

Low wages, high costs

The cost of housing, energy, food, and many electronic goods is as high if not higher than in other European countries. So, life for many families is very tough indeed. Why should this be the case? Portugal's relatively low productivity, the key driver of economic success, is the main reason.

Under a projected scenario where global warming increases by 4.3°C by 2100, Portugal's GDP is expected to decrease by up to 7.75%. Tourism in Portugal is projected to decline by 2.5% and 5.2% due to temperature increases, reducing the Portuguese GDP between 0.19% and 0.40%. Farms will also be negatively impacted.

Is recession coming in 2023 in Europe? ›

The Eurozone has been confirmed as entering a 'technical recession' after the region shrank by 0.1% in Q1 2023, marking two consecutive quarters of contracting GDP. The slowdown comes after higher energy prices contributed to curbing demand in Europe's largest economy and surging inflation.

Future Plans: If you have plans to buy a new home in the near future, it may be better to wait until 2024 to sell your current home. This way, you can take advantage of any market improvements and get a better price for your home, which could help with the down payment and closing costs of your new home.

We're talking 30-year fixed rates nearly 0.75% lower by the end of 2023 than in their previous forecast. And mortgage rates that could flirt with the high-4% range by the end of 2024. This would be welcome news to both existing homeowners and those still looking to buy.

"Possibly in 2024, but it will depend on the Fed's decisions about raising rates in the second half of the year," says Fleming. "And even if they do go down, it won't be back to the rates of yesteryear. 6% mortgage rates used to be normal, and that's more reasonable to expect too."

The first reason why June 2023 is an excellent time to buy a house is that mortgage rates are falling back into the 6s and are likely to hold. According to Freddie Mac, 30-year fixed-rate mortgage rates averaged 6.57 percent to open the month, and dropped 0.375 percentage points when Congress reached a budget deal.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

Lower closing costs: Closing later in the month will reduce your closing costs because your upfront interest and taxes will be calculated from the date of closing to the last day of the month, leaving a shorter amount of time for interest and taxes to accrue.

How much is an average house in Portugal in US dollars? ›

The national average price of a 2,000-square-foot home in Portugal is $278,000. Buying a house in Portugal as an American is about 40% cheaper than the U.S. median home price, which is roughly $455,000.

The geographic focus of North Americans changes depending on the type of housing they intend to buy, according to data from idealista. For example, those who want to buy a house to live in are looking mainly in Ponta Delgada, on the island of São Miguel (Azores), in Cascais, in Funchal, in Loulé and in Porto.

The country has no restrictions on foreigners looking to buy a house in Portugal. You won't have to fill in any extra paperwork or meet any criteria to buy a home per say. All you need is a VAT identification number, known as a número de identificação fiscal (NIF) or número de contribuinte in Portugal.

Moreover, the market is facing a structural undersupply, leading to price surges and constraints on housing accessibility. Prospects for 2023 remain positive, with market fundamentals in Portugal remaining strong, and a considerable amount of liquidity available for deployment from investors.

Buying property in Portugal in 2022

In general, and when it comes to buying a house in Portugal, most real estate experts believe that, despite the current circ*mstances, now is is a good time.

Property is taxed annually by the municipality in which it is located. Each municipality assigns a patrimonial value and assesses a rate that generally ranges from 0.5% to 1.0%. Rural properties frequently have a higher percentage of assessment but a lower value than urban properties.

London, Paris, Berlin, Madrid, and Munich were the leading five European cities by overall prospects for 2023.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

It is important to note, however, looking at a year-on-year comparison, property prices in Portugal have seen an increase of 6.5%. To no surprise, Lisbon remains at the top of the list, with property costing an average of €5301/m2.

House prices in Portugal will continue to grow, but at a slower pace, says Brussels. Causes are property scarcity and foreign demand.

Which country is safest for real estate investment? ›

Dubai, United Arab Emirates (UAE)

The emirates have world-class infrastructure due to which the highest number of real estate transactions happened in 2021, which is approximately 61241. The good part is that investing in Dubai requires no annual property tax, income tax, rental value tax, or value-added tax.

Portugal is the easiest European country to buy property in. Those who wish to purchase property in Europe can purchase commercial property under Portugal's Golden Visa scheme.

Real estate can be an asset class with high returns. It also usually offers a hedge against inflation. Since real estate has historically been inversely correlated with conventional assets, it can be a good way to diversify your investments away from the stock market.

The national average price of a 2,000-square-foot home in Portugal is $278,000. Buying a house in Portugal as an American is about 40% cheaper than the U.S. median home price, which is roughly $455,000.

The Algarve is one of the most popular areas in which to purchase property in Portugal. This region boasts a number of beautiful beaches and plenty of opportunities for golfing and water sports. The area is also known for its historic towns and cities, such as Lagos, Silves, and Sagres.