As it does every year, Worx Real Estate Consultants is anticipating the launch of WMarket 2023-2024, the annual publication that analyses the behaviour of the different commercial real estate sectors in Portugal over the past year, with a summary of the main conclusions and trends for the current year.
The context characterised by high interest rates largely conditioned demand for house purchases in 2023, which resulted in a 17% drop in sales (131,000 houses sold in Portugal last year).
However, in annualised terms, the decrease in the number of sales had no impact on prices. In fact, in 2023, the average sale price nationwide increased for new properties by 8% – 4,045€/sqm – and 9% – 2,116€/sqm – for used properties.
On a regional level, the Lisbon Metropolitan Area and the Algarve stand out among the most penalised areas in terms of the drop in demand in the first quarters of the year, which was reflected in adjustments to the sale price in recent quarters. However, in annual terms, both regions showed the biggest increase in sales prices in 2023.
In overall terms, the Lisbon Metropolitan Area’s behaviour followed the overall behaviour of the national market, recording a 24% drop in demand for homes – a total of 38,370 homes sold in 2023 – the lowest figure since 2016.
Also in the Lisbon Metropolitan Area, despite the scenario of contracting demand in the first quarters of 2023, the last quarter of the year already showed a slight recovery in sales, although below the average of previous years, which was 12,000 dwellings per quarter.
As noted, in the last two quarters of the year prices in the Lisbon Metropolitan Area adjusted downwards, with a drop in all municipalities except Cascais, Odivelas and Alcochete. With regard to the municipality of Lisbon, although demand contracted by around 20 per cent, the upward trend in the average sale price continued, which stood at around 6,940€/sqm for new properties and 4,210€/sqm for used properties.
In the North, the Porto Metropolitan Area also saw a drop in sales, albeit less marked (16%). In this case, the reduction in demand has already been reflected in a 4% adjustment in the price of new properties, while used properties have maintained their growth trajectory over the past year.
After an annual increase of 9%, the sale price in the municipality of Porto was around 2,700€/sqm for used properties, while the slowdown in new properties set the average price at 4,300€/sqm. In this context, it should be noted that the last quarter of the year also saw a 7% drop in the price of used properties.
On the supply side, a substantial acceleration in development is not expected for the current year, given the insignificant increase (5%) in the number of dwellings licensed in Portugal. In fact, with a total of 6,085 new dwellings licensed, the Lisbon Metropolitan Area, according to INE data, even has the lowest number of new licences since 2020.
In short, the residential market in 2023 saw a considerable drop in sales in the first half of the year, with the repercussions on prices being felt in the second half, both for new and second-hand properties.
However, the low level of promotion is likely to perpetuate the strong latent imbalance in the market between demand and supply, which inhibits a significant price adjustment.In fact, the last quarter of the year has already seen a slight recovery in demand, as well as a reduction in absorption time, which could be further emphasised by the possible fall in interest rates during the course of 2024.
In this context, it is unlikely that there will be a substantial drop in sales prices in the residential market, but it is possible that they will tend towards moderate growth or stabilisation, which in the first half of the year should also characterise the behaviour of demand, although in the second half of the year the possible drop in interest rates may induce new growth, perhaps more slight than that seen in previous years.
Published in Jornal Económico on 27th February 2024.