Portugal's housing market has experienced a significant decline in home sales during the first half of this year, as higher interest rates and the government's decision to end incentives for certain foreign buyers have taken their toll. According to real estate services provider Jones Lang LaSalle (JLL), home sales have plunged by 22%, totaling 68,000 units, compared to the same period last year. This comes after a record-breaking year in 2022, when 168,000 units were sold in Portugal.
The decline in home sales, however, does not seem to have an immediate impact on property prices. Demand for homes continues to outstrip availability, creating a structural shortage in the market. Joana Fonseca, head of research at JLL, highlighted this issue during a presentation in Lisbon, stating that "the pace of new homes arriving on the market continues to be well below the volume of demand." Consequently, while sales have dropped, prices are unlikely to see a significant decrease in the near future.
Earlier this year, Prime Minister Antonio Costa made the decision to terminate the golden visa program, aiming to curb speculation in the property market while addressing the housing crisis in cities like Lisbon. The program, along with the non-habitual resident regime, had previously played a crucial role in reviving Portugal's real estate market in the aftermath of the country's recession. These programs attracted foreign property buyers, leading to a boom in the market. However, they now account for only a small fraction of property deals in Portugal.
Despite the decline in sales, the underlying demand for Portuguese properties remains strong. The country continues to attract international buyers drawn to its favorable climate, attractive lifestyle, and relatively low cost of living. Additionally, the government's efforts to address the housing crisis may alleviate some of the pressure, potentially encouraging more local buyers to enter the market.
As the property market in Portugal adjusts to the end of the golden visa program and other incentives, it will be interesting to observe its long-term impact on sales and prices. While the decline in home sales may seem concerning, the continued shortage of supply suggests that the market fundamentals remain intact. Only time will tell how these developments will shape the future of Portugal's real estate market.