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Portugal is one of the countries where housing prices have risen the most in recent years. And this is expected to continue over the next few years, according to Moody's estimates. The rating agency predicts that the value of residential real estate will increase by 7% to 8% by 2020.
For European markets, Moody's is expecting a modest increase over the next two years. But in a report released this week, the agency points out that "Portugal, the Netherlands and Ireland will likely benefit more from the rise in real estate prices over the next two years" . The Portuguese market is even the one with the forecasts of a higher growth rate.
In response to Vivo's questions, the agency clarified the reasons that should continue to fuel the real estate market in Portugal. "In some areas, the gap between supply and demand causes a sharp appreciation of the price of residential and commercial property."
Moody's note that "real estate prices have risen since mid-2013 and accelerated in 2017 to reach levels before 2008." According to the most recent data from the National Institute of Statistics (INE), the selling price of homes in Portugal has increased by more than 16% since the beginning of 2016. In Lisbon and Porto, the pace was much higher, by 47% and 34% respectively.
Moody's points out that the INE price index has seen annual increases above 10%. And note that there are "even larger increases in other real estate indices". In addition to the lack of supply in some areas, the rating agency stresses that "the special tax regime applicable to non-residents stimulates the external demand for residential property in Portugal".
Despite Moody's dependence on the price of homes, other entities have warned that the value of real estate may have been too far. In the latest report on financial stability, Banco de Portugal said that "after a period of falling prices in the residential segment, signs of overall overvaluation of these prices appeared in the second half of 2017".
However, the supervisory authority noted that the indices of overvaluation in the residential property market were generally very limited. But he cautioned that "the length and speed of price growth could pose risks to financial stability if these dynamics persist or strengthen."
Among the reasons cited by the Bank of Portugal to explain the rise in prices, there was also the interest of foreign investors and the demand for real estate to take advantage of the growth of tourism. The central bank explained that the era of very low interest rates had an influence on prices. But he argues that the "normalization of monetary policy in the euro area", which includes the withdrawal of economic stimulus and the gradual rise in interest rates in the coming years, will ultimately help stabilize prices. of real estate.
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