The real estate market in Portugal has shown signs of stabilization – and even deceleration in 2023, as demonstrated by data on real estate transactions. The decrease in real estate transactions in 2023, when compared with 2022, is significant, with there being close to 134,000 real estate transactions in 2022, falling to 126,000 sales throughout the year of 2023 (up until the end of November).
Although it is too early to tell if this trend will continue, the number of transactions is a solid point of reference when it comes to taking stock of how the property market is performing. It is also worth bearing in mind that this shift is not universal across the country – or when looking into the differences between high, mid, and lower tiers of the market.
Smaller Cities in the Suburbs Clocking in Significant Growth
While Lisbon and Porto have been the cities that have experienced the greatest growth in Portugal in recent years, the latest data shows that it is the smaller cities located on the outskirts of these bigger cities that have shown the most significant growth in 2023.
For example, Seixal and Almada, two cities on the outskirts of Lisbon that have excellent access to the Portuguese capital, have experienced growth rates of close to 20 percent in some places. This is likely due to more affordable prices in these cities than buying property in Lisbon itself.
In comparison, areas such as Lisbon and Cascais have shown little growth in the higher end of the market but have maintained their prices throughout the year. Elsewhere, in the lower tiers of the market, prices have decreased by as much as 16 percent in some locations.
Are Portugal property prices really falling?
While prices have been decreasing in some locations, this decrease is by no means universal, with prices in some parts of the country continuing to experience a hike in prices – as is the case in Seixal and Almada.
It is difficult to say with confidence that this is a definite decrease in prices. Morei realistically, it is a correction phase whereby prices in the market have been increasing – in some cases alarmingly rapidly – for the past seven years. It is, therefore, inevitable that, at some point, the market would correct itself to maintain sustainability over time.
Also, external events, such as increasing interest rates and various wars, such as the Ukrainian War, have created increased uncertainty in the market, which often leads to fewer transactions, particularly accentuated in the lower end of the market.
Higher tiers in real estate markets tend not to eel these effects so much as buyers are securing properties without loans, as it is a safer option to invest in brick and mortar than in financial products when there is increased global uncertainty.
What to Expect in 2024
Moving into 2024, it is expected that these trends will continue to show in the market, particularly given the current uncertainties in the current economic climate. Price deceleration is likely to be focused on specific areas and not uniform across the whole country, while other areas will continue to see a high growth rate. For example, smaller cities that are near bigger cities, particularly in Lisbon and Porto, are expected to be desirable areas to invest in.
Is 2024 the prime time to snap up property in Portugal?
For investors and expats considering investing in Portugal’s real estate market in 2024, it’s essential to understand the dynamics of the market and give some thought to the timeline of the investment.
For example, when considering investing in Portugal’s real estate market and securing gains long term, then less developed areas that are within striking distance of bigger cities could be an excellent option, as bigger cities continue to expand and absorb in these surrounding areas. This makes the area more developed, for example, with better infrastructure, and will ensure that the asset increased in value in the future.
Plus, with more young professionals, digital nomads, and tech companies relocating to Portugal, fuelled in part by Web Summit relocating to Lisbon in 2016. This is an additional attractive proposition to buy a property to rent it out in the long term, to cater to this demographic.
For short-term investments, this also presents possibilities for touristic properties, which have been shown to be an excellent investment option in the past years, understandably so given the fact that Portugal has cemented itself as one of the most sought-after holiday destinations in Europe.
While tourism has generated massive investments over the years, numbers show that there is still a lack of properties to fulfil demand in peak seasons, highlighting the continued potential of this segment of the real estate market.
Summing up: What does the future hold?
While prices may be decelerating in some areas, this first showing of the stabilization of the property market is, in many ways, an inevitable eventuality as prices were increasing in outstanding rates in many hotspot locations. Smaller cities near the bigger cities are likely to experience price increases as they become more desirable locations for investors and expats, with these locations becoming valuable assets in the coming years.
In summary, as Portugal’s real estate market has demonstrated to be robust over the past ten years and resilient to external factors, such as the COVID-19 pandemic, it is highly likely that buying property in Portugal will continue to be attractive to investors and expats, with the market remaining highly competitive moving into the future.
Data taken from Confidencial Imobiliário, Casafari, and Goldcrest Insights.