Is There a Real Estate Bubble in Portugal?

is there a real estate bubble in portugal

If you’re thinking about buying property in Portugal, you’ve probably wondered if it’s time to start worrying about a real estate bubble. House prices in Lisbon are the domestic market trend setter, and they’re still cheap – but with every sign of increasing in the near future. In addition to rising prices, the country’s housing supply and demand are unbalanced. And as a result, prices are going up rapidly.

Lisbon is the domestic market trend-setter in house prices

When it comes to Portuguese house prices, the city of Lisbon leads the way. The city’s average price per square meter increased 4.9% in 2008, and is now more than forty percent higher than its 2010 peak. In the Algarve, centre, and north, prices are still affordable and have risen slightly since then. Madeira and Alentejo, meanwhile, are only 7% higher than their 2010 peak.

Lisbon is cheap enough to buy now but shows every sign of becoming more expensive

If you’re looking to invest in real estate, Lisbon is a city to consider. The Portuguese capital is relatively cheap to buy now but has shown every sign of becoming more expensive in the future. The price per square meter in 2007 was around 1,086 euros, and by 2008 it had jumped to a high of 1,028 euros, or about US$1,200. With a housing bubble that’s expected to continue to grow, this city is cheap to buy now but shows every sign of becoming expensive in the future.

Housing supply and demand are imbalanced

In the last year, Portugal experienced an unprecedented shortage of apartments for rent. The housing market was sluggish and the country entered the eighth State of Emergency. Moreover, the construction industry was hit by shortage of labour and material supplies. This caused a slowdown in construction processes throughout the country. But, there is still hope for the market. It is still on the radar of many opportunistic investors.

Housing prices are rising fast

The Portuguese real estate market is experiencing a housing shortage, creating a strong demand for homes. In recent years, the price of homes in Portugal has risen by over nine percent. While prices will be lower next year, they will rise by around six percent in 2019 and six percent in 2020. This seems like an unstoppable rise – but a recent article in Expresso reported that prices in January 2022 were up 13.8%, compared to just 7.7% in January of last year.

Rents are staying at EUR23/sq m/month

Prices for renting an apartment in Portugal are relatively affordable. A one-bedroom apartment in the centre of Lisbon will set you back around EUR600-700 a month. Though most expats do not pay this price, if you’re looking to rent a furnished apartment for six months or more, you might want to spend a few hundred Euros more. However, if you’re willing to pay EUR1,000 a month, you can try looking for a more affordable flat with fewer rooms.

Rental yields are compressing

The yield on a Portuguese property is currently 5.74%. Despite the rising cost of buying a home, renting it can be a profitable investment. The yield on a 10-year WAULT (whole-assembly unit lease) is just over five percent. In addition, the rents may not be as low as in the national average. Rental yields are becoming more compressed across Portugal due to the polarization in investment strategies. For example, investors may be competing with value-add strategies to capture long-term property. However, those who have short-term rental opportunities may be able to take advantage of the higher yields.