Will Portugal Still Be A Real Estate Hot Destination by 2023?

Portugal has been considered a hot destination for real estate investors for the past years. However, with some worldwide and Europe zone economies uncertainties, many experts are wondering if the country will lose its status as a top investment destination for

In this article, we’ll look at how the Portugal real estate sector is right now, why the country remains such a popular choice among foreign buyers and how it is expected to evolve going into 2023.

Portugal’s Property Current Market Situation

If in 2021 the consumer trend was mainly towards buying a house, in 2022, there has been a growth of more people showing a preference for renting (at least amongst Portuguese citizens).

Overall, there was a progressive growth in demand for renting in the first six months of 2022, which represents an increase of 45% over last year and 30% from January to June.

These data prove the strong dynamics that continue to exist in the real estate market, with a great demand by the consumer, although this current trend towards renting is naturally accompanied by a decrease in the demand for buying a home in the period from January to June 2022 (although it remains quite high).

There are several factors that explain this reality and the change in consumer mentality. Firstly, the increase in the average cost of real estate by about 7%, which makes them more unaffordable and more expensive than in the first half of last year.

This price increase is accompanied, and can also be related, to the decrease of about 30% in the supply of houses available for sale that took place at the beginning of this year, although this supply seems to be increasing again.

As of now, one can conclude that there continues to be huge consumer demand for buying a home, although with some slight change and more focus on renting at the moment. The average cost of renting has also increased in relation to mid 2021, making rent more expensive. This seems to be the most relevant trend so far in the Portuguese real estate market.

It is also curious to analyze that, since the big cities of Lisbon and Porto have the highest rents in the country, there is a great growth in demand for renting in the intermediate cities and in the interior, such as Bragança, Évora, Viana do Castelo, Santarém or Viseu, where rents have been increasing.

Whether that’s already from the recent changes made to the Portugal Golden Visa program in the beginning of 2022, which has been aimed at increasing the interest in low density areas and interior regions, remains to be analyzed.

Five Nationalities Among the Top Buyers

Americans, Brazilians, Germans, British and the French are top five nationalities with buyers showing more investment in Portuguese properties. These are groups of foreigners who most demanded houses and apartments in Lisbon between April and June of 2022, regardless of value.

And for luxury real estate, Brazilians are the biggest buyers, specially in Lisbon and its surrounding areas, like Cascais.

There Are Still Lots of Opportunities For Foreign Investors In Portugal

Investors from around the world are flocking to Portugal to invest in property. This trend started in the past decade, after the financial crisis hit Europe and investors were looking for safe havens.

Since then, interest in Portugal real estate has increased steadily.

Many foreign investors are attracted to Portugal because of its low cost of living. They appreciate the country’s beautiful beaches, warm climate, and vibrant culture.

Foreigners can buy property in Portugal without having to worry about language barriers. Many English-speaking expats live in Lisbon and other cities throughout the country.

Another reason why foreigners are drawn to Portugal is the country’s high quality of life. People are happy here, and the economy is growing.

While there are lots of opportunities for foreign investors in Portugal, you shouldn’t know that investing in property in Portugal is different from investing in other countries.

For example, even though you will find many properties listed for sale online, most are already from local real estate agents or companies.

This means that you’ll need to spend a lot of time searching for properties, unless you opt for real estate advisors experienced in the Portuguese market. Also, you’ll need to negotiate prices with sellers.

2023 Uncertainties – Foreign Interest Vs. Internal Buyers Concerns

During the pandemic, we saw several realities that influenced the real estate market and thus created a context that led to a change in the paradigm that we are experiencing in 2022.

However, on the other hand, and more recently, the instability in housing credit, with the rise in Euribor rates, as well as interest rates that have been rising since April, in addition to the announcement in July of the increase in interest rates by the European Central Bank (the first in 11 years, with more hikes expected later this year), are factors that may additionally discourage future buyers and create obstacles that lead them to consider other hypotheses, namely renting instead of buying.

And that is the main concern for Portuguese real estate experts going into 2023.

Even if the country’s foreign interest appears to continue increasing and might be intact for 2023, the internal demand might see a decline due to the uncertainty of inflation and increasing interest rates.