The latest data from the National Statistics Institute demonstrates the loss of momentum in the residential market. According to a report by Dinheiro Vivo, in June of this year, there was a drop of 7.6 percent in the number of transactions, which had not happened since February 2021. Bank assessments for home loans also fell in August for the third consecutive month. The Bank of Portugal also noted that, in August, mortgage loans registered the first slowdown in almost two years. "These are signs of some cooling of the market, on the demand side", said Beatriz Rubio, CEO of Re/Max.

But the industry remains optimistic according to the report. Paulo Caiado, president of the Association of Real Estate Professionals and Companies of Portugal (APEMIP), believes that this year "will not be significantly different from 2021", although he admits that "the second semester will be characterised by some curbing in the number of transactions".

But for now the sector is buoyant, in the first six months of the year, more than 87,000 homes were sold (an increase of 14 percent compared to the same period in 2021), for an overall value of more than €16 billion (31 percent more). Patrícia Barão, responsible for the residential area at JLL, recalls that the rationale for the business has not changed: "The scenario of high demand remains in view of a limited supply".

Lack of new builds

What is worrying the sector is the lack of new construction, as the market is totally dominated by the sale of used homes (new homes represented only 18 percent of total transactions in the first half of the year). "Uncertainty lies in the impact of the economic context on supply", emphasises Beatriz Rubio. The significant increase in construction costs, as well as in interest rates, with direct consequences on housing credit, may lead developers to adjust their projects, which will affect "even more the flow of available supply", says Patrícia Barão.

For Paulo Caiado, the cost of prime housing in Lisbon, Porto and the Algarve will not change and the new builds will face construction and material costs that have to be reflected in the final sale value. The head of JLL even admits that the increase in prices for new construction could raise prices by 5 percent by the end of the year. Ricardo Sousa, on the other hand, considers it possible that in this last quarter of the year and in 2023 there will be a stabilisation phase, if the macroeconomic context continues.

Increase in foreign investors

Francisco Bacelar, president of the Association of Real Estate Agents of Portugal (ASMIP), also admits some adjustment in prices with the drop in demand, but recalls that the country has witnessed a growing interest from foreigners. Brazil, the United Kingdom, France and the USA continue to give solid momentum to the market, says Patrícia Barão. "Portugal has achieved an enviable position and credibility internationally as a country to live and invest in, and is attracting clients from new countries, without a great tradition of buying a house in Portugal, as is the case of the United States, which are our number one clients today ", concluded Ricardo Sousa.