House prices in the eurozone were up 6.8% in the year to Q3 2022, whilst prices in the European Union rose by 7.4% on average.
Out of the 27 Member States, 15 EU countries registered a house price growth of more than 10% year-over-year. The EU countries with the largest increases in house prices were Estonia (24.2%), Hungary (21.0%), and Lithuania (19.3%). Denmark was the only country to experience negative growth, with prices falling by -2.4%.
Portugal had the 11th largest increase in the EU with a 13.1% annual upsurge in house prices. The country experienced a similar increase in the previous quarter (13.2%), preceded by a strong 12.9% growth rate at the beginning of the year.
Today, the average price of a property in Portugal stands at approx. $135 per square foot. Studio and one-bedroom homes will cost you around $168 per square foot, whilst two-bedroom properties are priced at around $144/sqft. Three-bedrooms go for $125/sqft, and properties with four bedrooms or more will cost you $108/sqft.
What is driving Portugal’s house price growth?
The country’s supply of available homes is still falling, largely due to rising construction costs. Portugal’s housing stock fell by 19% in the year to Q4 2022 (idealista). The highest stock decline was in Porto (-38%) followed by Guarda (-32%) and the capital, Lisbon (-31%).
Despite rising inflation, cost of living and mortgage rates, demand for homes still outweighs supply—especially in major cities where the population is growing and stock is shrinking. This is naturally pushing real estate values up.
According to Knight Frank, property prices in the capital saw a y-o-y growth of 11.4% in the summer of 2022, whilst prices in Porto were up by 15.7%.
Foreign investment in Portugal
With Portugal positioned as one of the hottest real estate markets in the world right now, foreign investors are flooding in. Its attractive property prices and low cost of living compared to its European neighbours are helping to maintain an influx of overseas buyers into Portugal. Last year, investment from Portugal’s Golden Visa program was up 42% compared to 2021 and equated to €654.2 million in total.
Overseas buyers tend to have more buying power than the local population and are more likely to make all-cash purchases. While Portuguese locals spend €1,372 per square metre on average, foreigners pay €2,234 per square metre, which is almost 40% more nationally.
Ultimately, with their big budgets and all-cash investments, international investors are helping to maintain a stable, healthy housing market in Portugal.
Growing demand from both domestic and overseas buyers, combined with a serious shortage of homes on the market, is keeping price growth high across the country. It also puts Portugal in a good position to weather the storm of a temporary fall in house prices, which is expected to affect major markets around the world in 2023.
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