The property market in Portugal continues to heat up, with The National Institute of Statistics (INE) reporting a surge in annual prices. The median value of property sold in the country increased by 9% in the second quarter of 2023 in comparison to 2022, bringing the median price per square meter to €1,629.
This increase is particularly notable when considering the 4.1% growth over the first quarter of 2023 and the acceleration from the 7.6% year-on-year growth observed from January to March.
A Regional Outlook
Diving into the data, the median house price rose in 19 NUTS 3 sub-regions. The NUTS (Nomenclature of Territorial Units for Statistics) is a geocode standard developed by Eurostat for referencing the subdivisions of countries for statistical purposes.
The standout performers were the Autonomous Region of Madeira and Médio Tejo, with staggering growth rates of 24.9% and 15.9%, respectively.
Examining the more affluent sub-regions in Portugal, we see that areas with already high property prices are outpacing the national average. The Algarve, Lisbon Metropolitan Area, Autonomous Region of Madeira, and Metropolitan Area of Porto not only exceed the national median housing prices but also boast year-on-year growth rates surging beyond the national rate.
Interestingly, while the aforementioned regions bask in the glow of robust growth, others have not fared as well. Sub-regions such as Viseu Dão Lafões and Baixo Alentejo have seen significant declines, with the former experiencing a sharp 12.9% drop in housing prices.
The disparity in growth rates highlights a divergent property landscape in Portugal. While some regions are flourishing, others remain in a contraction phase. For instance, Alto Alentejo continues to present the most affordable family accommodation prices, standing at 546 euros/m2, offering a stark contrast to the soaring prices in prime locations.
Overseas Investment
While changes to the Golden Visa introduced last month may see changes to how foreign buyers invest, over the past twelve months, overseas investment has been a key driver of growth.
The data indicates that the median value of family homes involving buyers with a tax domicile abroad was €2,409 per square metre, marking a 5.1% increase compared to the same quarter of the previous year. This trend underscores the international appeal of Portuguese real estate, particularly in contrast to transactions by domestic buyers, where the median value was €1,588 per square metre, reflecting an 8.7% rise.
The most sought-after sub-regions by foreign buyers align with the overall market trends, with the highest median house prices found in the Algarve, Lisbon Metropolitan Area, Madeira Autonomous Region, and Porto Metropolitan Area. These areas are not only prime locations for residents but also hotspots for international buyers, which is evident in the premium property prices paid by those with tax domiciles outside of Portugal.
In the metropolitan areas of Porto and Lisbon, the disparity in property prices based on the buyer’s tax residence is particularly pronounced. Transactions carried out by foreign buyers are markedly higher—in Porto, they are 61.3% greater, and in Lisbon, an astonishing 91.6% more than the prices paid by domestic buyers. These figures highlight the strong demand from foreign nationals, which can drive up local market values and affect the overall housing market.
What’s Next?
This influx of foreign capital has a dual impact: it can stimulate the local economy by bringing in investment and contribute to the development of the property sector. However, there are also concerns about housing affordability for local residents, potentially creating economic pressures.
These dynamics paint a complex picture of the Portuguese real estate market. On one hand, the robust growth in regions like Madeira and the Lisbon Metropolitan Area may draw investors looking for appreciating assets. On the other, the more modest pricing in areas like Alto Alentejo may present opportunities for those seeking affordability or hoping for a future upswing in the market.
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