Price falls decelerate in Lisbon but gather momentum in Porto and the Algarve

• Weakening demand is the main factor pushing down on prices at the national level
• Agents are experiencing much sharper price declines than developers

The April RICS/ Ci Portuguese Housing Market Survey (PMHS) shows the market continues to be plagued by a combination of falling prices, falling activity and very depressed confidence.The national activity index fell a further 6 points to –32, while the national confidence index declined by 2 points to –53.The April survey also shows a continuation of two key themes at the national level: 1) price declines are being driven by falling demand; rising supply is not an issue with new vendor instructions actually declining since last December 2) residential sales agents are experiencing much sharper price falls than developers.

However, the national picture masks some interesting regional variation: 1) new instructions are now actually rising in Porto and the Algarve, but these regions combined have less impact on the national reading than Lisbon, and 2) although price falls continued across all three regions covered in the survey (Lisbon, Porto and the Algarve), there was a marked deceleration in Lisbon, while elsewhere, price declines gathered momentum. Finally, regional trends in price expectations reflect that of prices; expectations are least negative in Lisbon and most depressed in the Algarve.

CI Spokesman, Ricardo Guimarães:

“Overall, developer’s and agent’s expectations are being influenced by: increasing inflation, rising interest rates, tight credit constraints and the IMF/ EU bailout negotiations. However, some respondents expressed optimism about the IMF/ EU deal; it may improve confidence among international investors, leading in turn to a more favorable credit climate.”

RICS Senior Economist, Josh Miller, says:
“The Portuguese housing market can be characterised by falling prices, falling activity and depressed confidence. This is set against a wider economic backdrop of accelerating inflation (4%), elevated unemployment (11.1%) and a shrinking economy (-0.7% in Q1). Unsurprisingly, these factors are weighing heavily on the demand side of the equation; supply - either in terms of rising new vendor instructions or excessive building - is not presently an issue.”