Portugal Real Estate Market: Foreign Sales Drop 2.8%

House sales to foreign buyers in Portugal fell 2.8% in Q2. Analyze the latest trends and their impact on the real estate landscape.

In the second quarter of this year, the Portugal real estate market experienced a notable decline in house sales to foreign residents, with a decrease of 2.8% compared to the same timeframe last year. This downturn resulted in the sale of 2,464 homes, which now constitutes 6.6% of the total housing transactions, a slight increase from 6.2% in the preceding quarter.

According to the Housing Price Index (IPHab) published by the National Statistics Institute (INE), buyers with tax domiciles outside Portugal displayed divergent trends. Notably, transactions among European Union (EU) residents surged to 1,242 units, reflecting a year-on-year growth of 5.8%—the first positive shift since the third quarter of 2022. Conversely, buyers from outside the EU recorded 1,222 transactions, marking a significant year-on-year decline of 10.2%, exacerbated by an even steeper drop of 11.9% in the first quarter of 2024. Each of these categories now represents 3.3% of the overall housing transactions in Portugal.

Between April and June, a robust total of 34,661 transactions were documented for buyers with tax domiciles within Portugal, showcasing an impressive year-on-year increase of 11.5%. However, the relative weight of these transactions in the overall market saw a slight decline to 93.4%, down from 93.8% in the previous quarter, yet an increase from 92.5% in the same period last year.

A regional analysis reveals that the North of Portugal led the charge with 10,995 transactions, accounting for 29.6% of total housing sales in the second quarter, an increase of 1.0 percentage points from the previous year. The Centre and Alentejo regions also demonstrated growth, with 5,885 and 1,945 transactions respectively, reflecting increases of 0.5 and 0.2 percentage points.

In Greater Lisbon, housing transactions remained stable at 7,031 units, maintaining an 18.9% share of the total, consistent with the same period last year. The Setúbal Peninsula saw 3,523 homes sold, representing 9.5% of the total, albeit with a minor year-on-year reduction of 0.4 percentage points. Following closely were the West and Tagus Valley and the Algarve, with 3,475 and 2,836 transactions respectively, maintaining their relative shares at 9.4% and 7.6%, although the Algarve experienced a decline of 1.2 percentage points.

In the Autonomous Region of Madeira, housing transactions totaled 836 units, accounting for 2.3% of the total, reflecting a slight year-on-year decrease of 0.1 percentage points. The Azores recorded 599 transactions, maintaining a steady relative weight of 1.6%.

In terms of monetary value, housing transactions in Greater Lisbon reached a staggering 2.5 billion euros, representing 32.2% of the total, albeit down by 0.7 percentage points year-on-year. The North followed with transactions totaling 1.9 billion euros, while the Algarve contributed 912 million euros, with both regions experiencing fluctuations in their respective relative weights. The Setúbal Peninsula's transactions amounted to 752 million euros, corresponding to 9.5% of the total, reflecting a minor year-on-year decrease.

The Centre region saw a modest increase in its relative weight to 9.3%, translating to a value of 733 million euros. Meanwhile, the West and Tagus Valley and Alentejo recorded housing transactions totaling 508 and 227 million euros respectively, with both regions experiencing slight increases in their relative shares.

In Madeira, housing transactions amounted to 189 million euros, representing 2.4% of the total, which is approximately double the 95 million euros recorded in the Azores, at 1.2% of the total.

In a noteworthy observation, four regions—Alentejo, North, Centre, and Azores—exhibited year-on-year growth that surpassed the national average in both the number and value of housing transactions, with increases ranging from 12.4% to 14.5% in transaction numbers and between 18.0% and 26.4% in transaction values. This data paints a complex and dynamic picture of the Portugal real estate market, underscoring the intricate interplay of regional trends and foreign investment.