Portugal Real Estate Prices Surge Above Global Average Amid Market Shift

Portugal real estate prices have surged above the global average, reflecting a significant shift in the housing market. Despite a decline in house sales throughout 2023, recent interest rate reductions and increased purchasing power are fostering a recovery.

House sales across Portugal and the broader European landscape experienced a notable decline throughout 2023, leading to a deceleration in the escalation of property prices. Nevertheless, a recent easing of mortgage interest rates, coupled with an uptick in purchasing power attributed to a slowdown in inflation, is fostering a resurgence in the real estate market. These dynamics, alongside a persistent scarcity of housing supply, elucidate the remarkable 6.5% annual growth in house prices recorded in Portugal at the onset of this year—outpacing the global housing price increase of 3.6%.

The latest report from Knight Frank, as examined by idealista, underscores that these factors are collectively "accelerating the global growth in house prices." An analysis encompassing 56 countries revealed that the average house price surged by 3.6% from the first quarter of 2024 compared to the same timeframe the previous year. This growth trajectory is notably higher than the figures observed at the close of 2023, suggesting a global acceleration in housing costs, albeit still trailing behind the 20-year average increase of 5.6%.

As the costs associated with debt gradually decline and the inventory of homes for sale remains constrained, the growth in house prices across the analyzed markets has averaged 3.6% in the first quarter of 2024, a 4 percentage point increase from the preceding quarter's growth of 3.2%. It is evident that property prices have risen in the majority of countries over the past year, with 45 out of the 56 markets surveyed experiencing heightened housing costs, Portugal included. The report highlights that many markets are grappling with a dearth of available homes and a sluggish pace of new construction, resulting in robust housing demand that is propelling prices to unprecedented levels.

Conversely, the persistence of elevated inflation rates in numerous global markets has rendered the trajectory of real house prices less favorable. When factoring in inflation, the average house prices have experienced a decline of 0.4% over the past year. The report indicates that real price growth now lags 3.3 percentage points behind the long-term average of 2.9% observed over the last two decades.