The latest data from the National Statistics Institute (INE) reveals a significant shift in the Portuguese real estate market as property purchases by foreign buyers have declined. In the first quarter of this year, Portugal’s real estate foreign buyers accounted for just 5.1% of total home transactions—marking the lowest percentage since the second quarter of 2021. This article explores the implications of this trend and the dynamics of the current real estate market in Portugal.
Foreign Purchases Drop Significantly
From January to March, the total number of homes sold in Portugal reached 41,358, reflecting an impressive annual growth of 25%. However, the number of homes purchased by buyers with tax residency outside Portugal saw a decline to 2,098 transactions. This represents a 5.1% share of the total market, with buyers from the European Union (EU) contributing 2.7% and those from non-EU countries accounting for 2.4%.
This downturn in foreign purchases is noteworthy, especially given that home purchases by EU residents increased by 12.1% year-on-year, totaling 1,109 units. Conversely, transactions from buyers with tax residency in other countries experienced an 8.3% decrease, marking the fifth consecutive quarter of decline in that category.
Domestic Buyers on the Rise
In contrast to the decline in foreign investments, the number of homes purchased by buyers with tax residency in Portugal surged by 26.6% compared to the previous year, totaling 39,260 units. This growing domestic market indicates a robust demand for housing within Portugal, as local buyers continue to drive the real estate sector forward.
Regional Insights
Regional dynamics reveal interesting trends in property transactions across Portugal. The North region led with 12,285 transactions, representing 29.7% of all home sales, although this figure reflects a slight decrease from the previous year. Greater Lisbon followed with 8,018 sales, while the Central region recorded 6,501 transactions, comprising 19.4% and 15.7% of the total, respectively.
In terms of transaction value, the Setúbal Peninsula and Madeira reported the largest annual increases, with relative shares of 9.9% and 2.8%. Meanwhile, Greater Lisbon and the Algarve, which together accounted for 42.4% of the total transaction value, saw a decline in their regional shares, indicating a potential shift in buyer preferences.
The decline in Portugal’s property foreign purchases, coupled with the rise in domestic transactions, signals a notable shift in the real estate landscape. As local buyers gain prominence in the market, foreign investors may need to adapt their strategies to remain competitive. Understanding these trends is crucial for anyone looking to navigate the evolving Portugal’s real estate market, whether they are domestic buyers or foreign investors seeking opportunities.
With its diverse regions and growing economy, Portugal continues to be a significant player in the real estate sector, despite the fluctuations in foreign investment.
