Shortly following the Great Recession (c2008), the Portuguese housing market was a shambles. Portuguese citizens and capital were fleeing the country, and the austerity measures imposed upon Portugal by the International Monetary Fund and European Union weren’t helping to improve the economy. Something had to give.
Enter an improved tourism sector and the implementation of a Golden Visa citizenship option. They were well received. Golden Visa investors began flocking to Portugal, primarily Lisbon, in 2013. Since 2014, the signs of recovery and growth in the property market have continued to improve. Portugal’s real estate prices have seen consistent growth over the past five years, with the past two years indicating that the trend has sustained: 2017 (9.2%) and 2018 (10.3%).
The speculation hasn’t yet abated. In fact, Moody’s Investors Service predicted house pricing increases between 7% and 8% in Portugal every year until 2020. With reported house prices in Portugal having risen by 3.3% in Q1 of 2019, that trend may still be on point. Some argue that, even though the housing market in Portugal is still hot, it is cooling slowly, meaning that although house prices are still rising, they are not rising at the same rapid rate as before. Some take this as a sign of a stabilising of the market.
As can be expected when fortunes swing dramatically, mistakes were made in the opening of the Lisbon housing market, from locals being essentially priced out of the market, to a glut of studio or one bedroom properties focused on short-term lets (or Alojamento Local, in Portuguese). Things went quicker than the Portuguese government probably expected, and initially some of the same things happened in Porto. In July 2019, however, the Porto City Council actively legislated to slow the number of short-term rental licenses, which helps encourage developers to divert from past efforts to split refurbishment properties into small apartments. Long-term, the investment styles will shift, and it is still anyone’s guess how that will affect housing prices.
Currently, Brazilians and Chinese are the Top 2 Golden Visa investors. Tourism is also a factor, with a number of international brands planning more hotels/properties, so competition for the short-term tourist rental market will become even fiercer, especially in Lisbon and Porto, as larger and larger hotels open.
As with any market, the longer a boom persists, the more likely one is to see diversification of investment, and in both Lisbon and Porto now, there seems to be a slower, yet continued trend of growth, with an emphasis on protecting the spirit of the city. Negative effects of unregulated speculation be damned, the Portuguese government and people are still finding a way to keep the Portuguese Economic Miracle alive, at least for the foreseeable future.