The global macroeconomic context has changed and the effects on the housing market in Portugal and across the world are increasingly evident. But will house prices drop in Portugal? According to Moody's, Portugal will not escape a correction in house prices in the near future, meaning that house prices in Portugal in 2023 could be about to drop. The financial rating agency considers that property prices in the country "exceeded the intrinsic values" of the assets, i.e. they are overvalued.
In a published analysis, quoted by the Portuguese newspaper Expresso, the agency states that, in addition to the slowdown in the economy, rising interest rates and high inflation "are squeezing household budgets and increasing debt servicing costs, which is eroding market demand and putting pressure on prices".
"The economy is slowing, high inflation is pushing up interest rates and investor demand is likely to start to fade, increasing the risk of falling prices in Portugal," states Moody's. According to the financial rating agency, rising interest rates may weigh more on buyer demand in Portugal than in other European countries "due to the Bank of Portugal's macro-prudential measures".
Despite this, the lack of supply could limit the fall in house prices in Portugal in 2023. "One of the factors underpinning house prices in Portugal is the limited supply, mainly of new construction. The low supply of new housing compared to the level of demand has supported the Portuguese property market and boosted prices in recent years," explains the publication.
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