House prices in Portugal continue to rise, albeit at a slower pace. The International Monetary Fund (IMF) is aware of this, of course, but rejects suggestions that the government need intervene – at least for now – since "most real estate transactions have not been financed with mortgages".
"House prices are still rising, but no immediate policy action is needed," the IMF indicated in a report released on Friday, July 12, 2019. The institution notes that the increases in house prices are evident, but that "vary considerably by region" and adds that "most real estate transactions have not been financed with mortgages".
Most of the real estate transactions that caused house prices to soar have taken place in "key locations", such as Lisbon and Porto, and have been linked to "strong growth in the tourism sector and direct investments by non-residents," states the IMF.
Home mortgages are a concern
The institution still led by Christine Lagarde states, however, that "if strong price rises were to persist, this could encourage mortgage lending (including through refinancing operations), further increasing banks’ high exposures to real estate… leverage".
The institution therefore recommends that the Portuguese authorities "closely monitor developments in mortgage markets", in order to implement macro-prudential measures, if necessary.
Prices will ease off, but at a slow pace
The European Commission has also recently expressed its views on the Portuguese property market, pointing to a trend of moderation in house prices in the country, albeit slow. "House prices continued to grow rapidly, up 9% (year-on-year) in the first quarter of 2019, slowing only marginally compared to the last two years," Brussels said in its summer forecast.
Data released by Eurostat also show that the country recorded the third highest year-on-year increase in house prices (9.2%) in the first quarter of this year and the second highest over the last three months of 2018 (3.6%), among the 28 member states of the European Union.