The increase in the supply of new homes and developments, together with the tourist accommodation crisis, explain the adjustment in the cost of housing in Portugal envisaged by the European Commission.
With 2020 coming to a close, it's time to have a look at some of the main statistics when it comes to house prices in Portugal for 2020, as well as some predictions from the European Commission in Brussels for 2021.
After the surge in property prices throughout Portugal in recent years, house prices in Portugal started to decelerate in the second quarter of 2020. And the European Commission's expectation is that they will fall further in the short term. Without pointing to estimates in figures, Brussels anticipates a downward trend in house prices on the Portuguese market, blaming the COVID-19 pandemic, but also saying that strengthening the supply of new housing construction should contribute to this adjustment phenomenon. On the other hand, this Post-Programme Surveillance Report from the European Commission highlights the resilience that the housing sector in Portugal has shown during the coronavirus health crisis.
"Several factors point to a further deceleration of housing price growth in the short term. Investment in residential construction continued to increase in the first half of 2020 and market supply is expected to gradually adjust to demand. Moreover, the fall in tourism activity will put further downward pressure on prices, as the short-term rental market (Alojamento Local) is unlikely to return to pre-pandemic levels any time soon," reads the paper published by the European Commission at the end of November.
Despite the slowdown in the pace of growth in the value of houses, in the third half of this year, in the middle of the COVID-19 pandemic, prices still rose in Portugal: 1% between July and September compared with the previous three months, to 2,090 euros per square metre (m2). In annual terms, compared with the third quarter of 2019, the increase was 5.5%, according to the idealista price index.