Will house prices fall in Portugal in 2021? Is 2021 a good time to invest in property in Portugal? What effect will COVID-19 have on house prices? These are just some of the questions on the minds of those planning a move to Portugal in 2021. Many foreign buyers may have put plans on hold due the uncertainties of Brexit and the coronavirus pandemic, however, in spite of such uncertainties, the property market in Portugal has been fairly resilient to the crisis with prices rising in 2020. With the help of real estate experts, we're here with everything you need to know about house price trends in Portugal in 2021 and the effects of COVID-19 on the market.
Rising house prices in Portugal in 2020
The trend of soaring house prices in Portugal in the last decade is something that continued in 2020, in spite of the COVID-19 pandemic which reduced the number of operations in the market. Property prices in Portugal rose by an average of 5.9% in 2020, and in the last quarter of the year, this increase in prices was 2.7% according to the idealista price index. Despite these property price increases in Portugal in 2020, increases did start to decelerate, one of the first effects of the COVID-19 pandemic on the market. However, 2021 will bring new challenges in the Portuguese real estate market, and the European Commission believes that this downward trend will continue.
Are house prices expected to drop in Portugal in 2021?
While property prices in Portugal remained high and saw increases in 2020, a recent report from Moody’s, the credit rating and research agency, predicts that average house prices in Portugal will fall by around 2% in the coming year as a result of the COVID-19 pandemic, decreases which are much less significant than those experiened in other EU countries, demonstrating the stability of the Portuguese market. Experts also point out that decreases will not always be the case and will depend on a range of factors, such as property type, location, and age, amongst others.
Released at the end of 2020, the report highlighted that a decline in house prices will be more likely in southern European countries, due to the fact that the economies in such countries are more dependent on industries such as tourism which is heavily affected by the current crisis.
How the tourism industry in Portugal will affect house prices in 2021
It is widely agreed amongst real estate experts in Portugal that the behaviour of the real estate market will depend on the recovery of sectors such as tourism and hospitality.
In the case of homes located on the Portuguese coast such as the Algarve, an area which is popular with second home buyers, especially international buyers and expats, the scenario is still very uncertain for 2021. One one hand, the lack of vaccinations in the EU and a lack of confidence from buyers could postpone sales. On the other hand, Pedro Fontainhas, Managing Director of APR (Associação Portuguesa de Resorts) is more optimistic. In an interview with the Portugal News, he stated that “the pandemic has brought homes to the centre of our lives, so now we are demanding more and better requirements from them", as well as the fact that “the pandemic has further reinforced international buyers’ interest, while the national audience is proving to be no less attentive and sensitive to the arguments for living in a resort”.
Moving abroad therefore remains a very attractive option, and areas in Portugal that will provide expats and international buyers with a better lifestyle after the COVID-19 pandemic are set to see greater price stability throughout 2021.
Demand for space
As a consequence of this, properties that are better adapted better to the needs of people in Portugal after the pandemic, offering a greater number of bathrooms, larger terraces, more outdoor space, a home office and an increase in the quality and specialisation of communal spaces and services are the properties that will see the least price variation, and may even see price rises.
Property location will also be key in 2021. Properties located outside big cities such as Lisbon and Porto, in the outskirts, or in coastal regions are starting to receive a lot of demand compared to city centre apartments, and according to a recent report released by real estate experts at Cushman & Wakefield, this shift between supply and demand will cause fluctuations in property prices throughout 2021, while energy efficiency and the use of ecological materials are also a concern for today’s buyers and are things that will push up property prices.