Property prices are at their highest level in a quarter of decade ... and keep rising!
Property prices are at their highest level in a quarter of decade ... and keep rising!

Too much demand and too little supply – it’s a scenario that continues to fuel the rise in the property prices. In the last year alone, prices have increased by 12.8%, the largest increase since 1992, according to data from Confidencial Imobiliário (Ci). There are two main factors driving this rise: urban renovation and foreign investment.

House prices began to rise in July 2016 and since then there has been an uninterrupted cycle of valuation, which is comparable to the series of increases recorded between late 2002 and early 2005, Ci explains in a statement. Last year saw the biggest price increase in 25 years, with the main increases in June and December of 2.4% and 1.6%, respectively.

Currently, the average asking price in Portugal is 1,223 euro per square metre or 113 euro per square foot. As is to be expected, Lisbon still the most expensive area with each m2 in the capital already costing 1,532 euro, which is 142 euro for every sq ft. In the North, on the other hand, the average value per m2 does not exceed 685 euro, or 64 euro per sq ft. The Algarve is the region with the second highest prices (1,416 euro/m2 or 131 euro/sq ft) while in the Centre and in Alentejo, prices vary between 743 and 870 euro/m2, 69 and 80 euro/sq ft, respectively.

"Despite this marked recovery, we need to be able to interpret the results in the light of what would have been a natural evolution of prices. If the market had followed a trajectory of valuation according to the rate of inflation which has been affected by the crisis, prices would be around 13.6% above the observed value," says the director of Ci, Ricardo Guimarães, in a statement.

However, the manager said that "there is a large increase in the number of projects and of prime segment properties … I think there's a notion today that prices were very low and with many opportunities for profit," he added.

Ricardo Guimarães also highlighted the strong demand from foreign investors and the "new positions that are generating more value, such as student accommodation or tourist rentals."

Legislation, lack of manpower in construction and the race to renovate the few available buildings, in the case of Lisbon, are also among the factors that have caused the price rise.