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Portugal Home Prices Post Biggest Increase in Almost Two Years

Residential apartment buildings beyond a restaurant terrace area in the Alfama neighborhood of Lisbon, Portugal, on Friday, Aug. 4, 2023. Lisbon Mayor Carlos Moedas said the Portuguese capital will have a record tourism year in 2023 and still has room for growth as he balances the city’s appeal to visitors with a housing crunch for locals. (Goncalo Fonseca/Bloomberg)

(Bloomberg) -- Property prices in Portugal rose the most in almost two years in the third quarter on the back of foreign demand and a shortage of homes on the market. 

Home prices rose 9.8% in the third quarter compared to the year prior, according to the country’s statistics institute. That’s the biggest increase since the fourth quarter of 2022. Year-over-year prices rose 7.8% in the second quarter.

Lisbon-based Square Asset Management, which oversees more than €2.5 billion ($2.6 billion) in real estate assets, has blamed rising prices on a housing shortage caused by long delays in issuing new building licenses, especially in the capital of Lisbon.

“These permit delays, which can last years, are critical because they end up increasing the final price of a home,” said Pedro Coelho, chief executive officer of Lisbon-based Square. “Lower interest rates and higher foreign demand for property is expected to keep prices up for the foreseeable future.”

The shortage of homes has coincided with rising demand from foreign buyers, including wealthy Americans, who have flocked to Portugal in recent years in search of sunny climes and a lower cost of living. Lower borrowing costs are also boosting local housing demand.

Also read: Lisbon Assembly Backs Proposed Referendum on Short-Term Rentals

Since 2018, the foreign population in Portugal has more than doubled and is now at a record one million people – roughly a tenth of the total population.

Growing discontent about rising housing costs prompted Portugal last year to exclude real estate investments from its golden visa scheme, a five-year program that offers residency through investment. The government has also cut back on tax incentives for new residents in a bid to cool down the housing market. 

Social housing accounts for just 2% of total housing stock in Portugal — among the lowest levels in the EU.

©2024 Bloomberg L.P.