Pandemic Sparks Soaring Real Estate Prices Across Europe: Portugal's Property Market in the Spotlight

In recent years, a wave of rising real estate prices has swept across Europe, defying economic turbulence and upheaval caused by the pandemic. Paradoxically, while many businesses grappled with the challenges of the pandemic, the property market experienced a remarkable boost, with property prices soaring in numerous locations. Prolonged lockdowns compelled individuals to reevaluate their lifestyles, homes, investments, and assets, driving them to make unprecedented changes. As the world grappled with uncertainty, the pandemic prompted people to rethink where and how they live. This paradigm shift wasn’t limited to locals upgrading their homes but extended to global investors in search of a “Plan B” second residency, offering refuge in more liberal countries that might promise greater freedom in the face of future crises.

In 2021, Portugal emerged as a frontrunner in this real estate resurgence, witnessing an overall price surge of 13.8%, as reported by The Portugal News. Lisbon, the country’s vibrant capital, secured its place on the PwC list of the 16th most attractive cities for real estate investments in 2022. The ripple effect wasn’t limited to property prices alone; rental returns also experienced an upswing. House rents per square meter in Portugal surged by 2.4% in April 2022 compared to the same month in the previous year, following a 2.2% increase in March. This surge in rental returns translated to an enticing prospect for investors, particularly in Lisbon and Porto, where average rental returns hover between 3% and 6%. To sweeten the deal, many developers are now offering investors the security of a guaranteed rental return ranging from 3% to 4% per annum.

Recent data from Idealista highlights a trend that extends beyond Portugal’s borders. The number of houses for sale in Portugal dropped across 16 districts in the first three months of 2022. This shift could be partially attributed to amendments in the Golden Visa legislation, rendering some real estate projects ineligible for the program and consequently removing them from the market. However, this phenomenon isn’t unique to Portugal; neighboring Spain also bears witness to this trend. With limited stock available, demand is outstripping supply, resulting in a relentless surge in property prices. The situation is further exacerbated by the specter of inflation, which is driving up the costs of building materials, thereby pushing construction expenses to unprecedented heights.

A significant development in the Portuguese real estate landscape is the transformation of Golden Visa projects, particularly those that qualify for the lowest-priced golden visa category at €280,000. Legislative changes at the beginning of the year have reshaped the landscape, imposing limitations on these projects. The consequence has been a remarkable uptick in the pace at which these projects are being sold. As prices continue their upward trajectory and available stock diminishes, investors are well-advised to act promptly if they seek to secure a property that promises not only current value but also optimal capital appreciation in the future.

The real estate resurgence that has swept Europe amid the pandemic showcases the resilience and adaptability of this market. Portugal, with its soaring property prices, burgeoning rental returns, and transformative Golden Visa landscape, stands as a shining example of this phenomenon. In a world marked by uncertainty, the Portuguese property market offers stability, opportunity, and the promise of a brighter future for both investors and residents alike.

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