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Portugal Price Rise Looming Large

February 16, 2010Article by Ray Withers

Analysts are forecasting that properties in Portugal on the foreign market will see rises in price before the end of the year, as demand increases. Portugal property is replacing Spain as a favourite with foreign buyers because of its proven stability and availability of finance for foreigners.

We all know the tale of the Spanish property market: first it was hit by oversupply through years of irresponsible overdevelopment, and then it was hit by the catastrophic drop in demand caused by the global recession, which of course worsened the oversupply problem to the degree of a million homes unsold — and some would say unsalable in the current market without severe discounts. This all resulting in Spanish property prices having fallen between 20 and 40 percent since 2007, much more than the government is willing to admit.

Meanwhile property prices in Portugal have fallen just 5% according to internationally recognised indices. While Spanish developers have had to cut prices by at least 25%, Portuguese developers have been unwilling to cut prices at all. This is all a testament to the stability and responsibility of Portugal property administration and industry.

Demand for Portugal property only really fell away in late 2008, months after oversupply started to cripple demand for Spanish property, and sales began to increase again as early as April according to most reports. And this is the main reason why Portugal property prices have held so firmly.

Not only is the Portugal property industry in better shape due to its responsible practices over the years, but the financial sector is in the same boat and for the same reason.

So now, as we go into 2010 and overseas property sales start to increase on the back of growing global confidence and the subsidence of fear, one can only assume that these same developers will use the same logic that kept them from dropping prices in the past year, a logic that will almost certainly cause them to push prices up as soon as they can.

And not only that: Portugal property prices have held so well because the supply demand balance has only very occasionally and very slightly tipped in favour of supply. So now that demand is increasing, this can only tip that balance in favour of demand, and once that happens, to not put prices up can only be called foolish — one thing that Portuguese property developers are not.

International property investment consultancy Property Frontiers, which has witnessed the savvy business acumen and professionalism of Portuguese developers at first hand in its years of working with them, is fully expecting price rises before the year ends, because of the increasing demand and availability of credit.

“Portugal is in somewhat of a unique position in Europe today; foreigners can actually obtain finance for property purchases. Of course there are other countries where finance can still be got, but when you start to look at things like tourism growth and stability, very few can match Portugal, certainly without going farther afield than Europe,” said David Cox, the firm’s director.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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