Euribor rises and House Prices don´t go down! But is there a solution?

The Portuguese phenomenon of raising interest rates and further rising prices is due to the fact that there is a shortage of supply on the market in Portugal. The large international and national demand for houses has made it impossible to lower prices on the national market.

It is cynical, but although the interest rate hike is causing difficulties for Portuguese families, our market has never been more attractive to international and domestic investors than it is today. There has been a change in the panorama of demand for housing in Portugal, which has led to more and more foreign investors investing in Portugal. This can be seen in the high demand from Americans and French, which has caused property prices to skyrocket in our coastal cities, especially in Porto, Lisbon and the Algarve.

The year 2022 was a record year for the Portuguese real estate industry with a transaction volume of over 30 billion euros.

The lack of real estate, the bureaucracy and the constant fiscal-policy changes and the delays in licenses are one of the reasons for this. In addition to the increase in the cost of materials and labor and the difficulty of builders and developers to gain access to loans for construction. These are the main factors behind this catastrophic situation on the Portuguese housing and real estate market, which will be with us for several years to come.

But the demand will continue and the range of interested parties in Portugal will increase, because Portugal is currently one of the most attractive countries in the world for several reasons.

And international demand, in which Americans have become the leading nation in a short period of time, will not remain solely with Americans. There are already signs that other Central and South American countries are discovering or have discovered Portugal for its quality of life and tax benefits.  Therefore, the shortage of houses and real estate will not decrease, but rather increase, because politically and economically we are simply not prepared to convert this investment for the good of our country.

Portugal and its government must act now and not after the next elections, we must liberalize the market and not restrict it. The key lies in the access and not in the restriction, because if there is enough, everyone has something of it and everyone pays less. But if there is a shortage, such as more taxes, more restrictions, more bureaucracy, more dependence on the state and those in power, freedom is taken away from us and thus also from those who want to invest their money to improve living conditions and access to housing for all.

The housing crisis cannot wait for ideological political programs, the money that investors bring into the country must be used and eventually channeled to create such a supply that we lack. It cannot be that we reject 16 billion euros of investment in the Residence Permit for Investment (ARI) just because we believe that in this way, we will reclaim the centers of our cities for low rents.

In my opinion, this capital can be well invested in real estate funds to create long-term national rental housing programs, as is already being done successfully in many countries outside Portugal but in the EU. With an assertive fiscal policy, investors here would have a long-term investment vehicle such as pension funds in Norway and Germany and others to guarantee members´ pensions, and in this way the national problem of housing shortages and speculation would be solved. 

Author: Paulo Lopes