Promising Trends in the Real Estate Market Portuguese in 2023 and for 2024

The residential real estate market in Portugal is constantly evolving, showing signs of resilience and adaptability in the face of the challenges faced. When we look at the third quarter of 2023, we see a reduction in transactions and values, especially in the Algarve and Greater Lisbon regions. However, this scenario does not obscure the opportunities and positives that outline the sector.

Slowdown in Transactions, but Price Stability

The 18.9% reduction in the number of transactions between July and September is a natural adaptation of the market. It is important to note that the stabilisation of prices, with an increase of 7.6% year-on-year, shows underlying robustness. This growth, although at a more moderate pace, indicates the continued appreciation of real estate assets in Portugal.

Attractiveness to Foreign Investors

Interest from foreign buyers, who account for 8% of total acquisitions, remains remarkable. This group plays a crucial role in driving the market, with a significant increase in the last five years. Buyers from outside the European Union, such as Americans, have contributed to the sector´s dynamics.

Sustained Growth Outlook in 2024

Forecasts for 2024 point to a favourable environment in the Portuguese real estate market. Demand for residential properties, driven by factors such as price stability and attractive opportunities, expected to sustain and even drive growth.

Investment Diversification and Promising Sectors

In the global context, digitalization and businesses related to the digital economy are gaining prominence. In Portugal, commercial real estate for sale and the hospitality sector are the most attractive investment destinations for national investors in 2024. This diversification indicates a strategic approach to ensure the soundness and resilience of the real estate market.

Challenges and Opportunities in Housing and Sustainability

The challenge of homelessness, affecting 86,000 households in Portugal, is a pressing issue. However, the government, even in a transition period, has implemented measures such as the "More Housing" package. The outcome of the elections in March 2024 brings uncertainty, but continued adaptation to these housing needs is crucial for the sector. A study by Deloitte highlights a sharp contrast between national and global preferences, especially when it comes to renting and building for rent. Addressing housing access and supply shortages requires concerted efforts by public and private parties to prevent loss of value. The creation of conditions, such as legislative stability, predictability, and security, is crucial for the State and private entities to contribute to the increase of real estate supply.

Investment Outlook in Portugal Amid Global Economic Uncertainty

The year 2024 brings a sense of adversity for investors around the world, with negative macroeconomic indicators, concerns about GDP growth, interest rates, and challenges in accessing credit. While the international outlook reflects pessimism, Portugal seems comparatively optimistic. We observed that, despite expectations of anaemic growth, inflation, and interest rates, assets in the domestic market maintain their incomes and values.

Construction costs and permitting issues stand out as the top concerns for investors. In the case of offices, the uncertainties related to remote work and its impact on occupation contribute to a sharp drop in investments, being the only sector that decreases in both national and international preferences.

Despite the challenges, investors and developers in Portugal exhibit great financial stability. Its ability to take a ´wait and see´ approach, with no immediate obligations to shareholders or banks, allows for debt restructuring if necessary.

Half of the investors surveyed in Portugal identify residential properties for sale and hotels as their top investment targets for 2024. The industrial-logistics, office, and so-called alternative sectors—residences for the elderly and students—follow in second place. Finally, commerce is the least attractive segment but still in third place, with housing shortages and tourism on the rise driving the preferences of investors and developers.

Conclusion: Resilience and Optimism in Real Estate Portuguese

Despite the challenges and political uncertainties, the real estate market in Portugal demonstrates resilience and a unique ability to adapt. Positive trends, such as price stability, interest from foreign investors, and diversification of sectors, indicate a promising scenario for 2023 and 2024. As the country faces challenges, the real estate sector remains a solid pillar, poised to shape a sustainable and dynamic future.

While the global economic scenario faces uncertainties, the real estate sector in Portugal maintains a more optimistic outlook. Investors and promoters, while acknowledging challenges, find stability in the market. With a focus on sustainability and digital transformation, the nation looks poised to navigate the complexities of 2024 and beyond.


Author: Paulo Lopes