The rise and fall of Portugal’s real estate market are not distributed uniformly across the country and its islands. Starting in the ever-popular Algarve, 2021 saw a massive 16.5% increase in bank valuations across the board.
In March of 2022, the inflation rate in Portugal hit 5.3%, a level not seen in Portugal for nearly three decades. Medium-term, this escalation will affect home prices, which have been steadily rising since the troika left the country.
Some foreign buyers are willing to pay twice as much as a Portuguese for a property in Portugal. No signs indicate that the rising cost of buying a home in Portugal will slow down anytime soon.
With 1,355 euros per square meter (euros/m2) in the fourth quarter of 2021, the median price of a Portuguese family home reached a new all-time high. This is an annual growth rate of 14.1% and a quarterly growth rate of 12.2%, as the Portuguese National Statistics Institute (INE) reported.
The data also shows that in many urban centres, like the Greater Lisbon and Algarve areas, foreign buyers spent over twice as much as Portuguese buyers on a home. Let’s delve deeper into what 2022 holds for the Portuguese real estate market.
Even though the Russian invasion of Ukraine has created a lot of uncertainty, the Portuguese economy is still expected to grow shortly.
The Bank of Portugal predicts that the country’s GDP will expand by 4.9% in 2022 (up from 4.9% in 2021) before slowing to 2.9% in 2023 and 2.0% in 2024, closer to the estimated long-term growth rate.
As economic activity rises, more people can find jobs, and the unemployment rate falls. Over the long term, these effects will fade, but they will be partially counteracted by rising wage and price pressures as the Portuguese economy makes greater use of its resources.