Housing market • House prices
30 July 2024
Statistics Portugal (the Portuguese State's agency for the production and release of official statistics) has just published the results of the "House Prices Statistics at local level", the most comprehensive and detailed report on the evolution of prices in Portugal (I've added a brief methodological note at the end of the article so that you can draw your own conclusions).
With the data for the 1st quarter of 2024, it has been possible to aggregate the data shared by the National Statistics Institute over 6 years, since the 1st quarter of 2018. This gives us a prominent picture of the evolution of house prices nationwide, with particular detail in Lisbon and Porto and their respective metropolitan areas.
It is just as essential to take advantage of this statistics information as to understand the market and its context and determine which data should be prioritized and which could be questioned.
The aim is to give readers a better understanding of the dynamics of housing prices across the country and to remind them that diversity is very significant, even within the same region.
Aerial view of a beach in the Algarve
By Radu Bercan.
BEFORE ALL THE FIGURES, A QUICK REMINDER OF THE CONTEXT
It's important to remember that the most significant increase in house prices in Portugal began in what is known as the "post-troika" period and was initially felt from the historic center of Lisbon to almost the entire capital area (and, with a slight delay, from downtown Porto to the rest of the city).
It should also be recalled that – following the Portuguese government's request for a bailout – the Troika (the term used to refer to the decision-making group made up of the European Central Bank, the European Commission, and the International Monetary Fund) was in Portugal from April 2011 to May 2014.
As the period under analysis in this article refers to the last 6 years (Q1 2018 - Q1 2024), a brief overview of the years immediately ahead is given.
DEMAND
After the Troika left, Portuguese banks once again injected money into the economy, and interest rates were then at historically low levels, which were to fall even further. This has created a double pressure on demand: more significant incentives for credit and less attractive savings/investment solutions (i.e., more occasional investors).
Just to give you an idea, on 17 May 2014, the day Troika left Portugal, the 6-month Euribor was below 0.5%. In November 2015, it would go into negative territory and stay there until June 2022.
In 2012, a new rental law came into force, which boosted the market, and by the end of 2014, more than 2,000 golden visas had been issued and more than 2,000 non-habitual residence tax regime had been granted. In other words, Portugal was finally on the road to investment.
As if that weren't enough, the country revealed itself to the world as a tourist destination of choice during those years. And an effect that is not often given enough importance, a Portuguese man becomes one of the most prominent figures in world pop culture.
Since 1998, when the World Exhibition was held in Lisbon and José Saramago was awarded the Nobel Prize for Literature, other figures, events, and achievements in areas as far apart as politics and diplomacy, tourism and industry, sport, architecture, and the visual arts have been complementing the impact of the most followed person on Facebook and Instagram worldwide being a national citizen.
Portugal's exposure has grown significantly.
People only consider a country to visit, invest in, or live in if they know or have heard of it. One of the things that changed the most was how media-savvy this small country had become.
SUPPLY
Construction came to a halt. Between 2010 and 2014, almost 40,000 construction and real estate companies went bankrupt. Some of those that survived focused on emerging markets (as did some architects), and the last sector the banks wanted to put money into was the one that, on its own, almost monopolized non-performing loans to companies.
According to the Bank of Portugal's Financial Stability Report, in 2014, these two sectors concentrated 50% of overdue credit of non-financial companies (48% in 2016).
A decade later, the sector's collapse still needs to be overcome: in 2003 and 2009, 359.0% and 137.7% more new homes were completed, respectively, than in 2022.
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Graph 0 – Evolution in the number of dwellings completed in new construction for family housing in Portugal since the beginning of the 21st century.
Source: Pordata.
However, these figures may not be sufficient to quantify the number of dwellings introduced into the market each year because they don't include property rehabilitation, a subsegment of this sector's business that has profoundly impacted the housing market in Portugal over the last decade. According to Statistics Portugal, between 2018 and 2023, it accounted, on average, for 22% of all construction work completed and 31% in the five years immediately prior.
Finally, a curiosity: in 2015, there were 10 Civil Engineering courses that didn't receive a single student.
LET'S TAKE A LOOK AT PRICES OVER THE LAST 6 YEARS...
Next, you'll find, for each region or city, the median price/sqm of the total number of residential properties sold, in each of the last 24 quarters available: from the 1st quarter of 2018 to the 1st quarter of 2024.
These figures will always appear divided into 3 tables for the different sub-periods: Q1 2018-Q1 2020, Q1 2020-Q1 2022, and Q1 2022-Q1 2024.
In these tables, the values in red represent decreases compared to the previous quarter, and the values in bold are the maximums recorded in that municipality/parish throughout the entire period under analysis.
After 3 tables for each region or city, a graph will clearly show the price variation over these 6 years for each municipality or parish under analysis.
MUNICIPALITIES IN THE LISBON METROPOLITAN AREA
Aerial view over Cascais Bay.
By Gustavo Frazão.
Q1 2018 – Q1 2020
Table 1.1 – Evolution of median value per sq. m. of residential property transactions by municipality in the Lisbon Metropolitan Area, between Q1 2018 and Q1 2020 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
THE VALORIZATION OF THE CITY'S PERIMETER
In the pre-pandemic period (Q1 2018 - Q1 2020), Lisbon still recorded a very significant increase in value: 29.1%. However, the municipality of Amadora broke all appreciation records in Lisbon Metropolitan Area (LMA), registering growth of 47.0%.
Its proximity to Lisbon and, most likely, the extension of the Metro's blue line (the Reboleira subway station in Amadora was first opened in 2016) made this municipality a functional alternative for those who could no longer afford Lisbon's prices but didn't want to give up quick access to the center of the capital.
According to Google Maps, you can get from Reboleira to Marquês de Pombal (usually considered the most central point of Lisbon) in just 19 minutes.
Q1 2020 – Q1 2022
Table 1.2 – Evolution of median value per sq. m. of residential property transactions by municipality in the Lisbon Metropolitan Area, between Q1 2020 and Q1 2022 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
Between 1Q 2020 and 1Q2022, which can and should be associated with the restrictions and constraints registered through Covid-19, the appreciation of houses in Lisbon contracted to 9.3%, with quarterly decreases.
In the same period, the appreciation in Amadora fell to 20.5%, and the slowdown in the appreciation rate was felt in 13 of the 18 municipalities of LMA.
WHERE HAVE PRICES RISEN THE MOST DURING THE PANDEMIC?
When we analyze the data from the Pordata portal, we realize that the 5 municipalities where the appreciation between Q1 2020 and Q1 2022 was higher than the price growth in the two immediately preceding years are also those with the lowest population density.
Alcochete and Palmela have 150 inhabitants per square kilometer. In Mafra, Sesimbra, and Vila Franca de Xira, the same ratio varies between 250 and 450 inhabitants per square kilometer.
Do you have an idea of the population density in the municipalities of Lisbon, Amadora, or Odivelas? It's between 5,000 and 7,500 inhabitants per square kilometer.
What does this mean?
During this period, prices tended to grow more in less dense areas of the LMA. This aligns with the idea that common sense has produced so much during the pandemic: more than ever, people showed a willingness to trade centrality for space.
Q1 2022 – Q1 2024
Table 1.3 – Evolution of median value per sq. m. of residential property transactions by municipality in the Lisbon Metropolitan Area, between Q1 2022 and Q1 2024 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
6 YEARS LATER, (MORE THAN) TWICE THE PRICE
Over the last two years, house price appreciation has continued but has lost some of its momentum. However, there is an inverse proportionality relationship between the value of houses in a given municipality and their appreciation rate.
In other words, the lower the house price in a given location (the municipalities at the bottom of the table), the greater the scope for it to rise. This is consistent with the idea that the crest of house price increases in Portugal began in the center of Lisbon (and then in Porto) and spread to its outskirts.
The values registered in Cascais are a surprise since, together with Lisbon, it forms the country's most expensive pair of municipalities, with a reasonably significant gap to the following municipalities. And yet (even with a decrease in pace since 2020), it manages – literally – to double its valuation in the space of 6 years.
On the other hand, there is reason to believe that this is one of those cases where the statistical solution found (the measure of central tendency, in this case, the median) may not be efficiently reproducing the evolution of house prices at every given moment.
I promise to return to Cascais and its valuation in the conclusions of this article to illustrate what was suggested in its introduction: that the results of statistical studies can be questioned.
Finally, looking at Graph 1 and price trends over the entire period under analysis (between Q1 2018 and Q1 2024), it should be noted that in 10 of the 18 LMA municipalities – Cascais, Almada, Amadora, Mafra, Sintra, Seixal, Setúbal, Barreiro, Palmela and Moita – house prices have risen by more than 100%.
In other words, they more than doubled.
On the other hand, when we take a closer look at Table 1.3, we see that the appreciation of houses in two-thirds of these municipalities is already below 10% per year. This could be good news for those wishing to buy a home in the country's largest metropolitan area.
Q1 2018 – Q1 2024
Graph 1 – Evolution of median value per sq. m. of residential property transactions by municipality in the Lisbon Metropolitan Area, between Q1 2018 and Q1 2024 (red columns represent rises over 100%, and orange over 50%).
Source: Statistics Portugal.
LISBON CITY PARISHES
Aerial view of Marquês de Pombal Square, generally referred to as the most central point in Lisbon.
By Sebastio.
Q1 2018 – Q1 2020
Table 2.1 – Evolution of median value per sq. m. of residential property transactions by parish in Lisbon city center, between Q1 2018 and Q1 2020 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that parish during the entire period under analysis).
Source: Statistics Portugal.
First, what is most obvious from looking at these tables is that we should be careful when we homogeneously talk about Lisbon. Its 24 parishes and 100 square kilometers represent a heterogeneous territory with different dynamics.
The period between the beginning of 2018 and the beginning of 2020 is still a time of significant house price appreciation in Lisbon.
The red quarters visible in Table 2.1 (which show a decrease compared to the immediately preceding period) are in a clear minority, and only in Carnide is the increase over these two years less than 20%, with 14 of the 24 parishes showing a variation of more than 30%.
Q1 2020 – Q1 2022
Table 2.2 – Evolution of median value per sq. m. of residential property transactions by parish in Lisbon city center, between Q1 2020 and Q1 2022 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that parish during the entire period under analysis).
Source: Statistics Portugal.
THE PANDEMIC, MOBILITY, RENTING AND LOCAL ACCOMMODATION
Table 2.2 shows that, in general, the pandemic period has significantly penalized the evolution of prices in the capital. This is partly due to the difficulty or inability that residents in other countries sometimes face in arriving or settling in Portugal.
It's important to remember that, unlike what is often suggested, the effect of pressure from foreign citizens on house prices is not strictly through the purchase of a property. Suppose this demand affects rents in the city. In that case, it will also impact the market value of a house, which is ultimately expressed as a multiple of the rents that the property can generate.
On the other hand, you may not remember, but during the state of emergency declared during the pandemic, the government made it impossible to cancel rental contracts for non-payment of rent. In other words, regardless of whether we agree or disagree with the measure (and we should remember that the context was probably the most atypical of our lives), the truth is that political action left landlords at the mercy of tenants.
What is the point of consulting the official data on new rents at the time (and in Q1 2021, Lisbon and Porto registered year-on-year drops in rents) when we know that in that period, there were landlords who agreed to lower rents and others who stopped receiving them?
We must remember the contribution of this context when we look at Table 2.2 and see the values in red, indicating price drops compared to previous quarters
Another piece of evidence is that prices in the parishes of Misericórdia and Santa Maria Maior fell during the pandemic (and that in some other parishes, the value increases were marginal). There is also a double effect here. These two parishes geographically encompass some of the most touristic areas of the cities. So it's normal that the short and medium-term rentals that proliferate there have fallen in number and value, penalizing the expected income those properties could generate.
At that time, there was no shortage of apartments on Idealista (Portugal's largest real estate portal), in central areas of the city, advertised at attractive prices for periods of less than a year in the hope that the following summer, the evolution of the pandemic would once again allow for high yields in short-term formats.
On top of this are two parishes that comprise neighborhoods where restrictions on short-term rental/Alojamento Local (AL) were imposed from the outset: the so-called "containment zones".
What happened in these areas?
- New license applications for AL units are no longer accepted;
- The sale of a property with a valid license implies its expiry, making it impossible to replicate the previous activity and its profitability, penalizing the commercial value of the property.
The first two containment zones were implemented in November 2018 and affected both parishes. But, a year later these restrictions were extended and left practically the entire parish of Santa Maria Maior excluded from new AL licenses. That said, according to the Lisbon City Council (CML) and the latest 2021 Census, in Santa Maria Maior and Misericórdia the ratio of properties dedicated to LA to "Classic Family Housing" was 71.3% and 47.4%.
In other words, in each of these parishes, for every 10 dwellings where someone is expected to live permanently, there were another 7 and 5 dwellings, respectively, dedicated to AL. These are very significant figures which seem to justify the need for CML to apply geographical restrictions to new AL licenses.
But this also means that a very significant proportion of the apartments in those two parishes will lose their ability to generate income the moment they are sold (due to the extinction of the AL license and the impossibility of replicating the current business model). This also means that the price at which it will be sold will necessarily be lower than the price someone would be willing to pay for those properties if there were no restrictions on their operation.
Q1 2022 – Q1 2024
Table 2.3 – Evolution of median value per sq. m. of residential property transactions by parish in Lisbon city center, between Q1 2022 and Q1 2024 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that parish during the entire period under analysis).
Source: Statistics Portugal.
AND NOW?
If you look at the behavior of housing prices over the last two years, you can see that properties in Lisbon are recovering their pace of appreciation. The figures registered between Q1 2022 and Q1 2024 do not suggest the stabilization of housing values that so many potential buyers seem to be looking forward to.
In other words, the most detailed and robust statistics on housing prices in Portugal suggest that, in general (and this disclaimer is essential), dwellings in Lisbon continue to appreciate. And, if the mathematical results are to be believed, they will have always appreciated above inflation during this period. Even if, in the conclusions of this article, it will be questioned whether it is reasonable to conclude that the methodology of this study allows us to take these particular data for granted.
As for the fact that in less than six years prices in Marvila have risen by more than 300%, and that this once forgotten parish has gone from the cheapest to the second most expensive in Lisbon, I refer you to this text from June 2022, which explained what “Marvila has that no other place in Lisbon can offer”.
Q1 2018 – Q1 2024
Graph 2 – Evolution of median value per sq. m. of residential property transactions by parish in Lisbon city center, between Q1 2018 and Q1 2024 (red columns represent rises over 100%, orange over 50% and below 100%, and blue below 50%).
Source: Statistics Portugal.
MUNICIPALITIES IN THE PORTO METROPOLITAN AREA
Aerial view of the “She Changes” installation, better known as “Anémona,” near Matosinhos Beach.
By Pedro Menezes.
Q1 2018 – Q1 2020
Table 3.1 – Evolution of median value per sq. m. of residential property transactions by municipality in the Porto Metropolitan Area, between Q1 2018 and Q1 2020 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
Remember what was written at the beginning? That the most significant increase in the value of houses in Portugal was initially felt from the historic center of Lisbon to almost the entire capital area?
And, with only a slight delay, from downtown Porto to the rest of the city?
This is precisely what can be seen when comparing the results obtained between the first quarter of 2018 and the first quarter of 2020 in the parishes of Lisbon and Porto and the municipalities of their respective metropolitan areas.
In this period, valuation was already more robust in the capital's metropolitan area than in the city center. But to the north, the parishes of the city of Porto were still appreciating at a higher rate than the neighboring municipalities.
Q1 2020 – Q1 2022
Table 3.2 – Evolution of median value per sq. m. of residential property transactions by municipality in the Porto Metropolitan Area, between Q1 2020 and Q1 2022 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
What struck me most during this period was the fact that appreciation in Porto and Matosinhos fell by more than 10% compared to the previous 2 years (from 35.8% and 36.9%, respectively, to 24.5%).
These are the most expensive municipalities in the metropolitan area. However, they are also the most densely populated and, therefore, at least in theory, the most vulnerable to the impact of a pandemic.
On the other hand, which municipality has seen the most significant increase in value during the pandemic period? Arouca, with 33.6%. Coincidently (or not), it is one of only two municipalities (along with Espinho) where the growth in value in the previous period was less than 10%.
Arouca has, by far, the lowest population density in the entire metropolitan area (according to Pordata, an estimate of only 64 inhabitants per square meter in 2023). That's why, although not as obviously as in the Lisbon Metropolitan Area (where there are municipalities with a higher population density), there also seem to have been those further north willing to trade centrality for space.
During this period, the wave of residential real estate appreciation in the Porto Metropolitan Area (PMA) began to follow what was to be expected: growth from the center to the outskirts.
Q1 2022 – Q1 2024
Table 3.3 – Evolution of median value per sq. m. of residential property transactions by municipality in the Porto Metropolitan Area, between Q1 2022 and Q1 2024 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
In 14 of the 17 PMA municipalities, prices rose by more than 20% between the first quarters of 2022 and 2024. Something that, for example, only happened in 6 of the 18 AML municipalities.
This sharper growth in prices in the north is essentially due to the aforementioned slight delay that Porto is experiencing compared to Lisbon at the start of this “post-troika” boom. Not forgetting that what we call a delay in the light of a chronological analysis can mean greater scope for valuation in an investment diagnosis.
CONCENTRATION OF THE HIGHEST VALUATIONS AROUND THE CITY OF PORTO
Graph 3 shows that, contrary to what happens in the Lisbon region (where prices tend to vary more in outlying municipalities), the biggest increases in value occurred precisely in 2 of the 4 municipalities adjacent to Porto: Matosinhos and Vila Nova de Gaia.
It should be added that, in general, in the municipalities where prices are lowest, the increase in value has not been particularly significant in recent quarters. Arouca, the least dense municipality and the one that had appreciated the most during the pandemic, has appreciated the least in the last two years.
These data suggest that, as house prices and real estate investment have expanded from the center of Portugal's two largest cities to their outskirts, it should be noted that in the north (even discounting priorly mentioned delay), the strength of this ripple effect seems to be more limited in space.
Graph 3 illustrates this. Of the 5 municipalities in the PMA (out of a total of 17) whose housing values have more than doubled, 3 of them are precisely the most expensive: Porto, Matosinhos and Vila Nova de Gaia.
Q1 2018 – Q1 2024
Graph 3 – Evolution of median value per sq. m. of residential property transactions by municipality in the Porto Metropolitan Area, between Q1 2018 and Q1 2024 (red columns represent rises over 100% and orange over 50% and below 100%).
Source: Statistics Portugal.
PORTO CITY PARISHES
Largo dos Lóios, Porto's historical city center.
By Rh2010.
Q1 2018 – Q1 2020
Table 4.1 – Evolution of median value per sq. m. of residential property transactions by parish in Porto city center, between Q1 2018 and Q1 2020 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
In this period, it is possible to confirm a reasonably robust evolution of housing prices in Porto. It is assumed that the increase in value in the União das Freguesias de Cedofeita Santo Ildefonso Sé Miragaia São Nicolau e Vitória, the city's historical area, which includes "Baixa" and "Ribeira" areas, may have been even more pronounced in previous years. In any case, this more significant price variation is beginning to be felt clearly in its 4 neighboring parishes: União das Freguesias de Lordelo do Ouro e Massarelos, Ramalde, Paranhos, Bonfim.
This price rise in historic areas and their surroundings demonstrates that urban rehabilitation has played a crucial role in the existing buildings (Porto's downtown was just as decadent as its Lisbon equivalent) and in rebuilding the social fabric. In other words, there has been a significant gentrification of the area. Some will call it a renewal of the resident population; others will call it segregation.
It should be noted that the União das Freguesias de Aldoar Foz do Douro e Nevogilde, where part of the famous Avenida da Boavista is located and, as the name suggests, the Foz area, is the most expensive region in the city but the one that has seen the least abrupt, albeit quite significant, increase in value.
Q1 2020 – Q1 2022
Table 4.2 – Evolution of median value per sq. m. of residential property transactions by parish in Porto city center, between Q1 2020 and Q1 2022 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
What is usually regarded as the pandemic period hasn't affected Porto the same way as it did the capital.
Although the appreciation of houses in the union of parishes that includes the historic area has fallen by more than 10%, this has to be attributed in large part to the lockdowns and all the restrictions that have greatly affected tourism.
On the other hand, the appreciation curve in Porto was still very vibrant. During this period, only Bonfim appreciated by less than 20% (10.9%). However, this figure must be put into context with the impressive 72.5% increase in value recorded in this same parish over the previous two years.
Q1 2022 – Q1 2024
Table 4.3 – Evolution of median value per sq. m. of residential property transactions by parish in Porto city center, between Q1 2022 and Q1 2024 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
Table 4.3 demonstrates how Porto's idea of delay compared to Lisbon also offers an inversely proportional insight: that there is more (temporal) space for the appreciation of residential assets in the "undefeated city" (Porto holds this nickname because, after its reconquest in the 9th century, it was never conquered again by other forces).
BUT BACK TO URBAN REHABILITATION...
As prices in the historic area grew, interest in the neighborhoods to the east (opposite to the mouth of the River Douro) increased.
The saturation of the historic area has generated one of the most visible cascade effects of the last six years. One outcome is the emergence of the parishes of Bonfim and Campanhã as part of the group of preferred targets for real estate investment and urban rehabilitation in the city.
After all, how many corners around Passeio de São Lázaro or Campo 24 de Agosto, consensually described as decadent about 10 years ago, have now become regular features in the best-known lifestyle magazines?
And if you keep walking in the same direction, what will you find?
Campanhã Train/Bus Station. The location that offers, for instances, a direct link to Faro, the furthest of all the country's district capitals. Around it, an ambitious urbanization plan has already been presented that aims to turn that point of the city into a new centrality.
And what does Graph 4 do other than demonstrate that this is precisely what is happening?
In the parishes of Bonfim and Campanhã, house prices grew by 145% and 207%. To be clear, this means that - in 6 years - the variation in the sale value of residential properties in Bonfim has increased almost 2.5 times. And that, in Campanhã, their median value has more than tripled.
But does it make sense to say that house prices have tripled?
It may have. But please note that we are not necessarily saying that the same property, with no significant changes in its state of repair, has tripled in price in 6 years. Once again, we invite you to read the article's conclusions for a more detailed answer to this question.
Q1 2018 – Q1 2024
Graph 4 – Evolution of median value per sq. m. of residential property transactions by parish in Porto city center, between Q1 2018 and Q1 2024 (red columns represent rises over 100% and orange over 50% and below 100%).
Source: Statistics Portugal.
MUNICIPALITIES OF THE DISTRICTS' AND REGIONAL GOVERNMENTS' CAPITALS
Leiria Castle, seen from Rodrigues Lobo Square.
By Diogo Palhais.
Q1 2018 – Q1 2020
Table 5.1 – Evolution of median value per sq. m. of residential property transactions in the municipalities of the districts and the regional governments capitals, between Q1 2018 and Q1 2020 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
Do you remember some lessons from your early school days? Portugal is indeed a unique two-headed country.
Even today, almost forty years after I first heard this strange word, Lisbon and Porto metropolitan areas account for around 45% of the national population.
But the truth is that little by little, foreign demand is being felt all over the country.
Q1 2020 – Q1 2022
Table 5.2 – Evolution of median value per sq. m. of residential property transactions in the municipalities of the districts and the regional governments capitals, between Q1 2020 and Q1 2022 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
“From Bragança to Lisbon
9 hours away
I wish I had a plane
To go there more often (...)”
Para ti Maria (translated), Xutos & Pontapés (1988)
Q1 2022 – Q1 2024
Table 5.3 – Evolution of median value per sq. m. of residential property transactions in the municipalities of the districts and the regional governments capitals, between Q1 2022 and Q1 2024 (values in red represent price drops compared to the previous quarter, and the ones in bold register peaks in that municipality during the entire period under analysis).
Source: Statistics Portugal.
COAST VS. INLAND: THE GREAT NATIONAL CONTRAST
Those lines by Xutos & Pontapés (one of the most famous lyrics in the history of national rock music) are just a melancholic-funny portrait of a reality that illustrates the contrasts:
1) in the way people occupy the territory;
2) in the conditions they have at their disposal to move around.
In this case, Bragança is the district capital furthest from Lisbon.
It is because of these regional asymmetries, or in order to mitigate them, that the famous SCUTs (toll-free roads) were created. This is also one of the reasons (the other is usually to connect Lisbon and Porto in half the time) why successive governments have talked about the railroad so much.
The truth is that Guarda, the district capital whose municipality has the lowest transaction values in the whole country (and the one where the price evolution has been the weakest in the last 6 years), is the same city that has been without a rail link to Lisbon since April 2022, due to work that should have been finished in December of the same year.
If we divide Table 5.3 in half, we realize that among the 10 capitals with the highest land prices, there are only 3 that are not bathed by the sea or an estuary: Évora (a city with a deep tourist tradition), Coimbra (a mandatory stop for any train running between Lisbon and Porto, and home to the oldest university in the country), and Braga (the largest urban center outside the metropolitan areas of Lisbon and Porto).
With this being said, Braga and Coimbra, respectively, are around 30km and 40km from the nearest beach, which technically makes them considered littoral cities.
But this is just a reminder of what most 10-year-olds will have learned at school: most of Portugal's population lives on the coast. We should add that Demographics is one of the fundamental factors in the valuation of residential buildings.
Another note about the 10 "most expensive" capitals is that only Setúbal is not home to a university (but it does have a polytechnic institute). Any higher education establishment (including polytechnics, although predictably with less impact than a university) influences market values. Student demand for rooms and apartments puts pressure on rents, which – necessarily – inflates the market value of dwellings. It goes without saying that the impact on local economies doesn't stop at accommodation.
Q1 2018 – Q1 2024
Graph 5 – Evolution of median value per sq. m. of residential property transactions in the municipalities of the districts and the regional governments capitals, between Q1 2018 and Q1 2024 (red columns represent rises over 100%, orange over 50% and below 100%, and blue below 50%).
Source: Statistics Portugal.
TOP 30
Do you know which are the only regions that, according to the 2021 Census, have seen population growth in the last 10 years? Lisbon Metropolitan Area (LMA) and the Algarve.
And that, of the 30 municipalities where the cost of housing is highest, 13 are in the LMA and 11 in the Algarve?
The list is completed with Porto and Matosinhos in the Porto Metropolitan Area (PMA), Grândola and Sines in the Alentejo (which counteract the sharpest regional decline in the whole country), and Funchal and Nazaré.
A picture of a surfer in action at the Nazaré Challenge, part of the World Surf League's Big Wave Tour in Portugal, the organization that runs the world's professional surfing competitions.
By Hugo Amaral.
I have shared data such as that shown in Graph 6 with people who continue to claim that foreign demand does not significantly impact house prices in Portugal.
And I wonder if the fact that 6 out of the 10 municipalities where it costs the most to buy a house are located in the Algarve – the first destination in mainland Portugal to be mentioned when it comes to tourism – isn't an indicator you should consider.
It's not a question of demonizing foreign demand (in fact, people in my profession – real estate agents – primarily benefit from it) but to try to recognize the real causes of the phenomena. Failure to do so could mean attributing to other phenomena an impact that doesn't concern them, which would create obstacles to knowledge.
I think there are conclusions to be drawn from the fact that half of the 30 most expensive municipalities include 11 municipalities in the Algarve, 2 in the Alentejo, 1 in Madeira, and another whose best-known images are of surfers and giant waves (the days of black and white portraits of fishermen and ladies fishmongers on Nazaré beach are long gone).
This goes without mentioning the obvious: there is undeniable foreign demand in the other 15 most expensive municipalities (13 in the LMA and 2 in the PMA). In fact, Statistics Portugal itself points out that "In Grande Lisboa and Área Metropolitana do Porto, the median price (€/m2) of transactions carried out by purchasers with tax residence abroad exceeded the price of transactions by purchasers with tax residence in the national territory by 82.3% and 47.5%, respectively".
Researchers widely accept that using tax residence in Portugal to determine the number of foreign buyers is insufficient. Non-habitual residents, the overwhelming majority of whom are foreigners and necessarily domiciled in Portugal, are just one of the evidence indicators of this underestimation.
Graph 6 - Ranking in descending order of the 30 municipalities with the highest median values per square meter (€/sqm) in Portugal [the red columns correspond to values above €4,000/m2, the orange ones to values above €3,000/m2, and the blue ones to values above €2,000/m2]..
Source: Statistics Portugal.
CONCLUSIONS
(and what the statistics don't tell us)
This article aims to share the dynamics of house prices over the last 6 years and identify the variables responsible for their trajectories in different parts of the country.
That said, the figures presented throughout this article leave little doubt: house prices have risen significantly in different regions since 2018. Previous studies suggest that this trend has been going on since mid-2015.
SPECULATION OR REHABILITATION?
In the context of urban rehabilitation, purchasing a vacant building at time X will predictably lead to the sale of "new" apartments at a much higher value/ sqm at time Y, through the incorporation of value from the development of the project and the respective work.
In other words, the price variations we have seen in this article should not be understood strictly as a "natural appreciation" of housing prices.
The result of intervention in the building incorporates value. The end product is often a different apartment in a different building. Hopefully, in a street that has also become a different place through the repetition of this pattern.
It is this pattern that should be present in more visible increases in house prices. When this is the case, most of the built heritage in a given place becomes an upgrade on what it was before. This probably invites a perception of change: the feeling that the place is nicer today than it was yesterday but still not as nice as it could be tomorrow.
Detail of buildings in Largo do Toural, in the historical center of Guimarães.
By Bruno Martins.
This is something we have seen, not just in Lisbon and Porto, but in many other medium-sized cities with historic areas, or rather, in residential areas where, as a general rule, there are centuries-old buildings.
It may sound vague, but appreciating what is perceived at a given moment as “old” is very present. And one thing is sure: I receive a lot of briefings from foreign buyers that begin or end with the expression “house with character”.
Let's go back to the historic centers of Lisbon and Porto. As mentioned in the introduction to this article, according to INE, property rehabilitation will account for 22% of all work completed in Portugal between 2018 and 2023 and 31% in the five years immediately prior. I wouldn't be surprised if, in the rehabilitation areas of Porto, the weight of urban rehabilitation was double. At the end of 2022, Confidencial Imobiliário (the best-known real estate database in Portugal) reported more than 30% growth in investment in urban rehabilitation areas in Porto.
I want to point out that when we see that prices in Campanhã have tripled in the space of six years, we should consider that this appreciation could also be the result of the repetition of this pattern: decrepit apartments, buildings, and streets rehabilitated to today's standards.
WHEN STATISTICS AREN'T ENOUGH...
In 2023, I began to hear Afonso Silva, Operating Principal at KW LEAD and author of a monthly event called “Barómetro de Mercado” (Market Barometer), comment that prices in Lisbon might not be rising. He suggested that the median/sqm of sales (the central value, the one that divides a set of data in half and which is used by INE) wasn't replicating the evolution of house prices in the capital in the best way.
Earlier this year, I read a short text by Joaquim Montezuma, Professor at ISEG and PhD in Real Estate Economics from the University of Glasgow, in which he shared a similar idea.
As far as I could tell from the conversations I had with both of them, neither seemed convinced by the rise in prices, considering the significant decrease in demand (determined by the number of transactions), and a slight increase in supply (measured by the availability of new dwellings).
Remember when I said that Cascais was surprising for having both such a high price/sqm and such a sharp increase in value over the last 6 years?
In other words, that the median value/ sqm of transaction values had doubled in the space of 6 years?
It occurred to me that I could go to Idealista and analyze the supply of houses on the market. I found that, as of today, July 30, 2024:
1) Of the 1,050 residential properties that Idealista advertises for €3,000,000 or more throughout the Lisbon District (which comprises 16 municipalities, including Lisbon and Cascais), 595 (57%) are in the municipality of Cascais. Lisbon has 236 advertisements for dwellings in this price segment, equivalent to 40% of those in Cascais.
2) On the other hand, these 595 homes (worth €3,000,000 or more in Cascais) represent 11% of all the houses advertised by that real estate portal in that municipality. While the 236 properties advertised in Lisbon for €3,000,000 or more represent just 2% of the total number of homes advertised on that portal in the capital.
Are these figures high? Yes. And honestly, it seems surprising to me that 11% of the listings for houses for sale in Cascais have values equal to or greater than €3,000,000. Even though we know that the annual weight of transactions for properties of this value may be lower, if only because, traditionally, sales times are longer.
If and when they are sold, the transaction values of these houses will necessarily inflate the median and average value/sqm of the universe of dwellings sold in Cascais. Not only do these sales tell us very little about the evolution of house prices in other market segments, but they also don't suggest that the value of those other properties has doubled in six years.
Could it be that, as Joaquim Montezuma said, “the increase in prices is caused by a greater weight in the sample of more expensive properties”?
I would venture to answer yes.
Let's go back to Afonso Silva and an interesting example he has used to illustrate the idea that transaction values in Lisbon will not continue to rise, at least not at the rate that the median prices/sqm suggest.
Source: Barómetro de Mercado (Market Barometer).
Source: Barómetro de Mercado (Market Barometer).
First of all, please take a quick look at these two images. If demand for bottles in that price segment fell significantly, the median unit price would rise. However, this doesn't necessarily mean that the value of bottles in general would have risen.
As we know, the fall in demand for homes has been impacted, above all, by the rise in interest rates over the last two years. In all likelihood, the households with the lowest incomes will be the first to be impacted because they have less margin/financial cushion to withstand and accommodate such a sharp increase in what is usually the expense that takes up the largest portion of disposable income.
Therefore, as with bottles of wine, a drop in a lower-middle residential market segment will give greater relative weight to higher-value transactions and inflate the median, the central value that divides a set of data in half.
I don't think there is much point in raising hyperbolic doubts about all the housing price studies known to date. However, it is indisputable that the knowledge and insight that Afonso Silva and Joaquim Montezuma have brought are of great use in analyzing residential property values and their evolution over the last two years, particularly in the metropolitan areas of Lisbon and Porto.
AUTHOR'S COMMENT
When someone is considering buying/selling a residential property, it's common to base their expectations on the values they will make/spend on articles like this one. However broad, deep, analytical, and critical a text may be, it is a mistake to value reflections like this beyond a simple contextualization.
Do you have extra reasons to read this article if you are considering buying/selling a property? Absolutely. However, this text's effort is not enough to assess the market value of a given home, nor is its purpose.
When someone is thinking of buying an apartment in Matosinhos, a villa in Belém, or a dwelling in any of the other places mentioned in this article, they need to understand (or at least try to) what is happening right there.
Each neighborhood has its unique characteristics and trends. Understanding these nuances is crucial in making well-informed decisions.
View of the town of Óbidos from the castle walls.
By Kite_rin.
BRIEF METHODOLOGICAL NOTE
All the data shared in this article was sourced from the local "House Prices Statistics at local level" of the Statistics Portugal, which has three methodological advantages over any other housing price report in Portugal:
1) They refer to the actual transaction values and the Gross Private Area that appears on the property's Tax Authority Property description (thus ensuring consistent information on prices per square meter), information that is only possible thanks to the existing protocol with the Tax and Customs Authority (AT), which gives Statistics Portugal access to tax information;
2) They include all property transactions in Portugal for “housing”, with a gross private area of more than 20 sqm;
3) The results published for each quarter correspond to the arithmetic average of the value recorded in that quarter and the three previous quarters, significantly mitigating any seasonal effects on sales behavior.
Bank Appraisals on Housing
Statistics Portugal also produces a monthly study on bank appraisals. But this is only “information characterizing the dwellings that are the subject of an application for bank financing and in the process of which there is a technical evaluation of each property”, which includes 7 banking institutions and which Statistics Portugal presumes to cover about 90% of the total amount of new housing loans granted in Portugal. In other words, this data only represents a portion of the universe of transactions.
Not to mention that, in my opinion, many of these reports are done in such a short space of time that their quality is significantly affected.
Studies produced by portals, brokers and databases
It should also be noted that when we are dealing with a study carried out by a real estate portal, the results are based on the asking price (which, in the vast majority of cases, does not correspond to the actual transaction value). It is also more difficult to ensure that the areas entered are correct. What's more, we often find the same property advertised on the same portal for different prices and area values.
On the other hand, if the study was carried out by a real estate brokerage brand, it will be able to present real transaction values (and more information and details about those particular properties), but only those in which it had direct involvement, which will significantly limit the scope of the study.
There are also databases (the best-known is Confidencial Imobiliário) that have access to the transaction values that the affiliated brokerage companies communicate to them. But in any case, they ignore all transactions carried out by private individuals or brokerage companies with which they do not have agreements (the point in favor of this database is that it produces results more quickly).
For these reasons, I believe that Statistics Portugal's local housing price statistics are the ones that offer the most exhaustive and representative picture of the entire universe of housing prices in Portugal.
