The increase in inflation and the decrease in purchasing power have significantly affected the Portuguese in several areas. This is no exception when we talk about real estate market trends in 2023.
Experts point to a year of cautious optimism in the real estate field, although there are many challenges. Explore with us the real estate market trends in 2023 and discover how the National Coordinating Director of DECIÕES E SOLUÇÕES, Guida Sousa, views the current situation.
5 Real estate market trends in 2023
1. The effects of inflation
The sharp increase in inflation has direct effects on increasing the cost of living and reducing purchasing power. Adding to the fact that salaries remain practically unchanged, the Portuguese have suffered a decrease in financial capacity.
As a consequence, they look for lower-value properties (namely to remodel), prefer to rent or postpone the decision to move casa. This trend in the real estate market in 2023 is particularly true for those who depend on bank financing.
2. The expansion of areas of interest
According to Guida Sousa, the increase in demand on the outskirts of cities (for example, Lisbon, Porto and Coimbra), in rural areas and Interior of the country, mainly by the middle class.
Guida Sousa also clarifies that this trend in the real estate market in 2023 comes mainly from reasons of an economic nature, not just for reasons of preference: “At the time of the pandemic peak, this phenomenon began to be a requirement for families who wanted to escape from the hustle and bustle of the city and/or having more space at home. Post-pandemic, this is a criterion imposed on Portuguese families due to the lack of economic possibilities to live in big cities.”
3. Rising interest rates
The European Central Bank has been increasing interest rates. This is a tool that aims to slow down or reverse the rise in inflation, as it limits the money available to circulate.
The increase in interest on loans makes it impossible for many families to buy a house (and for others to be able to sell), as it is more difficult to pay the installments. In a panorama of general sustainability, the granting of credit is more careful, which reduces the risk of default and a consequent chaos identical to that of 2008.
Some owners are led to put their properties for sale for a lower price, in order to generate liquidity. According to Guida Sousa, this leads “to a negative adjustment of prices present in the market, even if minimal. Thus, we are facing conditions that encourage an increase in supply simultaneously with a decrease in demand, in the lower market segment, thanks to families with lower incomes.”
This is one of the phenomena that contributes to price stabilization, one of the most anticipated trends in the real estate market in 2023.
4. The adjustment of real estate prices
The rise in interest rates and the drop in purchasing power determine the cooling of the real estate market. Since a general slowdown in demand and a stabilization of inflation are expected, we can expect a more balanced and rational definition of selling prices.
However, this adjustment is far from homogeneous. It will be much more visible to national buyers (more subject to financing, interest and inflation) than in foreign countries. And it is likely that some price increases will be felt, especially in regions where demand exceeds supply, such as Lisbon and Porto.
Other trends in the real estate market in 2023 resulting from the correction of prices include the increase in negotiation power and the period during which the properties are on the market.
5. Foreign influence in Portugal
2023 is the year that confirms the foreign presence in the Portuguese real estate market as predominant and inescapable. The reinforcement of North American investment stands out.
The migration of the Portuguese middle class to the outskirts and to the interior is largely dictated by the presence of the international upper classes in urban centers and on the coast, where prices they shoot. At a European level, Portugal still has a stable real estate market and a low cost of living.
There are attractive factors such as quality of life, the intensification of teleworking, security, the mild climate, gastronomy and ease of integration.
Challenges and opportunities
As Guida Sousa illustrates, real estate market trends in 2023 are “a sweet treat for some and a mischief for many others”. It is not a year for alarms, but neither is it a year for excessive optimism.
The real estate market, as a provider of an essential good, is a perennially resilient sector, which continues to attract a lot of investment and is a profitable and safe option for investing money.
If you want to find out more about the real estate market, be sure to visit our blog . At DECIÕES E SOLUÇÕES, we not only want to offer you expert and personalized support, but also to provide you with useful information.
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