House prices up 5.96% y-o-y in Q3 2020

Portugal’s house price growth is slowing, amidst the economic repercussions caused by the COVID-19 pandemic. Property prices in Portugal rose by 5.96% during the year to Q3 2020, sharply down from the previous year’s 11.28% growth. In fact it was the lowest growth since Q4 2017. On a quarterly basis, house prices increased 1.77% in Q3 2020.

All regions of Portugal have experienced significant house price falls during the last decade. And despite some recovery in 2009, house prices started to fall again in the last quarter of 2010. Prices only began to recover in Q4 2014, after 13 consecutive quarters of y-o-y house price declines.

Construction activity is weak. 

Residential construction activity has weakened this year, mainly due to the COVID-19 pandemic. In the first three quarters of 2020, the number of licensed dwelling permits in Portugal fell by 2.3% to 17,603 units from a year earlier, after rising by 18.4% in 2019 and 43.5% in 2018, according to figures from the Instituto Nacional de Estatistica (INE).

Rents, rental yields: yields are good in Lisbon, at around 5.45%  

Lisbon apartment costs around €3,830 per sq. m.

Portugal: typical city centre apartment buying price, monthly rent (120 sq. m)
	Buying price	Rate per month	Yield
Lisbon	€ 300,000	€ 1,578	5.45%

Recent news: The Portuguese economy grew by a record 13.3% in Q3 2020 from the previous quarter, a strong rebound from a record decline of 13.9% in Q2, buoyed by a recovery in domestic demand, as well as exports. Year-on-year, the economy contracted by 5.7% in Q3 2020, following y-o-y declines of 16.4% in Q2 and 2.3% in Q1.

Despite the improvement, Portugal’s economy is still expected to contract by a huge 9.3% this year, based on the European Commission’s projections, after the country introduced new restrictions and curfews amidst the continued rise in coronavirus infections.