Portugal's house prices up 5.96% y-o-y in Q1 2019

Portugal’s housing prices continue to rise, fuelled by surging demand as well as improved economic conditions. Property prices in Portugal rose by 5.96% during the year to Q1 2019, up from y-o-y increases of 5.39% in Q4 2018, 4.7% in Q3 2018, 4.53% in Q2 2018 and 4.7% in Q1 2018. House prices increased 1.88% q-o-q in Q1 2019.

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.

Demand and supply are surging. In 2018, the total number of housing transactions in Portugal rose strongly by 16.6% to 178,691 units from a year earlier, according to the Instituto Nacional de Estatistica. Likewise, the value of transactions surged 24.4% y-o-y to €24.06 billion (US$26.81 billion) over the same period. Clearly the new wealth tax introduced in 2017, applicable to higher-valued properties, has in fact had a negligible impact on the luxury housing market.

In Q1 2019, the number of licensed dwelling permits in Portugal soared almost 28% to 5,887 units from a year earlier, after rising by about 40% in 2018.

The Portuguese housing market is expected to remain buoyant this year, with Moody’s Investors Service predicting house price increases of between 7% and 8% every year until 2020.

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 government introduced a new wealth tax in 2017, officially called Adicional Imposto Municipal Sobre Imóveis (AIMI). It is an annual tax, charged on the Valor Patrimonial Tributário (VPT) of higher-value properties, regardless of where the owner resides. Under the new wealth tax, the owner is liable if his/her property (or share of a property) is worth over €600,000.

The Portuguese economy expanded by 0.5% q-o-q and by 1.8% y-o-y in Q1 2019. The economy is expected to grow by 1.7% this year, from annual rises of 2.1% in 2018, 2.8% in 2017, 1.6% in 2016, 1.8% in 2015, and 0.9% in 2014, according to the European Commission.