Trend: house prices up 4.7% y-o-y in Q3 2018

Portugal’s housing prices continue to rise, fuelled by surging demand as well as improved economic conditions. Property prices in Portugal rose by 4.7% during the year to Q3 2018, from annual increases of 4.53% in Q2 2018, 4.7% in Q1 2018, 3.03% in Q4 2017, and 4.04% in Q3 2017.

House prices increased 1.95% q-o-q in Q3 2018.

Analysis: demand is rising strongly. During 2017, the total number of housing transactions rose by 20.6% to 153,292 units from a year earlier, while transactions value surged 30.6% y-o-y to €19.34 billion (US$22.78 billion), according to the Instituto Nacional de Estatistica.

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.

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

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

Portugal.: 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.

Portugal’s economy grew by 2.7% in 2017, up from the previous year’s 1.5% expansion and the highest growth since 2000, according to INE. In Q3 2018, the economy expanded by 2.1% y-o-y, from annual growth of 2.4% in Q2 and 0.4% in Q1. The economy is projected to expand by 2.2% this year and 1.8% in 2019, according to the European Commission.