House prices up 8.12% y-o-y in Q2 2020

Portugal’s housing prices continue to rise strongly, amidst surging demand buoyed by low interest rates. Property prices in Portugal rose by 8.12% during the year to Q2 2020, slightly lower than the previous year’s 10.09% growth. In a quarterly basis, house prices fell slightly by 0.3% in Q2 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. 

Yet, construction activity has weakened this year, mainly due to the COVID-19 pandemic. In the first half of 2020, the number of licensed dwelling permits in Portugal fell by 4.1% to 11,259 units from a year earlier, after rising by 18.4% in 2019 and 43.5% in 2018, based on INE figures.

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 shrank by 13.9% in Q2 2020, worse than the previous quarter’s 3.8% contraction and the biggest quarterly contraction ever recorded, according to the Instituto Nacional de Estatistica (INE). Year-on-year, the economy plunged 16.5% in Q2.

Portugal’s economy is expected to contract by a huge 9.8% this year, based on the European Commission’s projections, reflecting the impact of the coronavirus pandemic which prompted the country to introduce isolation measures in March.