The real estate sector’s resilience in face of the pandemic may begin to waver, warn a number of industry experts, with several factors putting pressure on property prices at the same time.
The European Commission had already hinted at the likelihood that home prices in Portugal will drop, pointing to the combined effects of the pandemic and the increased volume of newly built residential units on the market.
Other industry insiders have begun to chime into this chatter. The Director of the Banco de Portugal (BdP), Ana Paula Serra, says “although residential property prices have shown resilience so far, the risk of a downward correction remains, particularly for some segments and locations where we’ve seen the overvaluation of prices since 2018,” according to Idealista.
Serra adds that “the risk will be particularly pertinent if we witness the prolongation of the pandemic crisis…,” according to Idealista.
This sentiment was seconded by Paulo Barros Trindade, the president of the Associação Profissional das Sociedades de Avaliação (ASAVAL — the Portuguese real estate appraisal association), who warns that “if the economic recovery is slow and unemployment continues to rise, the end of moratoriums could affect families’ ability to fulfill their financial obligations, and may create pressure for the forced sales of homes, which will translate into prices falling,” according to Jornal de Negócios.
To help borrowers financially impacted by the coronavirus crisis, the Portuguese government and private banks have offered debt moratoriums, which in some cases don’t expire until September 30, 2021, so this forced sale scenario of residential properties is still a distant and hypothetical reality.
Serra likewise says that there hasn’t been a significant increase in housing stock for sale, likely linked to the debt moratoriums that in the short term has mitigated the entrance of a large number of properties onto the market and has prevented sales at discounted prices, according to Idealista.