The Portuguese residential market is starting to feel the crisis that the country is facing, in a “natural response” to the increase in interest rates and the cost of living for families. This is one of the conclusions of JLL's most recent study, Portugal Living Destination, which reveals that in the 1st half of the year, the number of homes sold in Portugal fell 22% compared to the same half of the previous year.

Between January and June 2023, 68,000 homes were transacted, reflecting a “very solid demand flow”, according to the consultant and reported by idealista, supported by national buyers, who represent 93% of homes sold. Still, the “dynamic presence of foreigners” continues to be evident.

The Portugal Living Destination study concludes that the housing market maintains a positive performance despite the “profound cyclical changes” of the last two years. Proof of this is the behaviour of prices which, even in the context of sales adjustments, maintain the growth trend. In the last three years, highlights JLL, house prices have risen by 25% and rents by 23%.

The problem continues to be “the structural shortage of supply”, says Joana Fonseca, Head of Strategic Consultancy & Research at JLL. “While it is true that the number of permits has gradually increased in recent years, the pace of new homes arriving on the market continues to be well below the volume of demand,” she highlights.

Lack of supply

The lack of supply is a structural problem in the country, and continues to worsen year after year, as the study shows. In the last year and a half, 30,750 new homes were completed in Portugal and another 46,700 licensed, numbers that despite signalling a growth trend compared to recent years, “not only remain below housing production standards at the beginning of the millennium (72,800 homes completed per year, on average, between 2000 and 2010), as they are insufficient to meet current demand needs, which in the same period absorbed 236,000 homes”.

“The market continues to provide many opportunities for development, as a result of this persistent imbalance between supply and demand. Furthermore, there is a need to adjust products to new demand requirements. It's not just a bet on quantity. The main focus of housing today is to make homes available to everyone, which implies diversifying in terms of locations, target segments and even typologies, considering the demographic changes that have emerged in the last decade”, argues Patrícia Barão, Head of Residential, at JLL.