In the backdrop of a 17% decline in home sales in 2023, as reported by "Confidencial Imobiliária and SIR," there emerged signs of relief in November 2023. These signs suggest a possible consolidation of the slowdown in the current year, sparking optimism for a more stable market in the months ahead. This newfound stability is expected to play a pivotal role in bolstering market confidence and influencing purchasing decisions.

However, this optimism is not without its caveats. External factors, such as the ongoing conflict in the Middle East and the Ukraine invasion, have led to a surge in construction material prices, adding another layer of complexity to the real estate landscape. The ripple effects are particularly visible in the realm of house sales, notably for those reliant on housing loans in the average customer segment. A clear retraction in sales is evident, with hopes pinned on a potential recovery in access to credit for these families by the end of 2024 or in 2025.

The broader impact of the rise in interest rates has been profound, affecting families both in terms of home loan repayments and their ability to secure credit for home purchases. This issue remains a significant political concern, emphasizing the need for comprehensive measures that enhance the rental market and provide legal certainty for both tenants and landlords.

In the midst of this perfect storm, characterized by declining purchasing power and stagnant house prices, the market is cautiously anticipating a potential reduction in interest rates. However, the realization of this shift remains uncertain, despite the aspirations of some experts and politicians. The year 2024 is shaping up to be atypical, marked by various influencing factors, including the implementation of programs such as Simplex. This program holds the potential to stimulate the market and exert a lasting influence on supply dynamics in the years to come.

Amidst the challenges, there emerges a compelling window of opportunity driven by the chronic shortage of housing supply. The transformation of office buildings into residential units is gaining traction, aligning with the evolving demands of a sector where many existing structures no longer suffice. Developers and investors are increasingly inclined to repurpose buildings for residential use, especially in secondary or peripheral office locations that complement established residential areas.

Furthermore, the simplification of urban licensing processes is poised to facilitate the conversion of commercial properties to residential use. This presents a unique opportunity for the real estate and rental market to attract substantial investment capital, contributing to the overall evolution and resilience of the sector while addressing societal gaps in Portugal.

In summary, 2024 stands at the cusp of potential surprises, and the prudent interpretation of current signals coupled with informed governance decisions can pave the way for positive transformations in the real estate landscape.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes