More than ever, the country is teasing foreign buyers and attracting tourists. How is the increase of interest affecting the housing market?
A nun gazes at the Pope. On the window, the sentence translates as, “Will the future need us?”
Ponte de Lima [North of Braga], the oldest villa in Portugal. Check out its Festival Romaria.
Photo, courtesy of Julia Fridman.
Santiago de Cacem. Eco Suites Resort is located a 15-minute drive to the open-air zoo "Badoca Safari Park" and overlooks the landscape.
Between 2012 and 2022, around 10,600 golden visas were granted, representing a global investment of around six billion euros - 0.2% of GDP in 2022. As for the visa commonly assigned to digital nomads, it attracted 26,525 citizens between 2018 and April 2023.
It is undeniable that more foreign buyers chose to purchase property in Portugal. We look at the impact of this change on the national market, through facts that might debug some misleading over-the-counter myths.
Fact 1: The investment bubble mostly touches Lisbon and Porto.
Although foreigners buy houses that are much more expensive than the Portuguese in the different regions of the country, their representation in the total volume of housing sales in Portugal, even while rising significantly, is still low. For this reason, its impact on the median house price is more limited.
“The pressure from foreigners on housing prices is greater in the metropolitan areas of Lisbon and Porto, but the impact of this demand on the median value of housing appears to be globally limited,” concludes a policy paper titled “The housing crisis in large cities – an analysis” produced by FEP* professors for the Francisco Manuel dos Santos Foundation. *FEP is an economic research lab and school in Porto.
Fact 2: What has changed: down payment for a home doubled in 5 years.
"The money needed to 'down payment' on a house in Lisbon and Porto practically doubled between 2017 and 2022, according to another study by the Francisco Manuel dos Santos Foundation, which warns that it is 'likely' that the degradation of access to housing will continue” [for the local population].
According to the document, the initial capital needed to 'down payment' on an average house increased from about 30 thousand to 56 thousand euros in the municipality of Lisbon, and from 16 thousand to 37 thousand in the municipality of Porto, between 2017 and 2022. With the rise in house prices outpacing wage increases, families are facing increasing difficulties in accessing the housing market, having seen the "income needed to purchase a home" increase "considerably in recent years".
Fact 3: the minimum wage is low compared to Portugal’s economic growth.
Although it was slightly increased, the €887 / USD $970.353 per month to live currently in cities like Lisbon and Porto is very low. It should be addressed for the whole country and certainly follow in scale the economic growth in Portugal’s major cities and regions. This is one of the lowest figures in Europe, although the country has factually recovered from its 2010-2012 bankruptcy.
Fact 4: House prices are slowing globally, but not in Portugal.
Buying a house is more expensive around the world, but prices are growing at the slowest pace since 2015. However, Portugal is the 9th country where prices rose the most. The Knight Frank Global House Price Index covers 56 markets. In these markets, the average annual house price growth slowed to 3.6% in the 12 months to the end of the first quarter of 2023.
The rise in house prices globally has thus come down from the recent peak of 11.1% recorded in the first quarter of 2022. But there is an exception: 'Portugal appears in the top 10 of the index of markets where prices have grown the most in the last year (11.4%). In other southern European countries, however, house prices rose at a much slower pace: Spain (3.1%) and Italy (1.1%). Source TPN, Aug. 1st, 2023.
Fact 5: Two big waves of tourism enriched the country, prior and after the pandemic.
“In 2009, a very dark period was about to take over Portugal, with the economic crisis about to hit the country really hard. Unemployment was high, salaries were low, and immigration numbers went through the roof that year. But was it all bad? And how’s Portugal doing today? That’s what we’re going to find out. In 2009, a recorded 14.1 million tourists stayed in accommodation in Lisbon. That figure has since skyrocketed to just under 25 million last year,” writes beportugal.com.
What is the future of historic cities to welcome people and preserve their city charm and quality of life? Stretched between housing speculation and mass tourism, is there an alternative future for cities like Lisbon, Rome, Barcelona, or Amsterdam, with magnetic charm, and for some trampled by hordes of people walking up and down viewpoints and landmarks without much contribution to the city’s social, intellectual, and financial developments?
Rome is clearly upgrading. High-end hotel guests in restored palazzi are now clearly preferred to the cruiser with a ‘pack-lunch’.
Overcrowded Venice with cruise boats now banned from the lagoon.
Monastery of Batalha [left]. Sanctuary of Bom Jesus do Monte in Braga [right].
Read more in our previous blog: How to preserve National Heritage natural sites and historical cities from overtourism? Learning from Venice, Rome, or Amsterdam with hindsight.
Fact 6: Tourist arrivals in Portugal more than doubled in 2022.
Lisbon and the Algarve account for the bulk of the visitors to Portugal.
Source: National Statistics Institute.
But ‘overtourism’ in Lisbon is not yet an issue, according to its Mayor. Lisbon Mayor Carlos Moedas* said, "the Portuguese capital will have a record tourism year in 2023 and still has room for growth as he balances the city’s appeal to visitors with a housing crunch for locals,” in an article on Bloomberg, the 2nd of August.
“The city is expected to report a record 19 million overnight stays this year, which would be 12% higher than in 2019, Moedas said in an interview at the town hall. Lisbon is among the cities with the strongest recoveries since the Covid-19 pandemic that hurt tourism starting in 2020, he said. “It’s an absolutely extraordinary recovery. Tourism is 20% of Lisbon’s economy. Tourism is employment.”
Lisbon, with 546,000 residents, every day gets between 30,000 to 40,000 tourists and still has growth potential, according to Moedas*. “I think we’re still very far from over-tourism. We’re not at the levels of Venice or Barcelona. We should continue to bet on tourism, betting on quality tourism.”
The mayor said he’d back an increase in the tourist tax, which is currently 2 euros ($2.19) per night. “Foreigners could pay a little more, and with that, we’d have a cleaner city. And Lisbon residents would see tourism as something positive: There’s income that’s coming from tourism to clean the city more.”
Rua Augusta, Lisbon. *Carlos Moedas, 52, of the center-right PSD party, was elected mayor of Lisbon in 2021 and is a former European Commissioner responsible for research, science, and innovation. Read the full article on Bloomberg: "Lisbon Mayor Sees No ‘Overtourism’ Despite Record Visitors"
Fact 7: Long-term rentals in Lisbon are among the highest in Europe.
Lisbon has been named the 3rd most expensive city to rent a house at the beginning of 2023, with an average rent of a one-bedroom flat in the city costing more than 2,000 euros.
Rent for a one-bedroom flat in Lisbon cost 2,005 euros in early 2023, according to a study comparing 24 European cities, making it the most expensive city after Amsterdam and Reykjavik.
In the study by the Housing Anywhere International Rent Index, only Amsterdam and Reykjavik came ahead of the Portuguese capital. Amsterdam’s rent for a one-bedroom flat is 2,250 euros on average, the highest value of all 24 cities analyzed. But here is the difference:
The minimum wage in The Netherlands is €1,934 with an increase of 12.1% in ten years.
The minimum wage in Portugal was €823 [now €887] with an increase of 7.8% in ten years. That amount is closer to Bulgaria which is at the tail of the European minimum wage, with €399.
Another example: the cost of rent for a studio in Paris ranges from €770 / USD $971 to €1,656 / USD $1,864 per month; with a minimum wage of €1,709. Minimum wages in the EU in 2023 – Graph to compare figures.
What are the solutions? Brainstorm with us! Share your feedback, your expertise, and own experiences in other cities. Brainstorming together will help us all yield a variety of innovative ideas and perspectives. We believe it possible to find practical and sustainable solutions to ensure the preservation of these cities' magnetism while harnessing the positive aspects of tourism and economic growth.
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If you wish to travel short-term or invest in Portugal, reach out with your questions and queries. And check out Mojo's properties for sale.
Mojo is a Boutique Real Estate guiding and assisting investors and buyers in Portugal. We scout and cherry pick the best possible property within your brief and budget. We manage and coordinate the purchase process with expertise in renovations. And groom your property for short and long-term rental, striving optimal yields for our investors. Call and text via whatsapp: +351.962.621259