The bubble that apparently surrounds the real estate market in Portugal is not speculative, but it does not hide two realities that haunt the sector: on the one hand, the breakdown of transactions and; on the other, the significant increase in pre-COVID stock, whose prices show a high inelasticity and, for this reason, is not being absorbed, reveals the monthly report of October imovando.
[dropcap]A[/dropcap]ccording to the consultant, in the second quarter of 2020, compared to the same period in 2019, there was a 21.6% drop in the number of transactions at national level, with this contraction particularly affecting the used property market and, in terms of regions, were the geographical areas that are most exposed and dependent on foreign direct investment that suffered from the pandemic (Autonomous Region of Madeira registered 28.7% less transactions and the Algarve saw an erosion of 37.8% of sales made ).
On the other hand, the current stock of residential properties on offer shows a worrying sign in terms of turnover in the companies’ inventory, since 61% of the apartments and 63.9% of the houses on sale are more than 6 years old. months in disclosure, values that, according to the imoving, reveal a strong deterioration compared to September 2019, when these same indicators amounted to 46.9% and 53%, respectively.
According to the analysis of the real estate consultancy, the accumulation of stock raised in a pre-Covid phase, along with the unequivocal real estate cooling experienced in the second quarter of the year, invite a different reading of the “high resilience of the sector” in a pandemic context, especially if we take into account three “silent” forces that support this apparent stability:
- The bank appraisal values refer to properties in an effective process of purchase and sale, and since the beginning of the pandemic, the weight of properties with lower square meter prices has been lower, which ends up artificially inflating the average value of this property. indicator;
- The average transaction values are impacted by exactly the same substitution effect that increases the average bank appraisal values, which results more from a sharp drop in sales of properties with lower market value, and less, from a generalized maintenance of the values practiced;
- In the second quarter of the year, the value inherent to transactions related to Gold Visas was the target of strong growth (turnover grew, compared to the previous quarter, by more than 134%), while the rest of the market underwent a very strong erosion. pronounced (real estate in global terms sank 23.8%), so the weight of transactions of higher value properties (traditionally insured by this segment) was also greater.
The safeguarding of the national real estate dynamism and the relative stability of the observed asking prices, more than a reflection of a change in the sector’s practices, and more than the result of a true adaptation of the industry to the new reality of social distance and increasing digitalization of the processes, it has been ensured by driving forces external to the market itself, in particular, by the moratoriums that were instituted on housing loans and by the fact that credit institutions continue to feed the circulation of product.
Furthermore, in September alone, the number of Real Estate Mediation companies in activity contracted 5%, which also reveals that the growing demand of the market is only within the reach of companies that are willing to adapt to a new reality (more volatile), new working methodologies and a closer relationship with technology.
