Portugal’s housing market shows signs of slowing down

The latest Prime Watch update suggests that Portugal's real estate market is displaying "indications of a slowdown." In the office sector, the limited availability of quality office spaces continues to hamper business operations, as many companies are compelled to stay in their current locations due to the lack of alternative options. This is compounded by an actual decrease in demand, which is likely to result in rent stabilisation.

The report also underscores the sector's overall vitality, which "remains robust," and this is evidenced by several ongoing projects that are currently under construction and already partially occupied. This accentuates the ongoing significance of pre-contract agreements, as the supply and demand imbalance persists.

Separately, in the logistics segment, the situation is similar, but there's a much more pronounced increase in absorption volumes, with a 93% year-on-year improvement in the first half of this year.

Quality scarcity of houses, reduced activity, declining demand, and stable rents drive the slowdown. Photo by Freguesia de Estrela on Unsplash.

Regarding the retail sector, there is a noteworthy shift as physical in-person shopping makes a resurgence. Larger spaces that facilitate greater interactivity have become a recurring theme in street-level retail and shopping centers. Additionally, the food retail sector continues to expand its network of convenience stores.

The investment market has performed well, with a turnover of 691 million euros. Nevertheless, Prime Watch foresees a potential 30% reduction in activity by the end of 2023. Jorge Bota, Managing Partner of B.Prime, commented that, "Despite a first half in which activity slowed down, both in investment and office leasing, we are confident that an upturn in turnover by year-end will offset this decline. This positive performance is anticipated to extend into early 2024, with the stabilisation of factors that had previously limited activity, such as inflation and interest rates."

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