Portugal is one of the countries where house prices have increased the most in recent years - and it should maintain that status over the next few years, according to Moody's estimates.
The rating agency predicts that the value of residential real estate will increase from 7% to 8% by 2020, and notes that Portugal is one of the countries where prices have risen most in recent years. For European markets, Moody's expects a modest rise over the next two years.
In a report released this week, the agency stresses that "Portugal, the Netherlands and Ireland are likely to benefit most from the appreciation of house prices over the next two years."
The Portuguese market is the one with the forecast of a higher growth rate.The ratings agency specified the reasons that should continue to fuel the real estate market in Portugal: "There are some areas where the gap between demand and supply is leading to a strong appreciation of the price of residential and commercial real estate."Moody's notes that "house prices have been increasing since mid-2013 and accelerated in 2017 to levels before 2008."
According to the most recent data from the National Institute of Statistics (INE), the price at which houses are sold in Portugal has increased more than 16% since the beginning of 2016.
In Lisbon and Porto the rises were much higher, with increases of 47 % and 34% respectively.Moody's points out that the INE price index has had annual increases above 10% and notes that, "there are even greater increases in other indices of real estate."
In addition to the lack of supply in some areas, the credit rating agency points out that, "the special tax regime for non-residents is boosting external demand for residential properties in Portugal."
Despite Moody's reliance on the evolution of home prices, other entities have warned that the value of real estate may have gone too far.
In the last Financial Stability Report, the Bank of Portugal pointed out that "after a period of lower prices in the residential segment some signs of over-pricing in aggregate terms appeared in the second half of 2017."
The bank noted, however, that the indications of overvaluation in the residential real estate market in aggregate terms were very limited. But it warned that "the duration and rapidity of price growth may entail risks to financial stability should these dynamics persist or strengthen."
Among the reasons for the rise in prices, pointed out by the Bank of Portugal, was the interest of foreign investors and the demand for real estate to take advantage of tourism growth.
The central bank explained that the era of very low interest rates was having an influence on prices, but argues that the, "normalisation of monetary policy in the euro area," which includes the withdrawal of stimulus to the economy and the gradual rise in interest rates in the coming years, will eventually help to stabilize house prices.
