Is Now the Perfect Time to Invest in Portuguese Real Estate in 2024?

All sources have been thoroughly verified for credibility. Furthermore, an industry specialist has reviewed and approved the final article. Image: property market Portugal Everything you need to know is included in our Portugal Property Pack....

All sources have been thoroughly verified for credibility. Furthermore, an industry specialist has reviewed and approved the final article.

property market Portugal Image: property market Portugal

Everything you need to know is included in our Portugal Property Pack.

Are you considering buying real estate in the land of Port Wine? Are you wondering if the prices are adequately positioned?

People have different thoughts about market timing. Your Portuguese friend might tell you that now is the ideal time to buy property, whereas your colleagues in Lisbon may think that prices will soon decline.

At Investropa, when we create articles or update our pack of documents related to the real estate market in Portugal, we base our work on verifiable facts and concrete data rather than subjective opinions.

We have carefully gathered and analyzed official reports and government website statistics. Using this information, we have created a reliable database. Here's what we found that can help you decide whether it's a good time to buy real estate in Portugal.

Happy reading, and let's dive in!

How is the property market in Portugal these days?

Portugal is, today, one of the most stable countries in the world

Stability is the first indicator to look at because it minimizes legal, regulatory, and political risks, making it crucial for real estate investment choices. It is an information you need as a foreigner looking to buy a property in Portugal.

You probably already know that Portugal is incredibly stable. The last Fragile State Index reported for this country is 27.5, which is extremely high.

Portugal has experienced a period of economic and social stability since joining the European Union in 1986 and has implemented strong fiscal policies in recent years that have helped reduce its public debt and improve economic growth. Additionally, its strong commitment to democracy has helped ensure a peaceful transition of governments and enabled it to remain a stable country.

Investors can definitely rely on the country's stability for investment. Let's review the economic outlook.

Portugal will grow at a moderate pace

Before diving into real estate investment, the initial step is to assess the economic strength of the country.

As per the IMF's forecasts, Portugal is set to conclude 2023 with a growth rate of 1%, which is positive. Regarding 2024, the figure we're looking at is 1.7%.

This steady growth might keep going since Portugal's economy is expected to increase by 7.9% during the next 5 years, resulting in an average GDP growth rate of 1.6%.

The moderate growth rate in Portugal provides stability for investors, and it also allows for potential increases in value over time. This makes it a safe and potentially profitable option for property investment.

Portugal gdp growth Image: Portugal GDP growth

Portuguese business owners still don't express confidence in current market conditions

How do the people of Portugal view their economy? The GDP forecast doesn't provide the complete picture. Thankfully, in Portugal, there is an official metric that is regularly reported. It's not the case for every country, so we're lucky.

The calculation of the Business Consumer Index (BCI) involves surveys and assessments of business leaders, indicating their confidence in the present and future economic conditions.

Statistics Portugal reports that the Business Confidence Index has reached a value of 0 for Portugal. It is definitely a small score.

Unfortunately, we're on a descending trend. The score, 12 months ago, was at 6.

The current score is not necessarily negative. It's important to note that the BCI index has declined in several countries worldwide. Moreover, low confidence scores often indicate temporary uncertainty, which is a natural part of economic cycles.

Now, let's analyze additional data to assess whether it's an opportune moment to consider investing in Portugal.

Portugal is issuing fewer building permits

Considering the number of permits issued can give you useful information when deciding if it's a good time to buy property in a country. When there is a higher number of building permits being issued, it means more construction is happening, which boosts the economy, creates jobs, and provides more options for people looking to buy or rent properties, making the property market stronger.

Unfortunately, the number of building permits issued is decreasing in Portugal.

Throughout the past year, according to Statistics Portugal, the number of building permits delivered by the Portuguese municipalities fell by 0.4%, from 25,620 to 25,519 units.

This is definitely a red flag. Let's consider more data to get a better understanding.

One last thing to note, though. Fewer building permits mean less real estate supply. If that's the case, then property prices will increase in Portugal in 2024.

Portugal's property market soars with unstoppable growth

Portugal's home prices have increased by 61.8% in 5 years according to Statistics Portugal.

It means that if you had bought a villa in the Algarve for $425,000 five years ago, then it would now be worth around $688,000.

Recently, the property market in Portugal has experienced an unstoppable and soaring growth trajectory. Property values have been consistently on the rise, and market activity has intensified.

If you're considering buying a property in Portugal, that's a positive sign. The market is active and growing. However, it might be beneficial to wait for prices to decrease before making your investment. This way, you can secure a better deal and potentially save money.

You can find a more detailed analysis of the real estate prices in our property pack for Portugal. Portugal housing prices real estate Image: Portugal housing prices real estate

Portugal's population is getting richer

Thinking about population growth and GDP per capita is essential when buying real estate, mainly because:

  • A growing population means more people needing homes
  • A higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Portugal, the average GDP per capita has changed by 5.0% over the last 5 years. It's a solid number.

This means that, if you purchase a cozy cottage in Porto and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.

If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in Portuguese cities like Lisbon, Porto, or Faro in 2024.

Rental yields are attractive in Portugal

Rental yield is a frequently used measure to understand real estate investments.

It's the annual rental income of a property divided by its price. For example, if a Portuguese property is purchased for €150,000 and generates €6,000 in annual rental income, the rental yield would be 4%.

According to Numbeo, rental properties in Portugal offer gross rental yields ranging from 4.2% and 6.9%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Portugal.

It means that a real estate purchase will provide a satisfactory return on investment.

As previously observed, the supply of real estate will remain constant, indicating that property prices are unlikely to change. However, there will be a growth in the number of affluent tenants. Consequently, rental yields may increase in Portugal in 2024. Portugal rental yields Image: Portugal rental yields

In Portugal, inflation is projected to remain moderate

In two words, inflation is when expenses inflate.

It's when your typical pastel de nata in Lisbon costs 2 euros instead of 1.50 euros a couple of years ago.

If you're planning to invest in a property, high inflation can offer several benefits:

  • Property values often increase over time, leading to potential capital appreciation.
  • Inflation can lead to higher rental rates, thereby increasing the cash flow from the property.
  • Inflation decreases the real value of debt, making mortgage payments more affordable.
  • Real estate can serve as a hedge against inflation, safeguarding the value of the investment.
  • Diversifying into real estate provides stability during periods of inflation.

In line with IMF predictions, the inflation rate in Portugal will increase by 13.5% over the next 5 years, with an average annual increase of 2.7%.

It means that Portugal might experience inflation soon, so it's worth thinking about buying property now.

Portugal Golden Visa might come to an end

The Golden Visa program in Portugal, which allows non-EU nationals to obtain residency through investment, is undergoing changes in 2024.

The program was initially criticized for driving up housing prices and potential misuse for illicit activities. The government had announced plans to end the program in 2023 but later proposed amendments to address the concerns.

For those considering buying property in Portugal, now is seen as a good time because the changes in 2024 may limit the eligibility for a Golden Visa through real estate investment.

The amendments aim to address housing concerns and prevent the exploitation of the program.

However, the final implementation date is uncertain, as it requires parliamentary approval, and past changes took some time to come into effect.

Is it a good time to buy real estate in Portugal then?

Time to conclude!

Undoubtedly, 2024 presents a highly favorable opportunity for property investment in Portugal, supported by a combination of compelling indicators that strongly outweigh potential concerns. Portugal's exceptional stability, along with projected moderate economic growth, establishes a secure foundation for potential investors. The remarkable growth trajectory of Portugal's property market further bolsters its appeal, signaling potential for appreciating property values.

Furthermore, the increasing wealth of Portugal's population and the attractive rental yields in the country contribute to a thriving investment environment. These factors imply growing demand for housing and the potential for steady income streams for investors. Despite the neutral aspects, such as the decrease in building permits and moderate inflation, Portugal's stable economic landscape continues to provide a reliable setting for property investment.

It's important to acknowledge the hesitancy expressed by Portuguese business owners, yet the overall robustness of Portugal's property market, combined with the nation's stability and growth, mitigate the potential impact of this sentiment. In conclusion, the alignment of Portugal's stability, property market dynamics, wealth accumulation, rental yields, and the predictability of moderate inflation make 2024 an exceptional time for property investment in the country.

We genuinely hope this article has provided you with helpful information. If you need to know more, you can check our our pack of documents related to the real estate market in Portugal.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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