Speaking in unison at a Lisbon conference this week, bankers described the steeply rising house prices as a normal consequence of the market correcting itself following years of minimal investment.
The executive president of Portugal’s largest private bank, BCP, added that banks have increased their lending, which has assisted in corrections of what were previously stagnant house prices.
“The housing market has warmed up”, explained Miguel Maya, adding that locations such as Lisbon and Porto are not only performing well among domestic buyers, but also through foreign investment.
Novo Banco chairman António Ramalho substantiated these comments by adding that investment was also limited through the lack of building licences being issued. BPI chief Pablo Forero recalled the housing bubble in Spain, and said that the situation “in Portugal is very reasonable”.
These comments came after the European Banking Authority raised the issue of penalising banks with a bad debt ratio in excess of five percent of credit issued. The European average currently stands at 4.64 percent, while in Portugal this number is almost three times higher at 12.41 percent.
Meanwhile, real estate company ERA Portugal this week forecast a rise in the supply of homes will lower prices and also ruled out the possibility of a housing bubble.
João Pedro Pereira, from ERA Portugal’s executive board, told Lusa News Agency that there would be a rise in supply in the real estate market if the legal and fiscal framework was maintained.
“Many decisions regarding construction that were taken in the past years and up until now will finally lead to new properties coming onto the market,” he said.
“These are welcome and will lead to a slowdown in spiralling prices in the most expensive areas and will improve the quality of the housing offer in Portugal,” Pedro Pereira added.
He said that in historic areas the offer would continue to be made through the renovation of buildings, as “there is no space for new build”.
Regarding claims that there could be a housing bubble, Pedro Pereira said this scenario was raised by people who did not “take into account the fact that the offer in the real estate market can take many years to adjust to demand”.
This comes as it was revealed recently that house prices recorded their biggest increase in 26 years. Latest numbers out this week show that the cost of buying a house in Portugal has risen by 14.2 percent in the space of just one year, and is up by 30 percent since 2014.
But the Bank of Portugal remains cautious, and back in June said “some signs of over-valuation of real estate prices have started to emerge”.
Fears that rising prices could provoke another real estate bubble saw the central bank issue a recommendation that as from 1 July, banks should exercise greater caution in issuing mortgages and personal loans.
According to the Bank of Portugal, overall foreign investment in real estate in the country in 2017 represented 80 percent of all transactions, with fears mounting that domestic homeowners are being priced out of the housing market. Rental prices have also shot up to new highs.