The EC has warned that there are “signs of a potential overvaluation of housing prices in the various member states, combined with a high indebtedness of families”.
Brussels' analysis of EU home prices “shows widespread evidence of overvaluation,” with one of the most worrying cases being Portugal, alongside Austria, Belgium, Czech Republic, Denmark, France and Germany. Currently in Portugal, the study by the EC found that a family needs more than 10 years of average disposable income to pay for a house of 100 square metres. This is also the case in 10 other EU countries, including Spain, Austria, France and Greece.
While the pandemic caused many major economies to stall, the real estate market in Portugal and 10 other member states continued to rise during this time, with increases above 6 percent. Despite the first quarter of 2021 registering house price growth of 5.2 percent in Portugal, property prices rose once again in the second quarter up to 6.6 percent.
Property prices are growing at the fastest pace seen in the last decade and represent a “risk”, especially when combined with the “high indebtedness of families”, states the EC.
With inflation rising in Europe, “uncertain adjustments” in labour markets and a possible increase in interest rates, the ability of households to pay their home loan obligations may be compromised, as these factors could exert “additional pressures” on the family budget.
But unlike the rise in indebtedness, the economic recovery is unlikely to lead to a correction in house prices, says the European Commission, although it admits that the shortage in the supply of houses could help to alleviate the situation in the short term.
According to the EC report, the “risks of downward adjustments in house prices are mitigated by supply constraints”. The “less dynamic” home supply has contributed to prices climbing, while “lower” levels of construction has also helped to reduce the direct economic impact of the correction in house prices.
According to a report by Idealista, the Banco de Portugal (BdP) made it known that the country is protected against house price alterations because an eventual reduction in house prices due to an increase in supply, for example, "will tend to be mitigated by the reduction in recent years in the household debt ratio for all income levels and by the improvement in the risk profile of borrowers", said the BdP.
The housing market in Portugal is very much over priced for the lack of quality on offer - housing rooms with no insulation, badly designed interior spaces, rooms with no windows, tiny, narrow verandas that people call "laundry rooms", no privacy (cement, windows and those horrible narrow verandas all peering into each other's homes), no urban planning - only cement and dirty communal spaces with no green areas ; in the Algarve the housing market continues aggressively only towards tourism (over priced, over rated), those who wish to renovate cannot get builders who actually show up for work, those who do manage to find builders cannot get the work done within the original deadlines. Housing is a basic human right but in Portugal it seems that the housing market is only for tourists and the wealthy who buy the Golden Visas. Portugal pushes its people into further poverty by the day, ramps up its usual marketing but fails to deliver quality of life. As long as Portugal continues to foster the cult of poverty and selling fictions (i.e that it has the best of everything) it will not develop into a country that it could so easily be. A real European country where there is quality of life, where there is respect for the environment and human life.
By K from Algarve on 28 Nov 2021, 14:27
Market sets the price, doesn't it?
By Wiklund Jan from Algarve on 29 Nov 2021, 15:10