Property developers in Portugal are more pessimistic in relation to the evolution of the residential market, in a context of general increase in prices and, more specifically, in construction costs.According to the most recent Portuguese Investment Property Survey (PIPS), conducted by Confidencial Imobiliário and the Portuguese Association of Promoters and Real Estate Investors (APPII), professionals in the sector believe that the real estate market will be marked by a drop in sales and a slowdown in prices over the next three months.
Pessimism returns for the first time since the end of the pandemic
The study by Confidencial Imobiliário, published on a quarterly basis, shows that the sentiment of professionals in the sector is now negative, which It hasn’t happened since the end of the pandemic. The indicator that measures professionals’ expectations for the next three months is at -28 points, returning to negative territory for the first time since the first half of 2021. number of real estate transactions will decrease in the next quarter: the indicator that measures sales expectations dropped from an already negative value in the previous survey (-17 points) to the current -69 points, reflecting “the existence of a strong consensus that this will be the trajectory of the market ”, according to the study. Regarding the evolution of prices, the promoters still anticipate a growth, but much lighter than in the previous quarter. The price indicator dropped from 40 to 24 points, signaling a clear perspective slowdown in the rate of rise in recent times.Read more: Real estate: Sell everything while you can
Rising construction costs worry the sector
One of the central concerns of the real estate sector is the rising construction costswhich has limited the launch of offers for the middle class. The latest data from the National Statistics Institute (INE) show that, in August, the costs of building a new house in Portugal increased by 12.6% compared to the same month last year, after the 13.4% rise in July. Prices are being driven mainly by the materials component, which increased by 16.6%, while labor recorded a more contained increase in costs, of 6.9%.“Property developers are concerned about all factors of rising costs, which make it increasingly difficult to launch an offer for the middle class. Once again, the licensing time of works as the main obstacle to the activity, with very relevant impacts on the viability of operations, especially in the current context of increases in construction costs”, says Hugo Santos Ferreira, president of APPII, quoted in a statement. Read also: Real estate: price and value
Foreign buyers gain even more weight
The persistent increase in construction costs in recent months has motivated a repositioning of the real estate market, with change in the target profile of projects. In this inquiry, prosecutors claim that 64% of new developments are aimed at an international audience (exclusively or in combination with national ones), an increase compared to 55% in the previous study. This means that only 36% of new projects now target Portuguese customers.Despite this, the promoters see the current moment as cyclical, maintaining a high rate of launching new projects (67% say they have new projects in their portfolio) and looking for land (56% are active or very active in the search for new land).“One of the most relevant numbers in this survey is the apparent redirection of real estate development towards international demand, after this market has lost share in the last couple of years. It is a strategic option that will allow developers to launch works aimed at more expensive segments, thus managing to accommodate the increase in construction costs, and to buyers with more purchasing powerless exposed to the reduction in purchasing power resulting from the impact of inflation and rising interest rates”, says Ricardo Guimarães, director of Confidencial Imobiliário.Read more: How to invest in real estate, even with little money
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