Two tier housing market leads to contrasting fortunes for property in Portugal

The problems that Eurozone
countries such as Greece, Ireland and Portugal are suffering are continuing to
affect buyer confidence in their respective property markets.  This has been particularly true in
struggling Portugal, as new research reveals that weakening demand and a ‘two
tier’ housing market is continuing to see prices fall in the country.

Prices of property in Portugal falling at a slower rate than before

The latest Royal Institution of
Chartered Surveyors/Ci Portuguese Housing Market Survey has found that demand
for property in Portugal is continuing to fall, although prices are not
declining as fast as they have been over recent months.

The National Activity Index fell
by one point to -49 whilst the National Confidence index fell by two points to
–61. However, the report also points out that house prices are falling at a
slower pace than previously.

RICS senior economist, Josh
Miller, said: “With the Portuguese unemployment rate at 12.4%, it is
unsurprising that house prices and activity is falling, while confidence
remains very depressed. Interestingly, the main factor weighing down on prices
is falling demand, rising supply is not an issue.

 Ã¢â‚¬Å“However, given that the vast proportion of Portuguese
mortgages are tied to short term interest rates, if the European Central Bank
continues to hike its main policy rate, then the risk of forced selling by
Portuguese homeowners will likely increase.”

‘Two tier’ market beginning to emerge

As prices continue to fall, a
leading Portuguese property expert believes that there is a ‘two tier’ market
for property in Portugal beginning to emerge.

Ricardo Guimaraes from CI argues
that as access to mortgage finance depends on a borrower’s income and debt
levels, wealthy applicants are still being agreed for home loans relatively
easily.  Less wealthy borrowers are
finding it much more difficult to agree the mortgages they need to buy homes.

Mr Guimaraes says that this is
creating a two tier market in Portugal ‘with more activity at the top end than
in the lower price ranges.’