Weak demand for property in Portugal continues to undermine market

The April figures from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário (CI) show that confidence in the Portugal property market continues to fall, negatively affecting prices in the country.

Whilst house prices fell again in April, there were some regional variations with some areas showing a better performance than others.

The national confidence index declined by two points to –53 in April 2011 whilst the national activity index in Portugal fell a further six points in April to –32.  Developers are more optimistic about prices than estate agents but overall the Portuguese property market continues to be depressed.

Some areas of the country are performing better than others with new instructions actually rising in the Algarve and in Porto.  However, prices fell across the country although the least significant falls were seen in the capital Lisbon.

Economic woes affecting prices of property in Portugal

CI spokesman Ricardo Guimaraes commented that the expectations of estate agents and developers are generally negative thanks to rising interest rates, increases in the cost of living and the recent European Union bailout.

Mr Guimaraes said: “However, some respondents expressed optimism about the IMF/EU deal. It may improve confidence among international investors, leading in turn to a more favourable credit climate.”

Josh Miler, senior economist at the Royal Institute of Chartered Surveyors said: “The Portuguese housing market can be characterised by falling prices, falling activity and depressed confidence. This is set against a wider economic backdrop of accelerating inflation (4 per cent), elevated unemployment (11.1 per cent) and a shrinking economy that was -0.7 per cent in the first quarter of the year.

“Unsurprisingly, these factors are weighing heavily on the demand side of the equation. Supply, either in terms of rising new vendor instructions or excessive building, is not presently an issue.”