July 2020 

Housing Market Survey - Operators expect to return to normalcy in 12 months.

Portuguese Housing Market Survey RICS/Ci – March 2020

• Market activity weakens sharply
• Sales and price expectations abrupt drop
• Respondents feel that, on average, sales may take 12 months to recover

Unsurprisingly, the March 2020 RICS / Ci PHMS results point an abrupt decline in the sense of operators operating in the housing market, with measures taken to combat the spread of the coronavirus and severely restricting sales expectations. Likewise, in the rental market, expectations regarding an increase in rental and contract volumes have dropped significantly.

After two consecutive months of increases, new searches from new buyers dropped in March, with a net balance of -59% of respondents reporting a decline. Unsurprisingly, demand fell in the three regions where the survey was performed (Lisbon, Porto and Algarve).

At the same time, sales volume also declined sharply during the month of March, with a net balance of -52% of respondents noting a decline. With social distancing measures expected to continue throughout the coming months, short-term sales expectations are now firmly in negative territory. In fact, a net balance of -71% of respondents expects transaction levels to fall in the short-term.

The March survey included an additional query for operators, asking how long they consider it necessary for sales to return to pre-crisis levels. Thus, and once the outbreak is controlled, on average, the participants expect sales to take up to 12 months to recover, even though there are very different opinions on the market.

In terms of prices, a net balance of -18% of respondents recorded a decline in March (well below the + 14% balance that increased in February). In future terms, expectations regarding prices are negative for all regions, either in a 3-month or 12-month horizon. In national terms, a drop-in price of just over 7% is expected next year. Again, respondents were asked about their perspectives on how long it can take for prices to recover lost ground during the outbreak. On average, and once the pandemic is under control, participants consider that prices may take 14 months to return to its previous point.

In the rental market, the impact on activity was also steep, with a net balance of -37% of respondents seeing a decline in demand from tenants during March (the first negative reading since 2014). In future terms, a net balance of -63% of respondents anticipates a drop-in rent in the short-term. 

Ricardo Guimarães, director of Confidencial Imobiliário, says: “It is natural that short-term expectations are low, reflecting the uncertainty about when this Covid-19 crisis will end. This is a critical factor for health and economic reasons. Still, opinions about the post-crisis period are less pessimistic and anticipate a recovery within 12 months after the outbreak is under control. Some operators note that the market was slowing down earlier, due to legal changes to the Non-Habitual Residents and Gold Visa regimes. Even so, there is a global perception that the recovery will depend a lot on the extent that this crisis will have on the economy and on the impact on household income and on the availability of companies to invest again ”.”

For Simon Rubinsohn, RICS Chief Economist: “the drop in current activity indicators, as well as, future expectations clearly reflect the emergency measures adopted to limit the spread of the coronavirus. The feedback also suggests that the legacy of Covid-19 may be of such magnitude, that any return to what might be called “normalcy” in the economy will take time and that families will remain cautious for a long time as well.”