Portugal’s housing market “overheated” due to strong demand, warns EU

“The price of houses in Bulgaria, Spain, Lithuania, Portugal, and Slovenia are overvalued” – EU report

This is according to the European Union, which has again warned Portugal over a overheated housing market, and says that the market is one of those in the European Union that faces a risk of a “strong correction” at a time when significant interest rate increases have already put the real estate market in negative terrain in several countries.

The latest report published by Brussels warns of macroeconomic imbalances within the EU and says “the price of houses in Bulgaria, Spain, Lithuania, Portugal, and Slovenia are overvalued”.

“In these countries, the evolution of house prices can be seen as a risk factor for a future correction if economic conditions deteriorate, with prices in Portugal strongly overvalued”.

This overvaluing in housing corresponds to around 20% to 25%, and when cross referenced with national data, and with the most recent evolution of prices, climbed 8.7% more in the second half of the year on last year.

In this respect, Portugal has the highest overvaluation from among the other EU countries because it is the country in which house prices have risen the most.

In Portugal’s case, “housing prices continue to be a worry”, having increased by over 12% in value in nominal terms last year and also after various increases above incomes.

“Despite some moderation in recent quarters, the growth in house prices has persisted because of strong demand, including from overseas investors, and because of a strong slowdown in the construction of new homes.”

According to EU Commission, the housing price index should grow 3.2% this year, followed by a slight slowdown in 2024 of 3%.

Source: Essential Business