By: CHRIS GRAEME
THE UK’S high street building societies might be jittery and investors in the United States might be on tenterhooks, but don’t expect a market crash in Portugal.
According to former banker and property consultant Carlos Moedas of Aguirre and Newman’s Lisbon office, the banking system in Portugal is just too well run and cautious in its lending policies for a run on the banks caused by the sub prime housing market crisis in the United States.
In fact, there’s every sign that the commercial property and housing markets could continue to grow well into 2008 if this year is anything to go by.
However, that doesn’t mean there won’t be a cooling down in the market after that, with property prices in residential falling from anywhere between one and five per cent in Portugal.
In fact, even in Spain, where the property bubble, according to alarmist analysts, is set to burst, a soft landing is predicted with property falling at around 10 per cent in the worst scenario.
“The Spanish were already building 800,000 units of homes in that country, which is more than France, Italy and the United Kingdom put together,” says Carlos Moedas, who adds that the Spanish were already in an oversupply situation on the residential market which had nothing to do with the sub prime crisis.
“This just brought the crisis to the fore in countries like Spain, although the sub prime issue had been bubbling around in magazines like Time and News Week for quite some months before it finally hit,” he adds.
“I think we can see this crisis as helpful because the Spanish situation was already shaken and now it is a fact that things are not doing as well as they were,” he says.
Even so, Spain’s economy keeps growing at a faster rate than the European Union average, with its economy growth still strong at 3.9 to 4 per cent.
“There is definitely what I would call a crisis in the residential market, but not a crisis in other property markets, such as the office rental segment, because you’ll still struggle to find an office space in Madrid and they are very expensive,” he explains.
That the market is going to cool down in both Spain and Portugal is granted, but prices in Portugal are unlikely to go down much, rather they may stay stagnant except in prime Lisbon city centre plots of land which will command sky high prices that Spanish and other developers will be prepared to pay.
“I don’t see price slides in the next few months. There will be a cooling down, but many markets will remain stable and, anyway, these market changes are cyclical,” Carlos Moedas points out.
In fact, there have been consistent booms and busts in the property markets on the Iberian Peninsula: 1976, 1985, 1993, and perhaps, 2008-9.
“It’s a business of cycles and sometimes you catch the upward swing in the cycle and sometimes the downward swing, and I can tell people that a good opportunity to buy will come quite soon, within the next two years. This means that people with money to invest in property and buy then, will be laughing all the way to the banks in 10 years time.”
Next week: The banks, mortgages and the Portuguese borrowing culture.
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