Chairpersons from the major banks in Portugal have united in stating that Portugal is not experiencing a bubble in the real estate market, creating further confidence in the industry.
At a conference in Lisbon the bankers stated that the reason behind the exceptional growth in the property market in Portugal was due primarily because the market was correcting itself following years of minimal investment and thus the boom should not be seen as a bubble. It was also stated that banks have also increased their lending in the sector which has also helped to correct the formerly stagnant house prices in the country.
According to a report by The Portugal News, Miguel Maya from the BCP bank said: “The housing market has warmed up”. He added that locations such as Lisbon and Porto are not only performing well among domestic buyers, but also through foreign investment.
Novo Banco chairman António Ramalho substantiated these comments by adding that investment was also limited through the lack of building licenses being issued. BPI chief Pablo Forero recalled the housing bubble in Spain and said that the situation “in Portugal is very reasonable”.
The assurances about the property market in Portugal came following the European Bank Authority warning that they have raised the issue of penalising banks with a bad debt ratio in excess of five percent of credit issued. Currently the European average is at 4.64 percent, while the rate in Portugal is almost three times higher at 12.41 percent.
The Portugal News reports that “it was revealed recently that house prices recorded their biggest increase in 26 years. Latest numbers out this week show that the cost of buying a house in Portugal has risen by 14.2 percent in the space of just one year, and is up by 30 percent since 2014.”
But the Bank of Portugal remains cautious, back in June it said “some signs of over-valuation of real estate prices have started to emerge”.
Fears that rising prices could provoke another real estate bubble saw the central bank issue a recommendation that as from 1 July, banks should exercise greater caution in issuing mortgages and personal loans.
According to the Bank of Portugal, overall foreign investment in real estate in the country in 2017 represented 80 percent of all transactions, with fears mounting that domestic homeowners are being priced out of the housing market. Rental prices have also shot up to new highs.
