While property prices in Portugal are expected to remain high in 2020, a Moody’s report predicts they will fall by around 2% in the coming year as a result of the COVID-19 pandemic.

Released last week, the report from the credit ratings agency highlighted that a decline in house prices will be more likely in southern European countries, whose economies are more dependent on industries such as tourism, one of the most affected by the current crisis.

In Portugal, the behaviour of the real estate market will depend on how quickly sectors such as tourism and hospitality return to a relative degree of normality, compared to the years prior to the pandemic.

If tourism takes longer to recover, many properties once reliant on rentals may take longer to be sold or placed on the traditional property market, potentially creating surges of “excess” supply – a complete turnaround from the scenario in recent years.

Expected trends

According to Moody’s, prices in the European housing market “are expected to remain stable in 2020, but fall in most countries as a result of the COVID-19 crisis and the severe economic recession caused by the pandemic”.

This will be a consequence, for example, of the end of government support, such as bank default. However, consistently low interest rates make real estate investment more attractive than alternative investments, meaning that the drop may not be as sharp as predicted.

Another trend that Moody’s is certain will increase is the growing demand for larger homes in suburban areas, rather than large cities. “With people working more at home, (…) consumers will want bigger houses where they can work more comfortably, further away from these urban centres,” quoted the report.

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