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2021 Real Estate Market Outlook

A still scarce supply of new products is expected to ensure some stability in the residential market throughout 2021, although we may see a slight drop in prices, which is expected to be more pronounced in the second-hand product. The residential segments most dependent on the foreign market should continue to be penalized.


The residential sector proved to be resilient in 2020. Despite the pandemic and contrary to the expectations of many consumers, throughout 2020 there was no drop in house sales prices. There was even a small increase, sustained by a significant increase in the first quarter of the year and slight variations in the following.

At the same time, despite the greater difficulty in making visits and carrying out deeds, the number of houses sold in Portugal decreased by less than 10% and the volume of sales was equivalent to that recorded in 2019.

The main factors that in 2020 contributed to relative stability in the housing sales market are expected to prevail in 2021.

The stability of selling prices reflects a still limited supply of new homes. Although the number of new homes completed in 2020 has increased significantly compared to the previous year, another 25% in Portugal and 44% in Greater Lisbon (data accumulated until September), the volume of supply is still low. In fact, the growing complaint by property developers about the lack of expediency of the city councils, which was aggravated in this pandemic period, continues. The number of houses licensed in 2020 for housing construction decreased marginally in Portugal, around 1%, but the asymmetries between regions are significant. While in Greater Porto there was an increase of 16%, in the Lisbon region there was a decrease of 8% compared to the previous year.

At the same time, the benchmark interest rates remain negative and the banks maintain a high level of competition in obtaining home loans, reflected in the reduction in spreads. The volume of mortgage loans granted increased by 7% in 2020 while the volume of sales stabilized. We expect banks to maintain an active mortgage credit policy in 2021, although perhaps with extra care in analyzing customers' repayment capacity, which will continue to drive housing purchases.

Additionally, with the increase in telecommuting, the house gained relevance, including for the Millennial generation, creating a new dynamic in demand.

Factors that explain the resilience of the housing sale market:

• Shortage of supply

• Active bank credit policy

• Greater relevance of the home in a teleworking context

However, in 2021, more than the health situation itself, it will be the impact of the Covid-19 pandemic on the economy and the ability to maintain jobs that will regulate sales. The maintenance of bank default rates until a consistent recovery in economic activity begins is also of the utmost importance for the sector's stability. Although in this context it is very difficult to make predictions, we aim for transaction levels identical to those of 2020, that is, about 165,000 homes sold. In terms of prices, we may see a slight drop, which is expected to be more pronounced in the second-hand product.


In terms of segment, we should see different situations, similar to what happened in 2020.

Insecurity coupled with travel restrictions and uncertainty regarding the end of the Gold Visa program in coastal regions of the country has affected the most dependent on the foreign market. This context is expected to last, at least, during the first half of 2021 but it can be partially reversed if the transitional period of Gold Visas, still to be clarified, define conditions that still allow purchases in the coastal regions of the country.

This is the situation in the Algarve, the region that recorded the sharpest drop in the number of sales in 2020, reflecting its high dependence on the foreign market.

The rehabilitation product segment, which is mainly aimed at the foreign market, is also expected to continue to record a greater drop in demand. We refer to small-scale projects, located in central areas of the city, but outside the prime axes, without car parking, and mainly, located in containment areas, that is, where the chamber has limited accommodation activity.

On the contrary, medium and high-end products destined for the domestic market will continue to be placed quickly, since the volume of new offer is still very low.

The increase in teleworking combined with a greater need for outdoor space stimulated domestic demand for second homes in countryside and beach areas. Areas such as Comporta are expected to continue to register interesting demand.

As in the case of 2020, the high-end and luxury product is also expected to maintain high demand.


The development of rental housing projects is a growing trend in the world, but in Portugal they are taking a long time to arrive. In fact, if on the demand side we are sure that the market has enormous potential, in Portugal there are some constraints on the development of supply. The main constraint concerns the successive legislative and fiscal changes made by the current Government, which have made the housing rental regime increasingly unfavorable to the landlord, and moreover with high eviction times and costs.

In addition, the value of rents decreased significantly (in some areas by more than 20%) in 2020 due to the transfer of a large number of houses that were in Local Accommodation to traditional medium and long term rentals. If pandemic control is not expected before the middle of the year, we will continue to see conditioned tourism and pressure on household income, and consequently, a reduction in incomes, although much less marked than that seen in 2020.

Even so, and as we have already mentioned in the investment chapter, we foresee that in 2021 one or two housing developments for renting out to the middle class or co-living will start.

At the same time, it is likely that a project will arise associated with one of the large multinational companies that has been relocating some of its services to Portugal.


1. Faster licensing...

The lengthy licensing process is certainly the main challenge of the market, as maintaining it will make Portugal a costly country. It is also necessary to have a less complex and transparent licensing process, and for that, it is desirable that it be identical in all municipalities.

2. Legislative and fiscal changes that encourage investors...

The consecutive legislative and tax changes have created enormous uncertainty in the real estate market and heavily penalized investment. At the end of 2020, the Government approved the revision of the Gold Visa program, in order to exclude coastal areas, that is, the metropolitan areas of Lisbon and Porto, among others. The new revised program comes into force on July 1, 2021. However, a transitional period is expected until 2022, the conditions of which are not yet known, but which are expected to mitigate the impact of the end of the program as was created, during a period that will be of great difficulties for the national economy. It would be particularly desirable that instead of ending the program in the metropolitan areas of Lisbon and Porto, the minimum level of investment and energy classification of the property would be increased, even to qualify demand.

3. Digitization of the sector.

To allow distance purchases and keep the level of foreign investment high, it is necessary for the Government to invest in the digitalization of the sector, making it possible to carry out online promises and deeds. On the other hand, the deeds are public, but there is still no database for consultation.

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