All the signs indicate that the Portuguese property market is still slowly deteriorating, as figures from the May RICS/CI Portuguese Housing Market Survey show sales activity and pricing are continuing to weaken. Further gloom comes in the form of the National Activity and National Confidence Indices which both dropped seven points to -39 and -60 respectively. The country is currently braced for a new wave of austerity measures as the newly elected Social Democratic government is under a lot of pressure from both the IMF and the EU to implement measures they considered necessary in order to secure an EU bailout of about £70 billion.
According to the RICS these figures show that falling prices are driven by falling demand. At least there isn’t a problem of oversupply as most homeowners are sitting tight and new vendor instructions have been dropping since December. As with most countries there are regional variations, as the price falls were greatest in Lisbon and Porto but have slowed in the ever popular Algarve.
It’s not all gloom and doom, as sales figures in the Algarve and Porto are now falling at a slower rate than in April, and May saw an encouraging number of new enquiries. The Algarve can expect to see an increase in demand due to the holiday season, while other regions are likely to continue to be affected by credit restraints and distressed properties on the market. At the moment cash buyers are the main investors in Portuguese property due to the lack of available finance, and this is giving them far greater bargaining power with sellers and developers.