Opportunities are like the sunrise...

Who hasn't already regretted that moment of hesitation that made them miss an (unrepeatable) opportunity?

The downside is that you were probably the only one responsible. The good part is that in life all mistakes have an advantage: they serve as a lesson :)

We live in troubled times. Doubt has set in for 2 years:

"Is this the right time to fulfill that dream I've been chasing for a long time? Buying a house with a garden, leisure areas or even a swimming pool?

Should I wait even longer? It may be that the crisis that all inflations always bring creates new opportunities... It may be that someone has an urgency to sell and accepts to lower the sale price... It may be that someone gets tired of waiting for their house to sell and reduces the price... Maybe the market will "burst with the bubble" and prices will go down..."

And so on... These are the hesitations that keep you from deciding and when you know it, the sun has already set and the dream of that day is over. Then all you can do is regret the lost opportunity.

The world changed

First it was the pandemic, now the war in Ukraine. At least in one forecast, there is almost unanimity: inflation is here to stay! Inflation in construction costs, inflation in decoration materials, inflation in services and, consequently, increase in the sale prices of new and used homes.

Because? Because the world has changed. The globalization of the economy, which has contributed to lowering the prices of raw materials and consumer goods, has a compromised future. The reality of the new world is designed in regional blocks. Doubt and distrust are here to stay. From now on, producing in Europe will be more expensive, at this juncture in which trade relations with Russia or even with Asia (components crisis) were compromised. The costs of producing locally are higher, but they are a safer option for companies. Energy costs will tend to rise.Until the West manages to replace imports of goods and energy with more economical local alternatives, as a result of productivity gains, it will still take time.

Year-on-year change in the New Housing Construction Cost Index - March 2022

The graph above shows the growth in construction costs through the year-on-year change in the New Housing Construction Cost Index , compared to the previous year. Since March 2021 the rate has skyrocketed. And the cause is not just the inflation of construction materials (affected by the growth of energy costs and the scarcity of raw materials), the labor costs have also increased, as currently the shortage of human resources in this sector is great.

Conclusion: the brutal inflation that has affected the cost of building new houses since last year due to the pandemic, not only has not ended, but is tending to worsen . This aggravation will be felt even more in small-scale construction, such as housing. The same impact will happen in the renovation of used homes.

The Demand and the Offer

As we all know, this is the law that governs the dynamics of prices in the real estate market. Now, to the foreseeable stagnation in the supply of new houses, there is also the growing demand for houses in Portugal by foreigners or Portuguese who live outside Portugal and who, thanks to teleworking, are looking for countries with the lifestyle that Portugal has to offer, continuing to to work remotely. The same applies to retirees.

Cheaper cost of living, security, mild climate, quality infrastructure and services, good hospitality... in short, the quality of life that we are proud to offer, despite our financial incapacity to enjoy it ;)

Because not even the end of Visa Gold stopped the search. On the one hand Portugal continues to be a very attractive country in terms of granting visas for most nationalities and on the other, many Europeans already know Portugal through tourism promotion and continue to decide to move to our country.

This is the main reason for the appreciation of the real estate market recorded in the last 7 years, the foreign buyer or expatriate has a much higher purchasing power than the national buyer.

Buying a house, dream or nightmare?

Buy the luxury home you've always dreamed of

If in recent years, the recovery of the new construction real estate market has created opportunities for those who wanted to sell their used home and buy a new one (or in the project phase) and still earn from the exchange, know that that time has come to an end. Inflation and the scarcity of urban land will make this asset increasingly scarce and therefore more expensive.

The difference between the sale price of a new house and a used house will increase. This is already happening and it is inevitable.

On the other hand, the scarcity of supply in the used home market, combined and "in tow" of price growth in the new home market, will push all sales prices up, whether used or new. As long as there is demand - and it hasn't dropped even during the pandemic - the prices of used homes will not go down.

On the other hand, access to housing credit will become even more difficult. The instructions of the Bank of Portugal, in line with the recommendations of the ECB, will condition the value of the loan, which will be limited to 70% of the value of the property to be mortgaged. In addition to this limitation, restrictions regarding the effort rate of beneficiaries and their age will make access to this type of credit even more difficult.

Thus, faced with this scenario, many Portuguese who dreamed of living in a house, preferably new, are at risk of having to abandon that dream , not least because proportional increases in income in the middle class are not foreseen.

Offers in the real estate market will continue to disappear rapidly or to rise in price, especially in areas where demand continues to grow.

Conclusion: Opportunities are like the Sunrise, if you wait too long you will miss them.

Updated on: 
24. March 2022
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