Will house prices in Portugal & Europe fall or rise in 2023?
Real-estate market news Portugal - Should Portugal and Europe fear a housing market bubble in 2023? According to the UBS Global Real Estate Bubble Index report published on September 20th, 2023, this is the real-estate market forecast for Europe in 2023.
Is there a real-estate bubble in Portugal & Europe in 2023?
The real-estate market context in Portugal and in Europe is now perceived as a house of cards that is shaking due to fears of a real-estate bubble that will lead to falling house prices.
According to the UBS Global Real Estate Bubble Index report published on September 20th, 2023, real-estate market fears are sparked by the sharp increase in interest rates, since low financing costs used to be the lifeblood of global housing markets that led property prices to reach historical highs.
Will house prices in Portugal & Europe fall or rise in 2023? This is the real-estate market forecast for Europe in 2023 :
The new economic paradigm has led to falling property prices over the past year, registering the sharpest drop since the global financial crisis in 2008 due to inflation adjustments, according to UBS.
While the cities that were classified in the bubble risk zone by UBS recorded an even stronger average price decline, the impact of higher interest rates has been markedly different in cities both in Europe and globally.
In Europe, Zurich is the only city that remains in the bubble risk category in 2023 according to the UBS Global Real Estate Bubble Index.
Meanwhile, both Frankfurt and Stockholm have registered faster and more severe re-pricing market corrections.
What is the real-estate market forecast for Portugal and Europe in 2023?
Many European cities have planted the seeds for the next property price boom, since housing remains undersupplied due to the fact that the hybrid work model has not weakened demand for city-living.
In many European urban centers, the number of building permits has been declining significantly, causing the housing shortage to intensify, while housing demand is exacerbated - this may lead to soaring prices as soon as financial conditions for households improve.
In Portugal, there is a severe housing crisis in major urban centers and the Government has just enacted bold measures to increase the housing supply under the More Housing package (Mais Habitação). On September 30th, there were major demonstrations in Portugal to protest against the housing crisis, with protests in all major cities in Portugal, including Lisbon, Porto and 16 other cities. Portugal’s President of the Republic has stated that such demonstrations are "important for a good cause and are a sign that democracy is alive".
In Madrid, the housing market prices are considered a fair value compared to other Eurozone cities, since the Spanish capital has remained affordable as measured by the price-to-income ratio. Even though prices have increased by 3% in inflation-adjusted terms over the last four quarters, they remain 25% below the all-time high in 2007. Since housing demand is shifting towards the rental market due to higher interest rates, more build-to-rent developments are expected, thus keeping a well-balanced housing market.
Globally, the risk of a real estate bubble has shrunk following price corrections in 25 cities across the world, according to the 2023 study by Swiss bank UBS.
What is a real-estate market bubble?
A real-estate market bubble refers to a recurring phenomenon in property markets. The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.
Real-estate market bubbles are recurring events that are shown using historical data in order to define patterns.
Typical signs of a real-estate market bubble include a decoupling of prices from local income and rent prices, as well as imbalances in the real economy, such as excessive lending and construction activity.
While real-estate bubble risks are gauged based on existing patterns, it is not possible to predict if or when a market correction will take place, since other variables including macroeconomic changes, a shift in investor sentiment, or a major supply increase could change existing patterns and trigger falling house prices.
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