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House prices in Portugal "are overvalued", warns EC

The rise in house prices slowed down in 2023 and Brussels admits that there is a risk of a “sharper future correction”.

After a strong rise in house prices recorded over the past year, 2023 brought more moderate price growth in several European Union (EU) countries, with some Member States even showing falls in the cost of housing. This was mainly due to the increase in interest on housing loans and the lower debt capacity of families.

But in many countries, real estate markets remain overvalued, as is the case in Portugal, warns the European Commission (EC). And here Brussels even admits that there is a risk of a “future sharper correction” in house prices, if economic conditions deteriorate.

Despite the pandemic, the majority of the 27 EU countries experienced “strong growth in house prices”, even in markets that were already overvalued, that is, where house price growth already exceeded – by far – the evolution of income relatives.

But at the end of last year, the rise in house prices began to slow down, as interest rates on housing loans increased and inflation began to put more pressure on families' disposable income. And this trend of moderation in the rise in the cost of housing continued throughout 2023, with more EU countries showing declines in prices, Brussels begins by explaining.

Although it admits that “the overvaluation of housing prices has started to decrease in many countries” throughout 2023, Brussels warns that so far these reductions are “limited”, with there even being property markets that remain overvalued, as is the case in Portugal, read The warning report for macroeconomic imbalances in Europe for 2024 is included.

“Housing prices are overvalued and continue to rise in Bulgaria, Spain, Latvia, Portugal and Slovenia. In these countries, the evolution of housing prices can be seen as a risk factor for a more pronounced future correction, if economic conditions deteriorate, with housing prices being strongly overvalued in Portugal”, the document also states.

Specifically, the EC chaired by Ursula von der Leyen estimates that house prices in our country will grow by 3.2% this year, slowing down to 3% in 2024.

Full article here!

Source: Idealista


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