Portugal is fashion. As described in my blog post Portugal’s New Popularity, 2017 was a record year in both property sales and tourist arrivals, contributing to the fastest economic growth in this century, quicker than the European Union average. An estimate by Statistics Portugal (INE) revealed that Portugal’s gross domestic product (GDP) increased from 1.5% in 2016 to 2.7% last year.
Non Habitual Resident Status and the Golden Visa Programme continue to be the draught horses of the Portuguese property market. According to SEF, so far 5.876 residence permits, worth 3,6 billion euros, were granted under the Residence Permit for the Investment Activity programme (Golden Visa). China leads the list with 3.709 residence permits, followed by Brasil (507), South Africa (234), Russia (206) and Turkey (158).
This new property boom lead to a drastic increase of real estate agencies operating in Portugal. More than half opened their doors during the last 2 years. 1,385 started operating last year – another record and an increase of 30% compared to the year before. During January and February 2018, 327 new agencies were registered (more than 5 per day and more than in 2011 and 2012 together).
These are obviously great news for Portugal and its population since a growing economy creates new job and business opportunities. But let’s take a closer look. How is all this affecting the housing situation of the locals.
In a country where the minimum wage is 580€ per month, the price seems to be the biggest obstacle when it comes to renting or buying a property. Although banks are lending again, they are considerably more cautious than they were before the recession.
Due to the current tourism boom, more and more property owners are changing from long to short term rentals, especially in the most popular areas, making it more and more difficult to find a place to live for those who cannot afford to buy. At the same time, a diminishing number of long term rental properties is causing an increase of the rent.
According to a survey carried out by the Observador, it is in the Algarve where most locals struggle to find a property to buy and it is also in this municipality and in Lisbon where it is most difficult to find a long term rental property. This does not come as a surprise as these areas are the main targets of foreign investment.
In Lagos, a property worth 170,000€ can be rented for 554€ per month, which means that an amount equivalent to 26 years of rent would be required to buy such a property. Although in the Algarve the discrepancy between rent and sales price is one of the largest, this is excelled by Nazaré, where a 100 sqm property is worth 27 years of rent.
The municipalities of the Algarve present the biggest discrepancy between property prices and rents on one hand and wages on the other. Albufeira is the second most popular destination behind Lisbon – one in seven tourists chooses this municipality for their holidays, making it extremely difficult to find a property to rent on a long term basis.
According to Statistics Portugal (INE) the average price per square metre of properties sold in Albufeira, during the third quarter of 2017, was 1.524€. In 2015 the average gross wage of Albufeira’s inhabitants was 884€ per month, according to the Gabinete de Estratégia e Planeamento do Ministério do Trabalho, Solidariedade e Segurança Social, which means that a 100 sqm property is worth around 15 years of wages.
Rents are also high in Albufeira (5,78€ per sqm on average) when compared to the average gross wage. On a 100 sqm property, 66% of the gross average income of a worker is spent on the rent.
Portugal is certainly benefitting a lot from this growing economy but one should not forget that a home (shelter) is a basic need and in the most popular areas it is getting really difficult for Portugal’s inhabitants to find a place to live, no matter if the intention is to buy or to rent.