Portugal is facing a serious housing crisis. House prices are rising rapidly which makes it hard for people to afford homes. Portugal is one of the few countries in the OECD which are struggling to control this problem. Other countries on the list include Luxembourg, Germany, and the Netherlands. But these countries have higher salaries and better job opportunities unlike Portugal. This makes the situation worse for Portuguese citizens.
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Portugal Housing Crisis
Portugal has one of the worst rates of affordable homes in OECD countries. People are spending more of their income on housing. Many are unable to buy homes but rents keep increasing. Experts say urgent action is needed to fix this crisis.
A study by the IMF’s Finance and Development magazine highlights a global rise in house prices. Economist Enrique Martinez Garcia warns this is similar to the housing bubble before the 2008 and 2009 financial crisis. House prices in Portugal are growing faster than people’s incomes.
According to reports:
Despite regulatory efforts to limit speculative bubbles, in Portugal house prices continue to grow above fundamental market variables, such as disposable income
Real house prices in Portugal have risen by 55% since 2005. In the same period, disposable income has only grown by 9%. This shows that homes are becoming less affordable for ordinary people.
Foreign Buyers And Limited Supply
Foreign investment is one reason for the high prices. Many people from other countries buy houses in places like Lisbon and Algarve. These buyers often have more money to spend which pushes up prices.
There are not enough homes for rent right now. Insufficient new homes are being built to meet the demand. It is worse that there lacks a sufficient supply. People say the government fails to build necessary houses that people can afford.
Speculation is another factor driving up house prices. Some buyers purchase properties hoping to sell them later at higher prices. This activity inflates the market. Prices continue to rise above what most people can afford despite efforts to control them.
Record Increases in Prices
Recent data from Portugal National Statistics Institute shows house prices grew by 9.8% in the third quarter of last year. This is compared to the same period in 2022. This marks a new record and shows how fast prices are rising. The European Commission has also warned that the problem needs close monitoring.
Some countries have taken steps to tackle rising house prices. For example, New Zealand and Canada have banned property purchases by non-residents. These measures aim to help local people buy homes. Portugal has not introduced similar restrictions yet. But experts say it may need to consider such policies.
Housing Bubble Risk
The IMF has warned Portugal about the risk of a housing bubble. A bubble happens when prices become too high and then suddenly drop. This can cause serious economic problems as seen in the last decade financial crises. The IMF says international cooperation is needed to prevent this. It also recommends creating special financial tools for the housing market.
The housing crisis is affecting many Portuguese families. People are finding it harder to afford homes. Young people are struggling to buy their first homes. Rising rents are also making life more difficult.
Banks are becoming stricter about giving loans. House prices rise compared to incomes and fewer people can borrow money to buy homes. This will reduce demand in the future and lower prices. But for now, the lack of affordable housing is a major problem.
Solutions For The Crisis
Experts say there is no easy solution. However, several steps can help. The government needs to build more affordable homes. It also needs to limit speculation and consider restrictions on foreign buyers. Local authorities and the government must work together to create long term solutions.
The IMF also stresses the importance of international cooperation. Countries need to monitor global investment in housing and create policies to stabilize markets. In Portugal, support for first time homebuyers and more affordable rental options are also needed.
