The property market is going to tank in Portugal. Housing prices will drop significantly and many properties will likely come on the market. How am I certain this is going to happen? Other than it being obvious to everyone and their dog that we’re in a bubble, Bloomberg News confirms Portugal is the 6th most at risk compared to all other OECD and accession countries. The United States is considered less risky at #7 and we all know what’s happening over there right now, prices are dropping faster than you can say recession.
Speaking of overseas, China’s biggest property developer recently saw profits plunge by 96% and the other largest developers are bankrupt such as Evergrande and Shimao. New home construction is halted, resulting in ghost cities and borrowers refusing to pay their mortgages because it’s obvious those buildings will never be completed. What was once seen as a sure bet investment now is resulting in bank runs.
You may have heard the phrase: When the United States sneezes the world catches a cold. We’re about to find out what happens when both these global superpowers sneeze at the same time. It’s hard to imagine it won’t affect Portugal, especially since “Portugal is especially at risk in the euro area”, regardless how much money is spent advertising properties for sale to Americans. That can only mask the problem for so long.
This uncertainty is fueled by high inflation rates around the world and governments attempts to bring it under control. One of the most common measures to decrease inflation is to increase borrowing rates, happening now, which in turn cools the overheated property markets. High inflation and higher spreads, means those looking to enter the property market will have a harder time getting on the property ladder. Existing property owners will see a decrease in the value of their homes and anyone with a mortgage is going to have a surprise when they renew. God help those with variable mortgages.