Recent years have seen a correction in the housing market in the United States, marked by declining home prices and an excess of housing. Many are therefore speculating as to whether other nations, like Portugal, may be the next.
The reasons behind the US housing market correction include rising interest rates, an oversupply of housing, and the COVID-19 pandemic. There is a huge increase in housing demand in Portugal right now as many individuals are eager to relocate there from overseas. There are worries that the market could overheat and experience a correction later on.
Increasing interest rates is one issue that can cause a downturn in the Portuguese home market. The European Central Bank has hinted that it may increase interest rates soon, which would increase the cost of obtaining a mortgage. This can result in a drop in demand and a subsequent adjustment of prices.
The potential for an oversupply of homes is another element that could lead to a drop. Although there is a high demand for homes in Portugal right now, there are worries that developers may build too many homes in anticipation of a persistent demand. A surplus of houses on the market and a drop in pricing could result from this.
The COVID-19 pandemic may also play a role in a potential correction. Although though Portugal has not been as severely affected by the epidemic as other nations have been, there is still economic uncertainty that can cause housing demand to decline.
Notwithstanding these worries, it’s crucial to remember that the property markets in the US and Portugal differ greatly from one another. Portugal has tougher lending laws than the US, and there hasn’t been as much speculative investment there. The property market in Portugal is also heavily influenced by international demand, which may shield it from some of the internal causes that contributed to the American downturn.
Therefore, even while there are worries that Portugal’s property market could eventually undergo a correction, it is crucial to approach the situation with caution. There is no reason to panic at this point; policymakers should observe the market carefully and take appropriate action if necessary. There are numerous grounds to anticipate that the Portuguese market will remain robust in the years to come, even though some of the elements that caused the American market correction may not necessarily be present there.
Scott Kirk is the owner of BuyProperty.com and the online community “Expats in Portugal Q&A” which helps over 80,000 members relocate to sunny Portugal. You can contact him directly at scottk@buyproperty.com with any questions or comments.
