Portugal housing bubble bad news for expat retirees

Published:  4 Dec at 6 PM
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According to a major ratings agency, house prices in Portugal will keep on rising.

Portugal is still considered to be a cheap destination for expat retirees as well as for start-ups and digital nomads, but its ever-rising cost of accommodation may take the shine off its formerly well-deserved fame. For several decades, Portugal’s Algarve region has been the refuge of choice for British expats looking for a warm, inexpensive haven far away from the UK’s cold winters. Sadly, a report by Moody’s ratings agency indicates the haven may well still be there and the sunny weather is unchanged, but house prices have been escalating since 2013, with 2017’s figures now at the same level as they were just before the 2008 financial crisis.

According to the report, the rest of Europe is also experiencing property price hikes, but Portugal’s version puts it way outside the ‘modest increases up to 2020’ level of its competitors, including the Netherlands and Ireland. Moody’s believes increases in Portugal over the next two years will be in the range of between seven to eight per cent above their present level, and Portugal’s very own statistics division INE says house prices across the country have shown increases of over 16 per cent since the beginning of 2016.

The highest price hikes are found in Lisbon and Porto, running at present at 47 per cent and 34 per cent respectively and causing various commentators to sound alerts about future increases. For example, the Bank of Portugal is backing off from using terms such as ‘housing bubble, but the implication is clear. Apparently, the bank believes house prices are due to stabilise shortly as monetary policies are set to ‘normalise’, due to both the throttling back of ECB stimuli and a gradual hiking of interest rates. Perhaps would-be UK expat retirees aiming at avoiding the worst effects of Brexit should consider waiting a while before purchasing an apartment in the Algarve.
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