An analysis by the Banco de Portugal (BdP) reveals that all it takes is an online housing search for there to be an upward impact on prices, even in the absence of transactions. Specifically, the regulator observed a “strong correlation” between online house searches and prices in the Portuguese residential market, according to a report from idealista.
In its financial stability report, the BoP revealed an analysis that compares the evolution of house prices with an indicator of demand in the housing market, the Housing Search Index (HSI), which uses the volume of searches to the terms “buy a house” in Portugal (or similar) on Google Trends.
After analyzing the evolution of housing prices and online housing searches in Portugal between January 2004 and August 2023, the Portuguese regulator observed “immediately a strong correlation between the index [HSI] and price variations in the housing market,” the document reads.
In a second analysis, the importance of external demand for housing was also assessed, measured by research carried out outside Portugal. It was concluded that “external demand is relevant in defining the dynamics of housing prices in Portugal.”
For example, the online housing search indicator (HSI) for the two countries with the highest representation of owner-occupied housing in the Lisbon region (the United States and France) is characterized by a series of variations in housing prices in Portugal. “These indices are highly correlated with the house price growth series in Portugal, with correlations of 66% and 54%, respectively, for the United States and France.”
