So close, so far. If the Portuguese and Spanish neighbors have gone through very similar economic periods over the last decade, the evolution of the housing market observed in each of the two countries has been, “significantly different”, reports the Lisbon newspaper Public, by taking up the conclusions of a study recently published by the Bank of Portugal (BdP).
A study which had as its starting point the following question: “Since 2013, real house prices have increased by more than 80% in Portugal and less than 30% in Spain. How can we explain this gap, when the two economies have been marked by a common dynamic in recent years?
In this case, the two countries experienced, between 2008 and 2013, an average contraction in GDP of around 1% per year, with a significant drop in investment in housing and a reduction in the active population, under the effect an increase in emigration, aging and the unemployment rate. From 2014 to 2023, period “very atypical”, the economic recovery was undermined by the pandemic crisis, followed by an inflationary shock and a significant rise in interest rates.
“Overvaluation” since 2017
BdP economists found that the reaction of the real estate market was significantly different in the two countries. In ten years, housing prices have increased in real terms by 3% per year on average in Spain; in Portugal, growth was more than doubled and “real estate has been overvalued since 2017”, summary Public. “This phenomenon has not been observed in Spain”, adds the daily.
This “price overvaluation”, conclude the authors of the study, is fueled by “demand shocks” (without however identifying the origin of these shocks, which could be explained, for example, by a demographic phenomenon or a change in interest rates). “Price growth is clearly determined by demand forces. Supply is not able to counterbalance this effect and, in certain periods, it also contributes, albeit slightly, to price growth.”
