Now could be the perfect time to buy property in Portugal as recent data shows prices fell by 8.9% to the year ending May 2012, but in the quarter ending May 2012 prices dropped by just 0.8%. Prices of apartments have fallen more quickly than houses, dropping by 10% over the past year compared to just 7.2%. It is predicted that prices will continue falling for the rest year, and that domestic demand will remain weak due to Portugal’s problems.
Although Portugal had to request a bailout, it has coped relatively well and has stuck to a tough austerity programme that has earned praise from onlookers. Unemployment is still high in the country, as it recently rose to reach a record 15%, which means 830,000 people are now unemployed compared with 440,000 at the end of 2008.
One of the hardest hit sectors is the construction industry as the number of construction firms going out of business has increased by nearly 50% during the past year, and it’s expected thousands will lose their homes due to foreclosure.
The construction industry is estimated to owe banks around €25 billion, and the banks are cutting back on loans, resulting in projects grinding to a halt. In spite of the problems in the country, home ownership is surprisingly high, as the government gave out generous mortgage subsidies that pushed owner occupancy rates up to a high of 75% in 2001. This led to the rental market shrinking to just 21% of total housing stock.