While low prices and a vibrant tourism industry may make Portuguese property an attractive prospect for investors, getting a mortgage in the country is becoming more and more difficult. Ricardo Reis, Cushman & Wakefield Inc's head of valuations in Portugal, told Bloomberg that lenders are now requiring more collateral. This is causing a drop in the number of real estate valuations made by banks and in March, appraisals of homes and apartments fell by 6.9 per cent year-on-year. Average values now stand at €981 (£831.11) per square metre, the lowest level since September 2008, according to Portugal's National Statistics Institute.
"A lower bank valuation reflects the overall drop in property prices and may require potential home buyers to come up with more money to purchase the property due to a lower loan-to-value required by the banks in order to reduce their risk," Mr Reis explained to the news portal. This means that instead being able to take advantage of lower prices, some buyers remain priced out of the market.
Lower appraisals are given by lenders in volatile markets to protect them from being lumbered with an asset worth less than a mortgage. With the Portuguese property market still some way away from a recovery, this practice is becoming more and more common. Figures from the Bank of Portugal noted that during the first quarter of the year, lending fell once again and the trend looks set to continue.
These conditions may offset any benefits from government schemes to attract overseas investors, such as the Golden Residence Permit. Under this policy, investors from outside the EU can receive a five-year residency permit if they invest in property worth at least €500,000. The scheme is expected to generate considerable interest from Asians looking to enjoy the right to study and travel in 26 European states that make up to Schengen region. A similar scheme is also being implemented in Spain, but barriers to lending could throw a spanner in the works for such policies.
Article created on behalf of Propertyshowrooms.com News Desk (http://www.propertyshowrooms.com/news/)