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Portugal remains in the 'doldrums'

Posted on: 13-Aug-2013

Despite the release of relatively positive data for Q2, Portuguese property is still in a slump. The Global Property Guide reported that major factors remain weak, with the average property price in Portugal falling by 2.4 per cent year-on-year in June 2013. Figures from Statistics Portugal showed despite prices in the country rising by 0.2 per cent quarter-on-quarter in Q2, when adjusted for inflation, prices fell 3.4 per cent since June 2012.

The average property in Portugal now costs €948 (£816.11) per square metre. Flats are performing the best, falling just 2.2 per cent year-on-year in real terms in June to around €1,051 per square metre. When it comes to location, the news provider explained that prices dropped  across the country, but the Algarve had the sharpest decline, with a 5.8 per cent drop year-on-year.

Construction is also very weak. Statistics Portugal's index of production showed a 16.3 per cent year-on-year fall in activity for the quarter ending in June 2013. However, this is up by 2.9 per cent from May. Employment and wages and salaries indexes registered year-on-year falls of 15.3 per cent and 15.1 per cent respectively. 

However, Portuguese property is anything but down and out. The country still remains popular among second-home owners and investors in the holiday let market. In fact the Organisation for Economic Co-operation and Development named Portugal as one of the most favourable countries in the world to own property in May 2013. This is because real estate is undervalued and the price-to-rent ratio is appealing for investors. Homes are now seven per cent cheaper than their historical average and rents are 13 per cent more favourable for landlords.

Yet the mortgage market's instability could deter some from buying property in Portugal. Although interest rates are falling, dropping to 3.24 per cent in May 2013 from 3.99 per cent the year previous, there is extreme sensitivity to interest rate changes. The Global Property Guide explained this is because 98 per cent of all loans approved in Portugal have variable interest rates or initial rate fixation of less than one year.
Article created on behalf of Propertyshowrooms.com News Desk (http://www.propertyshowrooms.com/news/)

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