In Portugal, house prices are overvalued. In Spain – which has a macroeconomic context identical to ours – the real estate market has not evolved in the same way. Economists try to understand why.
If, in recent years, Portugal and Spain have been affected by identical economic dynamics, why do they differ so much in housing prices? This is the question that Banco de Portugal (BdP) seeks to answer, in a study in October.
In the space of ten years, house prices have increased 80% in Portugal. Right next door, in Spainthis increase did not reach the 30%.
As the newspaper details, between 2008 e 2013the “sister” countries of the Iberian Peninsula experienced an average annual contraction in gross domestic product (GDP) of around 1%, with a significant drop in investment in housing. It was here that differences in behavior began to be noticed. While in Spain there was an average annual drop of 8% in housing prices, in Portugal the decrease was only 4%.
Between 2014 a 2023a very atypical period was experienced, with economic activity growing at similar rates in both countries, while the unemployment rate also fell identically. But the real estate market’s reaction was substantially different in the two countries. During this period, house prices rose at an average of 3% per year in Spain; in Portugal, growth was more than double.
Why?
The decrease in the resident population in Portugal, in the period under analysis, should have contributed to the falling housing prices – but that didn’t happen.
On the other hand, in Spain there has been an increase in population – which actually leads to an increase in house prices.
Given this scenario, the researchers concluded that in Portugal there is a “episode of overvaluation” of house prices since the first half of 2017 – which does not happen in Spain.
On the other hand, once again, This phenomenon does not happen in Spain.
The study theorizes that this overvaluation is motivated by demand shocks – which can be explained, for example, by a demographic phenomenon or a change to the interest rates.
