Activity stalls but prices continue to rise!

• House price indicator remains firm

• New buyer enquiries and sales stagnate

• Prices seen rising over the near-term despite a flat outlook for activity

The May 2022 RICS/Ci PHMS results point to a largely stagnant head­line picture for housing market activity over the month, although prices continue to rise firmly according to the latest feedback. In the lettings market, tenant demand growth remains robust, while a lack of supply is still a prominent factor contributing to a rise in rental prices.

Starting with the sales market, the aggregate net balance for new buyer enquiries came in at -5% during May, down from a much stronger reading of +21% last month. As such, this is indicative of demand flat-lining over the month, with the regional breakdown showing a stagnant trend in both Lisbon and Porto, while respondents based in the Algarve reported an outright decline. Alongside this, new instructions to sell re­main subdued across all areas, evidenced by a net balance of -26% of respondents citing a fall at the headline level in May.

With respect to agreed sales, the headline net balance slipped from +20% previously to just +3% in the latest results. Again, this is con­sistent with a generally flat monthly picture for transactions. Looking ahead, near-term sales expectations are now in broadly neutral territory, posting a reading of +5% in May (down from a more positive figure of +13% beforehand).

For house prices, the headline net balance of +43% continues to sig­nal a firm pace of growth at the aggregate level (similar to last month’s figure of +45%). Moreover, a net balance of +67% of survey participants foresee prices remaining on a upward trajectory over the coming twelve months, up marginally on a reading of +64% previously.

Meanwhile, the Weighted Confidence Index (a combined measure en­compassing near-term price and sales expectations) returned a figure of +21, down slightly from a figure of +27 last month. That said, this measure is being supported by the resilient outlook on the pricing side of the equation, while sales expectations are much flatter.

In the lettings market, a net balance of +51% of contributors report­ed an increase in tenant demand during May, while the reading for new landlord instructions remains deeply negative at -32%. On the back of this discrepancy between rising demand and tight supply, rents are anticipated to increase over the near-term by a net balance of +36% of respondents.

Ricardo Guimarães, Director of Ci:
“May’s HPI, from Confidencial Imobiliário, shows a monthly price increase of 2.5% compared with the previous month. This result means house price growth is accelerating relative to the pace observed over recent months (even though prices were al­ready rising at a significant rate). Since December, prices have increased by around 10%, reaching more than 17% growth yoy. These figures show that inflation and construction cost pressure are leading to an appreciation in price expectations, despite the pressure on families’ disposal income.”

RICS Senior Economist, Tarrant Parsons:
“The global economic backdrop continues to weaken, with inflationary pressures prompting tighter policy from central banks around the world while also weighing on the outlook for consumer spending. Although conditions remain reason­ably upbeat across the Portuguese economy at this stage, the prospect of higher borrowing costs alongside a material slow­ing in growth across many advanced economies represents a significant headwind going forward. In turn, this could ham­per activity in the housing market, although pricing trends are expected to remain relatively firm for now.“

Source: Confidencial Imobilário

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