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Will property prices in Portugal stop rising? Will there really be a turning point in the real estate market? Despite one of the fastest growth rates in Europe, Moody's analysts believe that rising property prices will soon come to a halt due to these five reasons.

1. Economic slowdown
With the economy expected to grow by just 0.4% this year, Moody's analysts believe that the factors behind real estate market growth – such as the drop in unemployment and increased consumer confidence – may now be fading.

2. Inflation and high interest rates
As the economy slows, the cost of living in Portugal rises. In its recent report, Moody's notes that the increase in inflation and interest rates has constrained family budgets and put pressure on debt service costs, affecting demand in the property market and putting pressure on prices.

3. Less investor demand
With returns on fixed rate assets becoming more attractive, some investors are withdrawing from the real estate market and investing in those assets, say analysts. Another factor that could harm demand from foreign investors is the possible end of the Golden Visa programme.

4. Lower consumer confidence
High consumer confidence in Portugal has been an important driver of house prices, but rising inflation and a potential economic slowdown have caused that confidence to drop, and therefore demand.

5. Overvalued market
“The real estate market in Portugal shows signs of overvaluation, which exacerbates the risks of a correction in prices,” says the agency. Noting that, in the past, corrections have always come after periods of explosive growth in prices, Moody's warns that we may be on the verge of a correction in the market.

However, one factor that could help the real estate market resist a significant price drop is the limited supply of properties, which has reached a 15-year low. So if there is a correction, says Moody's, “the lack of supply will limit the dimension of the drop in prices”.

In-depth, local knowledge is vital for investors today. Speak to the team at Algarve Home Sales for advice on buying or selling property in Portugal.

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