Even before interest rates rose dramatically at the hands of European central banks, high property prices were already a talking point, with many experts and property-buyers alike asking the question: when will house prices stop rising?
Like many analysts in recent years, financial rating agency S&P is now forecasting a period of decreasing prices in residential property across Europe, and therefore putting an end to the housing boom.
They believe there will be a correction in nominal house prices in more European countries as interest rates keep rising across the continent. According to S&P, this will lead to weakened demand and therefore a drop in property prices.
But that won't be for some months, says the agency, which adds that demand will remain high until the end of the year. Some factors are contributing to preventing a sharp drop in house prices, such as:
• Delayed effect of interest rate hikes on household finances.
• Strong labour market.
• Improvements in household income and savings accumulated over the pandemic.
• Shortage of housing.
• Banks still willing to lend, although at significantly higher costs.
For these reasons, S&P expects that we'll only see a drop in property prices by the end of this year, but that will continue well into 2024. In Portugal, property prices are set to fall by around 8%, compared to 12% in the UK and 10% in Ireland.
A market slowdown had already been registered earlier this summer, but without a crystal ball, local advisors are still your best friend when it comes to navigating the property market in Portugal. Contact Algarve Home Sales for more information.