Lisbon is one of the few prime markets in the world where house prices could still rise in 2020. Why can't the same thing happen in London?
Property prices in most European cities are set for a year of serious falls. Shrinking GDP, rising unemployment and months of lockdown will drive down values in almost all major global cities. Paris, Madrid, London, Geneva and Berlin all have a rough year ahead.
But there is an outlier. In Lisbon, the prices of the most expensive homes are expected to rise by 3pc in 2020. In 2021, it forecasts a further 5pc jump.
The Bank of England has forecast that UK house prices are set to fall by as much as 16pc. So what can we learn from a city whose property market is set to buck the downward trend?
Lisbon’s property market was slow to recover after the global financial crisis, but then it exploded. At the beginning of 2017, annual price growth was nearly 10pc.
Demand from foreign buyers was fired up by the introduction of the Golden Visa programme, which gives buyers access to the EU if they spend €500,000 on a property, and the non-habitual residents visa, which grants mega tax breaks to buyers living in Portugal part-time. As tourism boomed, investors swarmed to buy up apartments to let out on short-term rental sites such as Airbnb, driving prices up further.
Problems with affordability had started to kick in at the beginning of this year. Price growth in March was just 1.5pc, although the slowdown was limited as there was more demand than supply.
Then came coronavirus. As in Britain, Lisbon’s property market was slammed by the lockdown.
Lisbon’s rental sector was the first to feel the brunt of the outbreak. As tourism dried up, Airbnb investors moved their properties en masse to the long-term lettings market. The same has happened to London, though on a smaller scale.
But house prices have so far been resilient, say agents. “Buyers might be trying to lower asking prices, but owners are not under pressure,”. Interest rates are low, the Portuguese government has introduced a wage protection scheme, and homeowners can take mortgage holidays.
Still, there is pressure in the pipeline. Tourism and hospitality are big parts of Portugal’s economy and unemployment will rise.
Another agent said: “In a six-month window, maybe prices will go down by 10pc, maybe 15pc in some extreme cases.”
His predictions are similar to analysts' predictions for the British market, forecasting price falls of 10pc for the UK this year.
And just as British house prices will likely be brought down first by landlords who are forced to sell because their rental income has dried up, Lisbon’s Airbnb investors will be the first to need to sell at a discount.
But agents expect Lisbon’s downturn to be short-lived. Once foreign travel can begin again, they are anticipating a surge in foreign money.
“Coronavirus made us very afraid at first, but it has somehow become an opportunity for Portugal,”. The country has handled the outbreak much better than its neighbours in Europe. “Tourists and investors are choosing Portugal as a place to visit and invest in because it has done better than Spain, France and Italy”.
There has been a massive uptick in inquiries for Lisbon. Foreign interest is already back in line with 2019 levels.
There’s a particular rise in interest from different groups of international property hunters who now want to take advantage of the Golden Visa. Buyers from the Philippines, China, India and America have all inquired about buying into the scheme since the outbreak.
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