Real estate developers are increasingly optimistic about the future of the residential market, encouraged by the improvement in demand and the favorable outlook for inflation and interest rates. This is what the latest results of the Portuguese Investment Property Confidence Survey (PIPS), an initiative of Confidencial Imobiliário and APPII, show.
Despite remaining in negative territory, the sentiment towards demand in the last three months, taking into account sales performance, registered a significant improvement, going from -70 points in the third quarter to -44 points in the fourth quarter of last year. At the same time, price sentiment was stable, with a balance of +3 points in the fourth quarter.
With regard to expectations for the next three months, a reduction in pressure on demand is expected, with the balance of this indicator rising from -64 points in the third quarter to -21 points in the fourth quarter. With regard to prices, expectations point to continued stability.
In this scenario of stabilizing prices and improving expectations regarding demand, greater confidence in the evolution of macroeconomic indicators is reflected, in a context of slowing inflation and a possible inflection in the upward trend of interest rates. This less pessimistic outlook has led to a redirection of future supply towards the middle class and domestic demand.
The PIPS data for the last quarter of 2023 shows a reduction in the weight of Lisbon in the new projects in the portfolio (from 52% in the 3rd quarter to 41% in the 4th quarter), in contrast to the peripheral areas of Greater Lisbon, whose weight increased from 30% to 44%.
At the same time, there was a reduction in the share of developments aimed at international demand (from 24% in the third quarter to 18% in the fourth quarter). Developments aimed at both domestic and international buyers also saw a loss of share (from 52% to 38%), while those focused exclusively on domestic demand now account for 44% of new projects (compared to 24% in the third quarter).
"This new pattern represents a return to the record that the market was seeing before the rise in interest rates, which led to operators taking refuge in the more resilient prime markets," explains Ricardo Guimarães, Director of Confidencial Imobiliário.
As the survey, which consults the main real estate developers on a quarterly basis, shows, developers are more confident about the future. However, they are still very concerned about the obstacles to their activity, headed by bureaucracy and licensing, which continue to be identified as the biggest obstacle.
Compared to the situation a year ago, some factors have eased up, such as construction costs, perhaps not because they have fallen, but because they are no longer a source of uncertainty when it comes to hiring contractors. However, on the other hand, they have worsened as a result of greater legal and fiscal instability, as well as the current political risks.
Therefore, overall, the obstacles have worsened by +15 points, which makes it difficult for the market to react in the way it could in a context of stability and predictability.