By: CHRIS GRAEME
AFTER A boom in housing credit over the past 20 years both housing sales and new mortgages in Portugal are declining sharply because of the financial crisis.
The number of property purchase contacts plummeted by 17.8 per cent in the second quarter of this year in relation to the same period in 2007.
According to statistics from the Directorate-General of the Treasury, there were fewer new and second-hand houses and apartments sold over the summer period as a direct result of banks turning down mortgages, homeowners deciding not to move and the faltering construction industry.
The amount of credit offered by the banks in Portugal has also fallen, with the average home loan standing at 96,000 euros in the first half of 2008, representing a 15.8 per cent drop on the same period in 2007.
José Eduardo Macedo, President of the Portuguese association for estate agent professionals (Associação dos Profissionais e Empresas de Mediação Imobiliária de Portugal – APEMIP), said these figures come as no surprise.
“The housing market had been expecting to shrink by 10 per cent in terms of the number of urban transactions,” he said.
“It is estimated that in 2008 total sales will stand at around 190,000 transactions, which is not only synonymous of the crisis, but also the fact that Portuguese housing needs have largely been met and the market is saturated with properties,” he added.
Uncertainty
According to the APEMIP, there are 3.6 million families and 5.7 million properties, not to mention 700,000 existing flats and houses needing renovation.
“Faced with the uncertainty fuelled by the crisis, people are more cautious than usual and think twice before moving house or trying to get onto the property ladder,” he said.
“Not only that, but banks, partly because of a lack of liquidity and partly because they are nervous, are being more choosy to whom they grant mortgages to and are expecting larger down payments,” he stressed.
The APEMIP also highlighted another problem whereby many families were downsizing by selling houses and buying cheaper or smaller ones on the outskirts of Lisbon and Porto.
“And those that do have ready cash to buy property are hanging on to it to see if property prices fall even further so that they can hold out for a better deal,” he said.
In June there were 1.6 million new and existing mortgage contracts worth 9.4 billion euros. In July, Portuguese families owed 533 million euros more than in 2007 while defaulted and unpaid loans stood at 2.7 billion euros.
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