Portugal’s central bank has issued its latest ‘financial stability report’, in which it outlines perceived emerging risks, and evaluates their consequences. High up on the list is the acknowledgment that “prices in the real estate market may undergo a correction, with an additional impact in the current context, marked by increased mortgage lending.”
The bank has already moved to reduce the amount of money banks were lending to people (compared to their salaries), but this is the first time (in recent years) that it has referred to “a risk of an abrupt and unexpected reduction in house prices”.
This event, if it happened, “exacerbated by a scenario of economic slowdown, and correction in international financial markets” would, the bank admits, mainly affect the most vulnerable families – the ones whose mortgages are already stretching household incomes thin.
The other risks are connected to ‘geopolitical tensions’, says the bank, the consequences of which could negatively affect economic activity, exacerbate inflation, and the capacity of families and businesses to pay their loans.
None of this is ‘new’ – but the warning about house prices does seem to be. Up until now, insiders have been suggesting more a scenario of price ‘plateauing’ into the future, not of an ‘abrupt’ or even ‘unexpected reduction’.
SIC today assesses the report, leading with the fact that foreigners account for almost 30% of all property purchases (and these tend to be at the ‘higher end’ of the market).
Principal foreign investment comes from Brazil, Angola and France – and the picture has remained fairly stable since 2019.
Notwithstanding the risks identified (including those of cyber attacks, and due to climate change), the bank appears ‘comfortable’ with the solidity shown by Portuguese banks, which it says should “maintain careful risk management” in order to retain resilience.
Source: SIC Notícias