Portugal’s Rental Sector Saw a Decrease of 13.5% in 2020

By: Boris_Dzhingarov

As for many countries, 2020 was an economic roller coaster for Portugal. The country rode out the first wave of the Covid pandemic with a commendably low loss of life, but it was the fortunes of other countries which determined its economic fate. The Portuguese government worked hard to reassure the tourists, so crucial to Portugal’s economic survival, that the country was open for business as usual and was a safe destination, but the uncertainty caused by the pandemic and high levels of Covid in neighbouring Spain rendered their efforts in vain. Travel corridors which were agreed with the UK to allow visitors into the country were only partially successful. The uncertainty around whether these travel corridors would remain open and the possibility of being stranded was sufficient to deter most tourists. The effect on Portugal’s economy has been catastrophic and the burgeoning property market has gone into steep decline.

The decline in rental prices had already begun prior to the onset of the pandemic but the pace of decline has accelerated. As is to be expected, Lisbon remains the most expensive property location in Portugal, even with a drop in rental prices of around 14% since January 2020. Porto, another popular destination with foreigners, has seen a drop in excess of 20%. Portalegre, near the Spanish border, is the cheapest place in Portugal to rent property, with average prices at a staggeringly low 391 euros per month, compared with an average of 1,314 euros per month in Lisbon.

In the past, many businesses have been encouraged to relocate to Portugal because of the low cost of office space, the average office rental cost per square metre is around 288 euros. Compare this with an average of 1513 per square metre in the U.K. or 890 euros per square metre in France. The pandemic and a drop of 12 billion euros in tourist revenue has resulted in a 24% fall in the take up of available office space. The question facing many countries around the world is whether office space will ever be filled again or will remote working become standard practice?

Portugal entered a second lockdown on the 15th  of January 2021 and the new Covid variant has caused contagion at a record high, hospitals are overwhelmed, the country has closed border with Spain and the Prime minister has described the situation as ‘terrible’. The Portuguese government has now extended the lockdown until at least mid-February. In the light of these tragic developments, it is hard not see anything but a continued decline in Portugal’s economic fortunes and consequently a continuing fall in the cost of rental property.

The economic recovery from this pandemic is going to be much slower than we would have initially anticipated and for a country like Portugal, so dependent on tourism, the short-term prospects are not good. We live in the hope that the widespread use of vaccine will bring a return to normalcy, at which time renting property in Portugal will once again become a very appealing prospect.

By Boris Dzhingarov

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