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Possible overvaluation of home prices requires monitoring, says Banco de Portugal - O Journal Economist

Possible overvaluation of home prices requires monitoring, says Banco de Portugal – O Journal Economist

On Monday, the Governor of the Bank of Portugal (Banco de Portugal), said that the current crisis requires monitoring of the real estate sector, after the institution warned of the risks of correction in housing prices that continued to increase in the epidemic.

“The current situation requires all the care that would normally be, in times of crisis, for this sector [imobiliário] “It should be given to him, because in fact, he has a massive overlap in the financial system,” Mario Centeno said, at a press conference on the June 2021 Financial Stability Report, released by the institution he leads.

The report notes that “the importance of this market recommends monitoring indicators of possible overvaluation of prices,” which continued to increase in the residential sector, despite the slowdown in its development, in the context of the pandemic.

The document warns of the risks of a “price correction in the residential property market in Portugal, which may result in, Among other things [entre outras coisas], from the possible decline in demand for real estate by non-residents, which arises in connection with the deterioration of international financing terms and “and in the event that, in the commercial real estate market,” there may be an additional decline in prices after that which occurred in 2020 for some sectors (retail, hotels) “.

“The situation in Portugal is characterized by a slowdown in price development,” explained Mario Centeno, with sectors in which this slowdown was more pronounced, such as the commercial sector.

“There are some aspects of demand that are still very active, particularly demand by non-nationals and non-residents, because the sector dynamics in recent months have not continued in bank credit as they have in the past,” he explained, Governor of BdP.

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However, the British Development Bank stressed that any correction in house prices would not be very important, as the governor explained that in recent years there has been a decrease in the proportion of household debt, as well as an improvement in the debt profile. risk.