FEP Professor Hugo de Almeida Vilares is one of the authors of the study “The housing crisis in large cities – an analysis”, the first policy paper of the Francisco Manuel dos Santos Foundation, which aims to propose concrete ways to respond to the difficulty that many residents in Portugal feel in renting or buying a home.
This analysis, by Paulo Rodrigues, Rita Fradique Lourenço and Hugo de Almeida Vilares, seeks to answer a set of questions that are currently at the centre of the discussion around the Portuguese real estate sector, namely: What was the impact of the pandemic on house prices? How is the market reacting to inflation? Are house prices in major cities overvalued or not? What can we learn from international experience in housing policy? What policies should be adopted to facilitate access to housing?
The impacts of the pandemic, inflation and rising interest rates on house prices and access to housing are therefore analysed, identifying critical objectives to be achieved in order to solve the affordability problem, based on housing policies adopted by other countries.
“The evolution of housing prices has contributed to the acceleration of inequalities in many countries, including Portugal, where the increase in housing prices has outpaced wage increases. This evolution, which leads to a deterioration in access to housing, also affects the rental market, one of the main sources of income for property investors and one of the main monthly expenses for tenants”, explains FEP Professor Hugo de Almeida Vilares.
The analysis showed, among other things, that housing demand has become internationalised and has undergone significant growth in the last decade, mainly in Lisbon and Porto, causing prices to rise, and that Portugal is a market with an inelastic supply, that is, it grows little in reaction to rising prices.
“The countries with the greatest problems in the housing market have had to respond with policies aimed at increasing affordability, particularly aimed at the population with lower and even median incomes. Thus, medium and long-term solutions necessarily involve expanding the supply of housing, with a view to stabilising prices, and measures such as rent control negatively impact the expansion of this supply in the medium and long term”, explains Hugo de Almeida Vilares.
In this study, the authors propose an integrated short, medium and long-term strategy, which meets four critical objectives: effective expansion of supply and its response to price increases (i.e. its elasticity); planning the expansion of large cities and ensuring the provision of sustainable transport systems and public goods and services; providing quality housing to citizens in a sustainable, inclusive, harmonious, affordable way, with less volatility in prices and rents; and temporary support for families in more difficult economic situations.
The study is available on the Francisco Manuel dos Santos Foundation website.