Centeno expects house prices to fall in Portugal

The Governor of the Bank of Portugal said this Friday that he expects a decline in house prices in Portugal and the number of sales, but without consequences for the stability of the financial sector.

“Given the impact of monetary policy, a cooling is expected, a slowdown in house price growth, an obvious reduction in the number of transactions,” Mario Centeno said at the launch of the March Economic Bulletin in Lisbon.

According to Centeno, so far the two indicators have developed in a manner consistent with the stability of the banking sector, and there are mitigation measures in place that suggest this situation will continue.

In the Economic Bulletin published this Friday, the Bank of Portugal (BDP) believes that the contractionary monetary policy cycle initiated by the European Central Bank (ECB) in July 2022 will contribute to the recent decline in housing transactions in Portugal, and also to a lesser extent degree – “for the behavior of prices (which did not decrease, but slowed down).”

The banking regulator notes that the response to new housing transactions has also decreased.

The ECB has raised interest rates ten times since mid-2022, putting them at their highest level ever, as it tries to reduce inflation, which has soared in 2022 and drained liquidity in the economy.

When the ECB changes key interest rates, this is reflected throughout the economy, affecting, for example, bank loans, general market loans, home loans, interest rates on bank deposits or other investment instruments.

However, since October 2023, the institution chaired by Christine Lagarde has maintained interest rates at 4.5% – the highest level since 2001 – and its credit line (which provides overnight loans to banks) at 4.75%. overnight reservation) at 4%.