In a regional report on Europe, the IMF notes that real estate markets are showing signs of overvaluation across the region, including in Portugal.

“Real house prices have doubled since 2015 in the Czech Republic, Hungary, Iceland, Luxembourg, the Netherlands and Portugal,” the report reads. IMF technicians underline that “since the pandemic, the divergence between house prices and incomes, and between house prices and rents, has increased even more”.

According to the Bretton Woods institution's accounts, house price/income ratios currently stand at more than 30% above long-term trends, while house price/income ratios "also far exceed historical norms, including in economies of Northern Europe or emerging European countries.

The IMF indicates, in this sense, that empirical models point to an overvaluation of 15-20% in most European countries, but with bank rents still increasing and real incomes being harmed by inflation, “house prices have dropped recently in many markets.”

The IMF director for Europe advises the authorities of European countries with housing problems, such as Portugal, to “be vigilant” about the risks to financial stability, proposing solutions on the supply side.

“House prices have risen sharply in a number of countries over the last decade and this has been due to low interest rates over a relatively long period and then in a number of countries we have had another boost during the pandemic as people have moved into telecommuting”, said Alfred Kammer.