In a class with economics students from the Vila Real de Santo António secondary school, in the district of Faro, Mário Centeno recalled the times he studied at that educational establishment and told the students that “luck only happens to those who are prepared” and, in a response to a student, he warned that housing crises can have “devastating” effects on the economy, but they need “a long time” to be resolved.

Asked by a 10th-year student about the policies that should be followed to “avoid exaggerated property prices in Portugal and to carry out a real reform in the area of housing”, Centeno recalled the financial crisis of 2008/2009 and the sovereign debt crisis that followed, which had a “strong impact on Portugal” and other European countries.

“[The crisis] had a consequence, and that consequence was – sometimes it’s better not to say too much, but I’m going to abuse it a little here, despite the chambers [of media outlets present] – devastating for the construction sector”, he stated, highlighting that the result was “more than a decade” with the construction sector in Portugal “practically stagnant”.

Supply and demand

The former Minister of Finance recalled the law of supply and demand and highlighted that, in Portugal, “supply was stagnant, new constructions were few, and demand was growing”, although this growth was not influenced by demographic issues, because, without immigration, there would even be less population in the country.

“When prices and the quantity traded go in the same direction, it means that this market is being impacted by forces that come from the demand side. And this is what has been happening in Portugal since 2014: the price increases and the quantity transacted increases”, he pointed out.

Driven by growing demand from foreigners, there was an increase in demand for housing, but “this process is slow” on the supply side, “more than desired by everyone”, not allowing for a drop in housing prices, he highlighted.

“I insist, it is not just in Portugal, it is across Europe, and the original reason, in my opinion, is that we exaggerated the response we gave to the financial crisis and the sovereign debt crisis, in the reduction we operated on the sector of construction”, he considered.

In addition to taking time to build, “Portugal did not grow in terms of the population” and the “structural need for housing did not increase”, said Mário Centeno, countering that there are countries that are at the opposite pole, such as China or Japan, “which they have the exact opposite crisis” of having an excess of houses.

“And I can assure you that the worst crisis that can exist in a country is a crisis in the housing market”, he argued, highlighting that the drop in prices has an influence on the loss of value of properties and those who borrowed money to buy a house end up “paying for the house at a price much higher than what the houses are actually worth”.