Households living in Portugal continued to buy cheaper homes and take out smaller mortgages at the end of 2023, in order to adapt to the current context characterised by high housing prices, interest rates and the cost of living. Compared to the property transactions carried out by foreigners and emigrants, families living in the country are buying houses for lower prices, but have borrowed more money from banks, reveals the latest quarterly report from idealista/credithabitação in Portugal. What also stands out is that mixed-rate home loans are the most frequently taken out by both Portuguese and non-residents.
Looking at the housing loans in Portugal formalised in the fourth quarter of 2023, it can be seen that 35.5% of the contracts were for the purchase of a first home by families living in the country – a purpose surpassed by credit transfers (38% of the total). It was also noted that one in five home loans were taken out by non-residents (emigrants and foreigners), according to the data in the report drawn up by idealista/créditohabitação.
Families living in Portugal who took out a mortgage in the final stretch of last year bought their first home for an average cost of 223,953 euros, 14.1 per cent less than a year ago and 13.2 per cent less than in the previous quarter. It was also noted that the average house purchase price by the Portuguese is 14% lower than the purchase price of housing in Portugal by foreigners and emigrants, which stood at 260,370 euros at the end of the year. This shows that the Portuguese continue to buy cheaper homes that are compatible with their family income – a trend that has already been seen throughout the year. They are also deciding to buy more affordable homes than non-residents.
In order to buy their first home (worth 223,953 euros), families living in Portugal borrowed an average of 160,713 euros from the bank. Although the amount of housing loans taken out by residents is around 11 per cent lower than a year ago and the previous quarter, the truth is that it is 1.5 per cent higher than that requested by foreigners and emigrants (158,327 euros).
This data from the report therefore shows that although families living in Portugal tend to buy houses more cheaply and borrow less, the truth is that they end up borrowing more money from banks than non-residents. But it wasn’t always like this: in 2022 and the first half of 2023, foreigners and emigrants borrowed more on average than the Portuguese, at a time when they also chose to buy more expensive homes.
The difference in salaries between the two can also help explain this reality: after all, the average income of the Portuguese who bought their first home (3,835 euros) is twice that of the foreigners and emigrants who decided to buy a home in our country at the end of the year (8,473 euros). As a result, those who live in Portugal are less likely to be able to save money to put a larger down payment on a mortgage, opting instead for a higher percentage of bank finance.
Home loans for those living (or not) in Portugal: what are the differences and similarities?
The main similarity between mortgages taken out by Portuguese people (to buy their first home) and those taken out by non-residents is in the type of rate taken out. As Euribor rates are still high – although they have been falling slightly since November in reaction to the ECB’s interest rate maintenance – both are preferring to take out mixed rate home loans, which involve an initial fixed interest period followed by a variable rate period.
Even so, there are differences in the amounts financed by the banks. More families living in Portugal choose to take out home loans of up to 200,000 euros (79 per cent) than households living abroad (67 per cent), although they represent the majority in both cases. What also stands out is that the majority of Portuguese opt to take out home loans of between 100,000 and 200,000 euros (62.8 per cent), while in the case of non-residents the most significant choice is for loans of up to 100,000 euros (40.7 per cent), the data reveals.
With regard to larger bank loans (over 200,000 euros), it’s clear to see that foreigners and emigrants tend to take out more – not least because they have greater purchasing power. One in four non-residents borrowed between 200,000 and 300,000 euros at the end of 2023 – more than families living in the country (20.9 per cent). And 7.4 per cent of households living abroad took out loans of more than 300,000 euros, of which 3.7 per cent even exceeded 500,000 euros, while only 2.3 per cent of those living in Portugal took out home loans of more than 300,000 euros.
There are also differences in terms of the financing optionsfor house purchase in Portugal. While the majority of residents opt for the highest financing percentages (80-90%), most foreigners and emigrants decide to opt for home loans financed between 70-80% of the lowest value between the valuation of the house and the price of the property.
There’s a simple explanation for this trend: remember that the financing level for non-residents in Portugal is usually between 70% and 80%, depending on the bank. And for those living outside the European Union, the maximum can be up to 70 per cent. What’s more, foreigners and emigrants who have taken out home loans have more than twice the average salary of Portuguese people, so they are more likely to be able to save and put a larger down payment on a home loan.
As a result, both families living in Portugal and abroad are opting above all for mixed-rate home loans , borrowing less than 200,000 euros – although there are more non-residents opting for higher loans. And that both are opting, above all, for the highest possible percentage of financing (between 80-90% for Portuguese and 70-80% for non-residents), even in times of high house prices and interest rates.
Therefore, the high percentages of finance requested by families living in Portugal, but above all their low salaries , may help explain why these households will have requested higher average mortgage amounts than non-residents at the end of 2023, despite buying cheaper homes.