Portuguese home valuations fall to four-year low

Ricard Reis, head of valuations for the firm in Portugal, told Bloomberg that lenders are requiring more collateral, making it harder to get a mortgage. As a result, appraisals of houses and apartments dropped by 6.9 per cent to 981 euros per square metre in March 2013 compared to 2012.

 “Lenders are now asking for more collateral from clients, making it more difficult for the borrowers to obtain mortgages,” Reis told Bloomberg.

While falling property prices in Portugal has seen the country become a popular destination for bargain hunters, lower appraisals help to protect banks from assets worth less than their mortgages.

Portuguese house prices fell 6 per cent year-on-year in the final quarter of 2012, according to Eurostat’s latest report - the fourth largest decline in the euro area.

The country’s recent introduction of a Golden Residence, which will give non-EU investors a five-year residency permit if they invest in property worth at least €500,000, was expected to boost activity in the country’s faltering housing market after investment volumes fell 38 per cent last year, according to Jones Lang Lasalle. But even with lowering values, tightening lending criteria may cancel out much of the scheme’s intended effect.

“A lower bank valuation reflects the overall drop in property prices and may require potential home buyers to come up with more money to purchase the property due to a lower loan-to-value required by the banks in order to reduce their risk,” added Reis.