22 November 2023
DEMOGRAPHY, the discipline that studies populations, their distribution, and characteristics, is one of the most critical keys for understanding a given housing market.
When discussing housing prices in a given place, one of the first things to pay attention to is the evolution of the number of inhabitants. In the case of Portugal, the total population is relatively stable.
According to the 2021 Census, the national population fell slightly (2.1%) compared to 2011, as did the number of inhabitants in Lisbon and Porto. However, these figures are only part of analyzing the residential market from a demographic perspective.
THE NUMBER OF INHABITANTS IN PORTUGAL HAS CHANGED LITTLE. BUT IS EVERYTHING THE SAME?
Not really. The number of foreign residents has increased considerably. According to the recently abolished Foreigners and Borders Service (SEF), in 2022, there were 781,915 foreign citizens with official residence in Portugal, of which 512,141 (65.5%) were registered in the districts of Lisbon, Faro, and Setúbal. But ten years ago, in 2013, the total number of foreigners legally residing in Portugal was less than 400,000.
As we can see in Graph 1, part of the Immigration, Borders and Asylum Report 2022, this trend has increased in recent years.
EVOLUTION OF THE NO. OF FOREIGNERS RESIDENTS
(2017 - 2022)
But if the number of inhabitants remains the same, what relevance could their nationality have? According to the October 25 publication by the National Statistics Institute (INE), "in the metropolitan areas of Porto and Lisbon, the median price (€/m2) of transactions carried out by buyers with a tax domicile abroad exceeded the price of transactions by buyers with a tax domicile in Portugal by 61.3% and 91.6%, respectively".
In other words, INE's calculations show that houses bought by people with tax residency abroad tend to be significantly more expensive than those purchased by people with tax residency in Portugal. That's all for now. We'll come back to it in the chapters dedicated to SUPPLY and DEMAND to understand to what extent this data may be more or less relevant to the evolution of the residential market.
The 1970s and the establishment of a democratic regime brought with them, among many other things, a variable that had hitherto had a residual statistical representation: divorce. Until exactly half a century ago, the number of marriages being dissolved had never reached a thousand per calendar year.
I now turn to Graph 2 to invite readers to compare the 4,875 divorces recorded in 1976 (three times as many as in the previous 12 months), the same year in which the current Portuguese constitution was approved, which, in addition to enshrining the right to housing, also stipulates that "spouses have equal rights and duties as regards civil and political capacity and the maintenance and upbringing of their children"; with the 15,098 divorces in 1998, the lowest figure in the last 25 years.
EVOLUTION OF THE NO. OF DIVORCES
(1960 - 2022)
What Graph 3 allows us to understand is that, as the number of divorces soared, the number of marriages fell, especially from 2000 onwards (the sharpest reduction in 2020 and the growth in the following two years can be attributed to the pandemic restrictions).
EVOLUTION OF THE NO. OF MARRIAGES
(1960 - 2022)
I can't tell you how many people there are in Portugal today, aged 30, 40 or 50, who, regardless of their marital status, live (or aspire to live) alone. What we all know, because the 2021 Census shows it, is that, compared to 2011, the number of households with 1 and 2 people has risen, and the number of households with 3, 4 and 5 people has fallen. To which I would add the following information: the number of 4-person households had already fallen in 2011, and the number of 5-person households has been falling ever since 1970.
But what does all this mean? That there is a clear demographic trend: there are more households, but they tend to be smaller. And therefore, even if the total population is not on an upward trend, there may be a need for more available housing. Even if the needs in terms of the size or number of rooms in these dwellings may, at least in theory, be smaller.
Source: Arquivo Municipal de Lisboa (Lisbon's Municipal Archive).
When there is so much talk about the need to increase public housing, it will be vital for governments and local authorities to bear these (and possibly other) demographic dynamics in mind so that they can better try to adapt the supply of housing to the characteristics and needs of the population.
Nowadays, the idea that we must build and renovate more is widely accepted. But the more we know about the potential recipients of these developments, the more appropriate this supply will be.