The January RICS Portuguese Housing Market Survey (PMHS) shows improvements in both the national activity and confidence indices relative to December 2010, but they both remain negative overall at -14 (-32) and -31 (-35) respectively. The indices range between -100 and +100, with 0 marking the dividing line between improvement and deterioration.

The detail of the survey shows that at the national level, weakening demand remains the main factor weighing down on prices and that the outlook for prices remain far more negative than that for sales.

However, there is marked variation at the regional level report RICS, which say that the Algarve stands out as the region experiencing the worst market conditions in Portugal. Here, a combination of sharply rising new vendor instructions and falling new buyer enquiries is weighing down more heavily on prices and price sentiment.

In Lisbon and Porto, market conditions are slightly more favourable. Although prices are still falling in these markets thanks to weakening demand, new vendor instructions are not rising at the same time so the downward pressure on prices is not quite as intense.

RICS senior economist, Josh Miller says: “The main issue affecting the Portuguese housing market is weak demand, related to the near record high level of unemployment (10.9%) and near record low level of consumer confidence. The Lisbon and Porto markets are faring comparatively better than the Algarve; in addition to weak demand, the Algarve is also experiencing increased home selling, which is putting additional downward pressure on prices.”