According to a leading currency exchange firm, the election of the social Democrat government in Portugal will bring about a new era of austerity in the country which should see property prices falling even further. The coalition government in the country is due to implement the austerity package being demanded by the EU in return for their £70 million bailout.
While this might seem reasonable enough, the Prime Minister, Pedro Passos Coelho has promised that his government will make even more cuts, with the idea being that deficit reduction targets will be met ahead of time, attracting investors back into the country. Cuts include selling off public services, higher health care costs and a reduction in unfair dismissal compensation.
It's expected that all this will have a negative effect on Portugal property prices as households will have less money to spend, but should prove attractive to foreign investors, especially those looking to buy property in popular destinations such as the Algarve.
Although Portugal has a similar deficit crisis to that of Greece and Ireland, it is slightly different in that the property market here has had very little effect on these problems. There has been far less re-mortgaging and high loan to value ratio loans available to the Portuguese, and in fact the country exhibited one of the most stable rates of loan default during the worst of the economic crisis. At the height of the boom in 2007 the non-performing loan barometer was just 4%, and this figure decreased to 3% last year.
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