Residential property prices and rents in Portugal are continuing to fall due to very weak demand, according to the latest housing market survey from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Immobiliario.

The index, which covers Lisbon, Porto and the Algarve, highlights the broad based weakness of the property sales markets alongside what appears to be the first signs of a slowdown in the lettings sector.

In the sales market both transactions and prices continued to fall. The national price net balance fell from -60 to -72, which means that 72% more respondents experienced price falls rather than rises.

It says that price declines continue to be driven by falling demand and that rising supply is not an issue as new property listings have been falling in Portugal since December 2010.

The lettings sector, which until now has benefited from the fallout in the sales market given mortgage lending constraints, showed the first signs of a slowdown in activity. Indeed, tenant demand fell slightly and new landlord instructions stabilised. Rents however continue to fall and rental expectations have turned more negative.