It’s no secret that the housing crisis in Portugal is a big concern for both locals and foreigners alike. With rents and house prices on the rise, it’s only natural to wonder if foreign investors are playing a role in making the situation worse. We’re here to shed some light on the current state of the Portuguese property market. We’ll take a look at rental and house price trends, rental and purchase offers, common myths and facts, and the impact of foreigners on housing in Portugal.
First of all, it is important to note that the housing crisis in Portugal is not an isolated problem, but rather a global one. As many major cities around the world struggle with skyrocketing housing costs, Portugal is no exception. However, once you have a basic understanding of the market, one question remains. Why is there a housing crisis when, over the last 10 years, the resident population has declined and the number of dwellings has increased? The INE (National Institute of Statistics) data on the evolution of the housing supply in Portugal shows that there are more houses on the market and fewer people living in the country than there were 10 years ago.
It is not true that Portugal has a housing shortage. The country has one of the highest numbers of houses per inhabitant – 5,970,677 houses for a total of 10,467,366 inhabitants in 2021 – and was ranked second in the number of vacant houses. Portugal has a home ownership rate of 78%, which is slightly higher than the European average of 69%. In theory, each of Portugal’s 4.1 million households has 1.4 houses available to live in.
Of these almost 6 million existing buildings, 18.5% are secondary dwellings (private holiday homes) and 12.1% are vacant or in need of renovation. These are the figures that need to be taken into account when discussing this issue. 30.6% of the houses in Portugal, which represents around 1.8 million houses that could be on the market. There could be several reasons why these houses are not on the market, such as
There is also a lack of motivation to let your property on the regular Portuguese property market. The landlord has to declare the rent to the tax authorities every month and pay taxes ranging from 10% (for leases of more than 20 years) to 28% (for leases of less than 3 years) of the rental income. Many landlords are also aware that since 2006 rents can only be increased by a government-regulated coefficient each year. In the past, many landlords did not rent out their properties because of this regulation, which led to many dilapidated houses because renting out simply did not pay off in the past.
Regarding the latter, according to the INE, the number of licences granted for rehabilitation in 2022 was 4,491, a decrease of 9.3% from the previous year and 17.4% from 2019 (the pre-pandemic year for a fair comparison). This data can be explained by factors such as the rent freeze, where the government sets a maximum percentage for landlords to increase rents, and the fact that taxes on rent are high.
But it is also true that the Portuguese family structure has changed significantly in recent years. We now have many more one-person households (an increase of 161,000 households between 2011 and 2021), as well as two-person households (an increase of 105,000 households over the same period), which means that if the trend continues, more housing will be needed for the same number of people. If the number of empty homes continues to rise and the government doesn’t come up with effective solutions to increase the number of affordable homes in Portugal, the problem will persist.
According to the National Registry of Local Accommodation, in September 2024 there were 120,034 Alojamento Local registrations in Portugal. This figure represents less than 2% of all traditional accommodation in Portugal.
Most of this local accommodation is not intended as permanent housing, but as a response to the increase in tourist demand in recent years. This in turn has important economic implications for Portugal. AL is a way to allow Portuguese residents to participate in tourism alongside hotels, which often pay the minimum wage and optimise their taxes internationally.
The situation is not helped by the concentration of the population in certain areas of the country. There is a traditional migration of the population from the interior to the coast and urban centres, especially the districts of Lisbon, Oporto and Faro, with increases of 2.4%, 0.7% and 4.3% respectively. This is because most employment and educational opportunities are located in these areas.
Foreign buyers do play a role in the property market, but they are not the main driver of price increases. Data from the Portuguese Statistics Institute (INE) shows that while foreign investment has increased, the majority of buyers in Portugal (88.3%) remain Portuguese citizens. And because of the end of the NHR programme and the Golden Visa and we knew them, the purchase of houses in Portugal by foreigners decreased in the beginning of 2024.
Foreigners also tend to buy much more expensive properties – the average transaction value for non-resident buyers is 39% higher than for resident buyers, according to data from July 2024. This means that they tend to operate on different tiers of the Portuguese property market. The biggest impact is, of course, on the coast. In Lisbon, foreigners bought 33% of the properties sold in 2023. In the Algarve, property sales to foreign buyers accounted for 27.2% and 38.5% of the number and total value of transactions in the region, respectively. This means that foreigners have significantly more purchasing power in the region.
According to data from Global Citizen Solutions, the Portuguese government granted a total of 1,888 Golden Visas in 2022, of which 21% were made through investments other than real estate. Comparing this figure to a total of 167,900 property sales in 2022, the impact of Golden Visa investors on the property market is negligible. Investments in real estate through the Golden Visa programme represent 3.5% of the total amount invested in the national market in the last decade. Investment in real estate through the Golden Visa hasn’t been available since 2023, so this is the last significant data.
As mentioned above, foreign investment in Portugal is also in a somewhat different property market bracket. The average value of a Golden Visa investment is around 575 thousand euros, mostly in hotels. And the average amount contracted for mortgage loans in 2022 was 112,514 thousand euros, according to statistical information from the Banco de Portugal.
Yes, they do. Portugal has a lot of houses on the market and rents and property prices are still relatively cheap compared to other countries. However, incomes in Portugal are low. According to the OECD, Portugal has the 6th lowest average gross annual salary among OECD countries. This is approximately $28,410 per year (€24,557), or €1,378.64 gross per month, to which compulsory taxes are applied, resulting in an average salary of between €1,010 and €1,125.
With most high-paying jobs located in Lisbon, Oporto and Faro – where property is more expensive – it is difficult for Portuguese people, especially young adults, to afford to rent or buy a home. Of course, there is also the difficult economic context that Europe is going through due to the war in Ukraine and inflation leading to rising interest rates.
It’s so important that the Portuguese government takes action to help tackle the housing crisis. For instance, we could think about reinforcing investment in the existing infrastructure, offering homeowners more motivation to rent their properties at affordable prices, and increasing the amount of public housing, which currently represents only 2% of the Portuguese property market. This could be done via the rehabilitation of the government’s vacant houses (645 in 2021), for example.
If you have any other questions about the topic or need help learning how to invest and live in Portugal, please don’t hesitate to get in touch with the lovely team at Pearls of Portugal!
English • Portuguese • Spanish • German