Real Estate Trends in Portugal for 2023

For Investors Coming to Portugal

There’s a D2 visa in Portugal, also called Immigrant Entrepreneur Visa, and it’s to grant residence authorization to foreigners who have conducted investment operations or who can demonstrate that they have financial resources in Portugal, including financing obtained from a Portuguese financial institution and who have the intention of conducting investment operations on Portuguese soil.

The real estate market in Portugal is expanding quickly. Property values are increasing because of a shift from older, more expensive construction methods to more modern, less efficient, but more desirable ones. 

Our econometric models show that the Portugal Residential House Price Index will average around 190.98 points in 2023 and 193.27 points in 2024.

Investing in a rental property in Portugal could be a wise choice. It is worthwhile to do so now, as there is greater demand for lodging than supply, especially in Lisbon and Porto. The high returns from tenants during the busy tourist season also make renting out property a good option.

This environment, which the conflict in Ukraine has exacerbated, is reflected in the pronounced increase in construction prices, causing a slowdown in industrial activity, a reduction in supply in the medium term, and a subsequent increase in the prices of already-built homes. 

Economic implications

The rise and fall of Portugal’s real estate market are not distributed uniformly across the country and its islands. Starting in the ever-popular Algarve, 2021 saw a massive 16.5% increase in bank valuations across the board.

In March of 2022, the inflation rate in Portugal hit 5.3%, a level not seen in Portugal for nearly three decades. Medium-term, this escalation will affect home prices, which have been steadily rising since the troika left the country.

Some foreign buyers are willing to pay twice as much as a Portuguese for a property in Portugal. No signs indicate that the rising cost of buying a home in Portugal will slow down anytime soon. 

With 1,355 euros per square meter (euros/m2) in the fourth quarter of 2021, the median price of a Portuguese family home reached a new all-time high. This is an annual growth rate of 14.1% and a quarterly growth rate of 12.2%, as the Portuguese National Statistics Institute (INE) reported. 

The data also shows that in many urban centers, like the Greater Lisbon and Algarve areas, foreign buyers spent over twice as much as Portuguese buyers on a home. Let’s delve deeper into what 2022 holds for the Portuguese real estate market. 

Even though the Russian invasion of Ukraine has created a lot of uncertainty, the Portuguese economy is still expected to grow shortly. 

The Bank of Portugal predicts that the country’s GDP will expand by 4.9% in 2022 (up from 4.9% in 2021) before slowing to 2.9% in 2023 and 2.0% in 2024, closer to the estimated long-term growth rate. 

As economic activity rises, more people can find jobs, and the unemployment rate falls. Over the long term, these effects will fade, but they will be partially counteracted by rising wage and price pressures as the Portuguese economy makes greater use of its resources.

INE Report on Real Estate Trends in Portugal 

INE reported that by the end of 2021, the annual rate of price change had increased in seven out of eleven Greater Lisbon area municipalities with over 100,000 residents, with increases in Setúbal (+9.8%), Loures (+3.0%), Almada (+2.2%), and Oeiras (+2.1%) exceeding the rate of change seen at the national level (+1.9%).

Municipalities in the Porto Metropolitan Area, including Maia (+10.5%) and Vila Nova de Gaia (+8.1%), also saw greater year-on-year growth than Portugal. For example, “the acceleration was less expressive” in Lisbon (+0.4%) and Oporto (+0.9%).

Additionally, the high demand for high-end and luxury products has persisted in previous years, and this trend is expected to continue. 

Supply may continue to fall short of demand for various reasons, including slow licensing processes in most National City councils and increased difficulty in obtaining construction credit.

House prices in Portugal have been volatile because of the coronavirus pandemic, creating an ideal buying environment for foreigners in 2021. 

A recent article in The Portugal News reported that Portugal’s general cost of living would increase by 13.8% in 2021.

In addition, PWC has ranked Lisbon as the sixteenth most appealing city to make Real Estate investments in 2022. Not only have home values rise, but so have rental profits.