Portugal's Residential Property Market Analysis 2025

Underpinned by supply-demand imbalance and reinforced by falling interest rates, the sales momentum in the Portuguese market persists, with house prices registering strong growth while rental inflation continues to ease.

This extended overview from Global Property Guide covers key aspects of the Portuguese housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

Despite already elevated base values, residential property prices in Portugal continue to register exceptional growth, supported by persistent supply-demand imbalances and further reinforced by the ongoing decline in interest rates. In April 2025, the median bank appraisal value for residential properties rose to EUR 1,866 (USD 2,093) per square meter, representing a 16.92% year-on-year increase, according to Statistics Portugal (INE). This marks the seventh consecutive month of double-digit annual growth in residential property prices since October 2024. "This persistent upward trend is driven by a combination of low supply, exceptionally high demand, and a development focus targeting the high-end segment of the market," noted experts from JLL.

Portugal's house price annual change:

[hp_graph]

Data Source: ECB.

The median appraisal value for apartments reached EUR 2,105 (USD 2,361) per square meter, increasing 18.99% year-on-year. For villas, values climbed by 17.98% to EUR 1,385 (USD 1,553) per square meter. The highest appraisal values across both segments continue to be concentrated in the Greater Lisbon and Algarve regions.

Median bank appraisal value of residential properties by region:

Analysis by the property platform Idealista shows the median asking price for residential properties across the country reaching EUR 2,851 (USD 3,197) per square meter as of May 2025, representing a year-on-year increase of 7.4%. At the municipal level, Lisbon remained the most expensive market, with median asking prices reaching EUR 5,720 (USD 6,414) per square meter, up 1.80% year-on-year. In Porto, prices advanced 5.84% over the same period, reaching EUR 3,768 (USD 4,225) per square meter. "House prices in both Lisbon and Porto are projected to continue growing in 2025, supported by an ongoing recovery from previous market corrections. The market remains stable, with steady growth underpinning a positive outlook for the year ahead," commented experts from Savills.

Data Source: Idealista.

According to Morningstar, multiple structural and cyclical factors continue to sustain momentum in Portugal's housing market, including resilient economic performance, low unemployment, a gradual decline in interest rates, and persistent supply constraints, particularly due to limited new construction. Morningstar analysts expect "the trend of sustained growth in property prices to continue in 2025, albeit at a slower pace" relative to 2024.

"There are no indications of a new, more balanced market cycle capable of addressing ongoing demand pressures. Despite elevated price levels, neither a meaningful increase in supply nor a significant moderation in demand is currently observable. <…> In the context of prevailing political uncertainty, further reductions in interest rates are adding additional pressure to an already overheated market," explained Ricardo Guimarães, Director at Confidencial Imobiliário.

Historic Perspective:

Supply Limitations Sustain Price Growth Over a Decade of Market Expansion

Between 2015 and 2024, Portugal's housing market underwent one of the most pronounced periods of growth in Europe. Over this period, national house prices more than doubled, with the most significant increases concentrated in Lisbon, Porto, and coastal regions. The expansion was primarily driven by sustained foreign investment, supported by the Golden Visa program and the Non-Habitual Resident tax regime, as well as by the growth of the tourism sector and the increasing prevalence of short-term rental platforms. Persistently low interest rates further facilitated borrowing, maintaining elevated transaction volumes.

Housing supply, however, did not expand at a comparable pace. Annual completions averaged slightly above 15,000 units. Although construction activity showed a gradual upward trend, new development remained constrained by administrative delays, labor shortages, rising construction costs, and complex regulatory frameworks.

In an effort to address these imbalances, the government implemented several policy measures aimed at increasing the availability of affordable housing, including a EUR 2 billion public housing program and the reclassification of rural land to enable additional development. Simultaneously, adjustments were made to reduce demand-side pressures. In 2023, the Golden Visa program was amended to exclude real estate as an eligible investment category, and the Non-Habitual Resident tax regime was terminated effective January 2024.

Despite these interventions, the structural imbalance between supply and demand remains, sustaining upward pressure on housing prices. In 2024, the median bank appraisal value for residential properties reached EUR 1,662 (USD 1,742), representing a year-on-year increase of 9.27% and bringing the average annual growth rate over the 2015-2024 period to 8.29%.

Data Source: INE.

Demand Highlights:

Sales Surge as Lower Borrowing Costs Stimulate Demand

According to the INE, a total of 156,325 dwellings were sold in Portugal in 2024, representing a 14.5% year-on-year increase. Market dynamics gained momentum in the second half of the year, with the fourth quarter recording 45,214 transactions, marking a 32.5% year-on-year rise and the highest quarterly sales volume in the past three years. Experts attribute this increase to successive reductions in housing loan interest rates and the introduction of the IMT Jovem legislation on August 1, 2024, which exempts individuals up to 35 years old from paying Municipal Property Tax (IMT) and Stamp Tax (IS) when purchasing their first permanent residence.

Secondary market transactions accounted for 124,445 dwellings, or 79.6% of total sales, reflecting a 14.8% year-on-year growth. Sales of newly built homes reached 31,880 units, up 13.4% compared to the previous year. Domestic buyers continued to dominate the market, with 93.7% of homes sold to individuals with tax domicile in Portugal, an increase of 16.2% compared to 2023. In contrast, acquisitions by foreign buyers declined by 5.9% year-on-year, affecting both EU and non-EU residents.

Data Source: INE.

The majority of sales (96%) were concentrated in Continental Portugal, with the North, Greater Lisbon, and Center regions jointly accounting for 65% of total transactions. The Algarve was the only region to record a year-on-year decrease in sales volumes, driven by a contraction in secondary market activity.

Number of dwellings sold by region:

Looking ahead, experts anticipate that the strong sales momentum will persist. Preliminary figures from Confidencial Imobiliário estimate that 40,750 homes were sold in Continental Portugal during the first quarter of 2025, representing a solid 28.2% year-on-year increase. The most recent housing market survey, conducted in March 2025, also indicates positive expectations for sales over the next three months.

"Portugal's economy remains steady, with growth outpacing the broader Eurozone, and the labor market continuing to show solid momentum. This strength is also reflected in the latest edition of the housing monitor, which reports an upbeat picture across the sales market and positive expectations regarding the near-term outlook. However, trade tensions between the US and the EU present potential headwinds for Portugal's trade outlook, which could weigh on growth in the longer term," commented Tarrant Parson, RICS Senior Economist.

Supply Highlights:

Acceleration in New Permits Amid Lingering Supply Shortages

Portugal continues to experience a persistent supply-demand imbalance in the housing sector, driving residential prices higher and further eroding affordability and accessibility. According to experts from the IMF, this imbalance stems from structural constraints, including legal and bureaucratic hurdles, elevated construction costs driven by global supply chain disruptions, increased demand for construction materials, and a tight labor market. These challenges are further compounded by strong tourism activity, which has fueled the growth of short-term holiday rentals, alongside sustained foreign demand for high-end properties, particularly prior to the amendments to the Golden Visa Program.

Although some signs of improvement have emerged in recent years, analysts from Morningstar note that new construction remains "much lower than at the turn of the century." Data from the INE indicates that 24,639 new dwellings were completed in 2024, reflecting a 4.17% year-on-year increase, though this marks a deceleration from the 12.82% annual growth recorded in 2023.

Data Source: INE.

Forward-looking indicators point to continued momentum in construction activity in the near term. According to the INE, 34,588 dwellings were licensed for construction in 2024, representing a 6.36% year-on-year increase. More recent data shows that 10,240 residential dwellings were authorized in Q1 2025 alone, corresponding to a 36.01% year-on-year rise. At the same time, experts from JLL highlight a notable shift towards new construction projects within total authorizations, marking a significant departure from recent years when a substantial portion of building permits focused on refurbishments.

Data Source: INE.

Continental Portugal remains the center of construction activity, with the majority of dwellings completed and authorized located in the North, Center, and Greater Lisbon regions. However, as of 2024, residential construction activity in both Greater Lisbon and the Algarve has declined on a year-on-year basis, further intensifying supply shortages and placing additional upward pressure on prices in these areas.

Residential construction activity by region:

Rental Market:

Inflation Slows Down for Existing and Asking Rents

While still substantially outpacing the overall consumer price growth, rental inflation in Portugal has been on a decelerating trajectory in the first five months of 2025. The actual rentals for the housing component of the consumer price index (CPI) reported by the INE registered a 5.2% year-on-year growth in May 2025, down from 6.5% in January and 7.1% a year prior in April 2024. According to the INE, all regions of the country displayed positive rates of change in housing rents, with the highest increase observed in the Autonomous Region of Madeira (7.5%).

Portugal's rent price index:

[rp_graph]

Data Source: ECB.

Rent increases for existing contracts can be expected to moderate further this year, as the official cap, which is established annually under the New Urban Lease Regime (NRAU) based on the CPI inflation, was set by the Portuguese government at 2.16% for 2025.

Data Source: INE.

In nominal terms, the median rent per square meter in new lease agreements of dwellings, as reported by the INE, reached EUR 8.43 (USD 9.00) in Q4 2024, up from EUR 7.71 during the same period in 2023. The regions posting the median values above the national one were Greater Lisbon, Setúbal Peninsula, Autonomous Region of Madeira, and Algarve. Among major cities, the highest median rents were observed in Lisbon (EUR 16.04 / USD 17.13) and Porto (EUR 13.04/ USD 13.93).

Median monthly rent in new lease agreements by region:

The decelerating but consistently upward dynamic has also been observed for asking rents based on properties listed on Idealista. According to the platform, the year-on-year growth in asking rents slowed down from 25.5% in May 2023 to 14.4% in May 2024 and 4.4% in May 2025. Most recently, the median asking rent was recorded at EUR 16.8 (USD 18.95) per square meter nationwide, EUR 22.4 (USD 25.3) in Lisbon, and EUR 17.8 (USD 20.1) in Porto.

In parallel, the research conducted by Global Property Guide showed gross rental yields for apartments in Portugal at the average level of 4.57% in May 2025, slightly down from 4.96% previously reported in November 2024. The highest potential performance among the surveyed submarkets was estimated for rental properties in Setúbal (5.08%), while the lowest yields were reported in Lisbon (3.83%).

Despite the slowdown, rents in the largest cities are expected to continue growing in the upcoming periods due to the persistent supply-demand imbalance. "The rental market in Lisbon and Porto will likely continue to see upward pressure on prices, particularly for new supply," noted Savills. "As demand remains high and supply is constrained, rental prices in both cities are expected to keep rising, though the rate of increase may vary slightly between locations."

At the same time (attributing in part to slower rental inflation), the supply of properties listed for rent on Idealista has been growing. The platform's analysis shows that there were 49% more listings in Q1 2025 than during the same period last year, with the availability improved in most major cities. "This increase in stock can be explained in two ways: on the one hand, owners may feel more attracted to making a profit from their properties by renting them out [due to previous strong growth in rents]. And, on the other hand, the pressure on demand for houses to rent has been decreasing, as buying a house has become more attractive due to falling interest rates and tax incentives," Idealista explained.

The overall size of the rental market in Portugal has been relatively stable in the last two decades, with Eurostat reporting the share of tenant households in the country at 26.6% in 2024, which is below the eurozone average of 35.6%.

Mortgage Market:

Increased Demand for Housing Loans Supported by Falling Interest Rates

After a brief holdout, the European Central Bank (ECB) continued its monetary policy easing cycle in early June 2025, lowering the benchmark rates by 25 b.p. and bringing the deposit facility rate to 2.00%, the main refinancing operations rate to 2.15%, and the marginal lending facility rate to 2.40%.

Portugal's mortgage loan interest rates:

[mortgage_graph]

Data Source: ECB.

Commenting on the decision, the regulator noted that inflation has reached the 2% medium-term target, and most measures suggest that it will settle at around this level on a sustained basis. At the same time, the EU growth projections for 2025 reflect a stronger-than-expected first quarter combined with weaker prospects for the remainder of the year, prompting another key rate cut. "While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defense and infrastructure will increasingly support growth over the medium term. Higher real incomes and a robust labor market will allow households to spend more. Together with more favorable financing conditions, this should make the economy more resilient to global shocks," said the ECB.

Data Source: ECB.

In line with the monetary policy dynamic, the average interest rates on loans to households for house purchase in Portugal continue to decline from peak levels previously reached in late 2023 － early 2024. According to the ECB figures, as of April 2025, the indicator reached 3.06% for new loans (79 b.p. decrease since the same period a year ago) and 3.58% for outstanding loans (107 b.p. decrease since April 2024).

While remaining notably above the pre-2022 historic lows, consistently declining interest rates should continue to support buyer activity in Portugal amid a supply-demand imbalance and sluggish new construction, experts believe. "While interest rates remain elevated, stability in recent quarters will provide more favorable conditions to those looking to secure a mortgage, further boosting the demand for housing," said the latest quarterly market overview from Savills.

Average interest rates on loans to households for house purchase:

"Mainly consisting of floating-rate mortgage loans, the Portuguese residential mortgage market is one in which borrowers are not as shielded from changes in the interest rate environment when compared to other markets such as France, the Netherlands, or Germany," Morningstar summarized the developments in the residential mortgage market. "Nonetheless, it seems that Portuguese borrowers have been able to withstand the recent cost-of-living increase, supported by a stable jobs market and a benign economic environment."

This view is supported by the latest data on new loan originations. Based on the ECB figures, the total value of new loans for house purchase reported by monetary financial institutions (banks) in Portugal demonstrated a slower but positive dynamic in 2024 (1.5% year-on-year), with pure new loans growing by 34.4% year-on-year, while renegotiations (previously fueled by the sharp rise in variable rates) dropped.

Early 2025 figures indicate further recovery as lower interest rates continue to contribute to higher mortgage loan volumes. "In the housing loans segment, the general level of interest rates, the regulatory and fiscal regime of the housing market, and to a lesser extent, consumer confidence contributed to increased demand," noted the April 2025 lending survey published by the Banco de Portugal.

In the first four months of the year, a total of EUR 8.7 billion (USD 9.8 billion) in new housing loans was issued by banks in Portugal, a 6.9% increase compared to the same period last year. Of those, EUR 7.0 billion (USD 7.8 billion) were pure new loans, which demonstrated a 37.2% growth against the comparable period in 2024.

Data Source: ECB.

The banking sector data published by the ECB shows that after decreasing by 1.2% in 2023, the housing loan stock in the country returned to growth, registering a 3.7% year-on-year increase in 2024. As of April 2025, the total value of outstanding housing loans maintained by Portuguese banks stood at EUR 107.0 billion (USD 119.9 billion). The relative size of the market, represented by the ratio of outstanding housing loans to GDP at current prices, continued to decline, however, dropping from the peak level of an estimated 65.6% in 2012 to 36.5% in 2024.

According to the most recent EUROSTAT figures, 32.5% of Portuguese households are homeowners with an outstanding mortgage or housing loan.

Data Source: ECB.

Socio-Economic Context:

Sound Growth Expected to Continue Despite Headwinds

Despite a challenging period of elevated interest rates and higher cost of living, the Portuguese economy has remained resilient to external shocks and continued growing above some eurozone peers. The country's real GDP growth, however, moderated from 7.0% in 2022 to 2.6% in 2023 and 1.9% in 2024 and is forecast to slow further to 1.8% in 2025, as the strong domestic demand is offset by tariff-related setbacks in external demand.

"While Portugal's direct exposure to the US market is relatively limited, risks of significant indirect setbacks remain high and relate to global trade disruptions and uncertainty," said the latest forecast from the European Commission. "On the positive side, Portugal's recent increase in household savings and possible expenditure switching towards domestically produced goods could result in higher than projected demand. All in all, the balance of risks is tilted to the downside as the high level of external risks appears only partly offset by domestic factors."

At the same time, Consumer Price Index (CPI) inflation in Portugal has fallen significantly from the average annual level of 8.1% in 2022 to 5.3% in 2023 and 2.7% in 2024. Most recently, the INE reported the indicator at 2.3% in May 2025. Given the steep drop in prices of crude oil and other commodities, the European Commission projects the inflation to ease further in the coming months, slowing down to the annual levels of 2.1% in 2025 and 2.0% in 2026.

Data Source: IMF.

In the Portuguese labor market, unemployment has remained relatively stable at historically low levels, with the seasonally adjusted rate most recently reported by the INE at 6.3% in April 2025, as both labor supply and employment keep rising at a strong pace, helped by net migration. In the upcoming periods, the European Commission anticipates employment growth to moderate somewhat but still lead to a marginal drop in unemployment to the annual levels of 6.4% in 2025 and 6.3% in 2026. Due to tight labor conditions in sectors such as information technologies and construction, wages are set to continue rising slightly faster than nominal GDP, according to the spring 2025 forecast.

Data Source: INE.

In May 2025, a snap parliamentary election was held in Portugal following the failure of the confidence motion by Prime Minister Luís Montenegro's government in March. Montenegro's center-right Democratic Alliance (AD) won the election but fell short of the full majority needed to end a long period of political turmoil, resulting in a fragmented new parliament and potential delays in major government projects.

Despite external headwinds and concerns about domestic political stability, the overall outlook for the Portuguese economy is optimistic, which is supported by rating actions from global agencies in recent months. In February 2025, S&P upgraded Portugal from 'A-' to 'A' with a positive outlook, citing its resilient economic growth, improvements in the country's external financial position, anticipated budget surpluses, and reduction of government debt among the deciding factors. In March, Fitch Ratings affirmed Portugal at 'A-' with a positive outlook, also pointing out the economy's expected resilience despite heightened risks.

Sources:

1. Statistics Portugal (INE)
   1. National and Regional Accounts: https://www.ine.pt/
   2. Prices: https://www.ine.pt/
   3. Labor Market: https://www.ine.pt/
   4. Consumer price index, May 2025: https://www.ine.pt/
   5. Monthly Employment and Unemployment Estimates, April 2025: https://www.ine.pt/
   6. House Rental Statistics at Local Level, Q4 2024: https://www.ine.pt/
   7. Survey of Bank Evaluation of Housing, April 2025: https://www.ine.pt/
   8. House Price Index, Q4 2024: https://www.ine.pt/
   9. Construction: Building Permits and Completed Buildings, Q4 2024: https://www.ine.pt/
2. Banco de Portugal
   1. Bank Lending Survey - April 2025: https://www.bportugal.pt/
3. Tax and Customs Authority (AT)
   1. IMT Jovem (PT): https://info.portaldasfinancas.gov.pt/
4. Official Gazette of the Republic of Portugal (Diário da República)
   1. New Urban Lease Regime - NRAU, Law no. 6/2006: https://diariodarepublica.pt/
   2. Notice No. 23099/2024/2, of October 18: https://diariodarepublica.pt/
5. European Central Bank (ECB)
   1. ECB Data Portal: https://data.ecb.europa.eu/
   2. Key ECB Interest Rates: https://www.ecb.europa.eu/
   3. Monetary Policy Decisions, 5 June 2025: https://www.ecb.europa.eu/
6. European Commission
   1. Economic Forecast for Portugal: https://economy-finance.ec.europa.eu/
   2. Distribution of Population by Tenure Status, Type of Household, and Income group: https://ec.europa.eu/
7. International Monetary Fund (IMF)
   1. Country Overview: Portugal: https://www.imf.org/
   2. 2024 Article IV Staff Report: https://www.imf.org/
8. Idealista
   1. Homes for Sale Appreciate 7.4% in May - Price Rises Maintain Pace (PT): https://www.idealista.pt/
   2. Home Sales Up 14.5% in 2024 - and Prices Jumped 9.1% (PT): https://www.idealista.pt/
   3. Renting a House in Portugal: Price Rise Slows to 4.4% in May (PT): https://www.idealista.pt/
   4. Renting a House in Portugal: Supply Increases by 49% at the Start of 2025: https://www.idealista.pt/
   5. Houses for Rent: There Are 21 Families Interested in Each Ad: https://www.idealista.pt/
9. Savills
   1. Residential Market Overview, Q1 2025: https://pdf.euro.savills.co.uk/
10. JLL
    1. Portugal Residential Market Dynamics, Q1 2025: https://www.jll.pt/
11. Confidencial Imobiliário
    1. Portuguese Housing Market Survey, March 2025: https://www.confidencialimobiliario.com/
    2. Housing Sales Estimated to Remain Above the 40,000 Units in Q1 2025 but Still Falling 5.4% Q-o-Q: https://www.confidencialimobiliario.com/
12. Roca Estate
    1. Overview of Portuguese Government Housing Programs: https://rocaestate.com/
13. Morningstar
    1. Portuguese Residential Mortgage Market Update 2025: https://dbrs.morningstar.com/
14. S&P
    1. Portugal Upgraded To 'A' On Ongoing External And Government Deleveraging; Outlook Positive: https://disclosure.spglobal.com/
15. Fitch Ratings
    1. Fitch Affirms Portugal at 'A-'; Outlook Positive: https://www.fitchratings.com/
16. Roca Estate
    1. Overview of Portuguese Government Housing Programs: https://rocaestate.com/
17. Reuters
    1. Portugal's Ruling Centre-Right Alliance Wins Election, Misses Majority: https://www.reuters.com/