Portugal

Portugal's Residential Property Market Analysis 2024

Lalaine C. Delmendo

Portugal's housing market is thriving, despite subdued economic performance.

Table of Contents

Housing Market Snapshot

In October 2024, the median price of dwellings in Portugal rose strongly by 12% to €1,721 (US$1,819) per square metre (sq. m) as compared to the same period last year, according to data released by the Instituto Nacional de Estatistica (INE). It was the highest median price of dwellings ever recorded in the country.

Dwelling prices have been continuously rising strongly in the past several years - increasing by about 9.2% annually from 2017 to 2023.

When adjusted for inflation, nationwide dwelling prices have increased by 9.5% y-o-y in October 2024.

After falling continuously from 2009 to 2013 due to the adverse impact of the global financial crisis and the eurozone debt crisis, property prices in Portugal started to recover in 2014 and have been rising since. House prices rose by 4.9% in 2015, 5.7% in 2016, 7% in 2017, 9.7% in 2018, 11.7% in 2019, 6% in 2020, 11.2% in 2021, and 13.5% in 2022. In 2023, house prices continued to increase, albeit at a slower pace of 5.4%. Currently, house price growth is accelerating again.

Portugal's house price annual change

In Grande Lisboa, property prices were up by a huge 11.2% (8.7% in real terms) in October 2024 from a year earlier, to a median price of €2,523 (US$2,666) per sq. m.

By region:

  • In the North, the median property price rose by 13.2% y-o-y in October 2024 (10.7% in real terms), to €1,472 (US$1,555) per sq. m.
  • In the Center, property prices were up by 8.8% y-o-y in October 2024 (6.3% in real terms), to €1,125 (US$1,189) per sq. m.
  • Oeste e Vale do Tejo also saw a house price growth of 13% (10.4% in real terms) y-o-y to €1,288 (US$1,361) per sq. m.
  • In Península de Setúbal, residential property prices soared by 11.3% (8.7% in real terms) y-o-y to €1,938 (US$2,048) per sq. m.
  • In Alentejo, property prices rose by a modest 4.5% (2.1% in real terms) y-o-y to €1,114 (US$1,177) per sq. m.
  • In Algarve, the average property price rose by 10.1% y-o-y (7.6% in real terms) to €2,321 (US$2,453) per sq. m in October 2024.
  • Azores Islands registered an annual property price growth of 7.2% (4.8% in real terms) to €1,295 (US$1,368) per sq. m in October 2024.
  • Madeira saw the biggest house price growth of 17.4% (14.7% in real terms) in October 2024 from a year earlier, to reach a median price of €2,010 (US$2,124) per sq. m in October 2024.

By property type, apartment prices rose by 12.9% y-o-y to €1,920 (US$2,029) per sq. m. in October 2024 while house prices increased by 9.8% to €1,317 (US$1,392) per sq. m.

The strong increase in house prices is supported by improving property demand. In the first half of 2024, the total number of housing transactions in Portugal rose by 3.1% to 70,202 units from a year earlier, a sharp improvement from a y-o-y decline of 18.7% in the full year of 2023, according to INE figures. Likewise, the total transaction value increased by 6.1% y-o-y to €14.61 billion over the same period, in contrast to an annual fall of 11.9% in the prior year.

"The forecast for 2024 is more optimistic. We expect to see an increase in investment volume of up to 15% compared to 2023, with activity picking up mostly in the second half of the year," according to CBRE in its 2024 Portugal Real Estate Market Outlook.

The residential construction sector remains stable. During 2023, licensed dwellings increased by 6% y-o-y to 32,053 units, following annual growth of 3.2% in 2022 and 12% in 2021, according to INE figures. However, in the first three quarters of 2024, licensed dwellings fell slightly by 1.4% to 24,611 units as compared to the same period last year.

Dwelling completions have followed a similar pattern, rising by 3% y-o-y to 20,156 units in 2022 and by 6.8% y-o-y to 21,534 units in 2023. In the first half of 2024, completions rose by another 3.2% to 12,193 units as compared to the same period last year.

However, Portugal's overall economic performance remains dismal. During 2023, real GDP growth slowed sharply to 2.3%, following strong expansions of 6.8% in 2022 and 5.7% in 2021, signaling a broad-based slowdown in activity across major sectors.

Economic activity is expected to remain subdued this year, amidst weak demand from its main trading partners. The economy recorded a real GDP growth rate of just 1.5% y-o-y in Q1, 1.6% in Q2, and 1.9% in Q3 2024. As such, the European Commission expects Portugal's economy to grow by a meager 1.7% this year and 1.9% next year. The International Monetary Fund (IMF) is more optimistic, projecting a real GDP growth rate of 1.9% this year and 2.3% in 2025.

Banco de Portugal, the country's central bank, projects a sluggish economic growth of just 1.6% this year, before improving to 2.1% next year.

Historic Perspective:

House prices are nearly 100% above pre-recession levels

As of October 2024, Portugal's nationwide house prices were about 96.2% above their previous nominal peak, seen in 2010. The housing market began to recover in Q4 2014, after 13 consecutive quarters of y-o-y house price declines. Despite the Covid-19 pandemic, house prices continued to rise in the past four years.

By region, Grande Lisboa's house prices are now about 110% above their previous peak. Also, house prices in Península de Setúbal are now more than 103% up while they are almost 96% up in the North. In Algarve, house prices are already more than 97% above their previous peak.

In Oeste e Vale do Tejo and Centro, prices are up by 67% and 58%, respectively. House prices in Alentejo are now above their previous peak by 33%.

Likewise, house prices in the autonomous regions of Madeira and the Azores Islands are up by about 77% and 50%, respectively.

The house price boom that swept most of Europe and the developed world from the mid-1990s to 2006 completely bypassed Portugal, except in the Algarve. One of the reasons is the country's sluggish economic growth. The country has grown by an average of just 0.3% per year from 2001 to 2016 before registering an annual average growth of 3% from 2017 to 2019. After experiencing a pandemic-induced contraction of 8.3% in 2020, the economy grew robustly by an average of 6.3% annually in 2021-22. Yet growth slowed sharply to 2.3% in 2023.

Surprisingly, the Portuguese housing market showed increased resilience in the past several years, with house price growth accelerating despite the Covid-19 pandemic.

  • 2003 - 2004: house prices rose by an average of 6.2% y-o-y (3.3% in real terms);
  • 2005 - 2007: prices rose by an average of 1.25% (-1.3% in real terms);
  • 2008: prices fell by an average of 4.7% (-7.1% in real terms);
  • 2009: prices fell by an average of 2.6% (-1.8% in real terms);
  • 2010 - 2012: house prices fell by an average of 3.1% (-5.5% in real terms);
  • 2013-2014: house prices dropped by an average of 1.5% (-1.5% in real terms), and;
  • 2015-2020: house prices rose by an annual average of almost 6% (5.3% in real terms).
  • 2021-2022: house price growth accelerated to reach an annual growth of 12.3% (5.9% in real terms).
  • 2023: house prices continued to increase, albeit at a much slower pace of 5.4% (3.9% in real terms).

Portugal Average Price of Dwellings graph

Portuguese property is relatively inexpensive

From the perspective of the foreign buyer, Portuguese property is astonishingly good value, despite the recent house price increases. Grande Lisboa, which includes the capital and prime city of Portugal, had the most expensive housing in the country, with a median house price of €2,523 (US$2,666) per sq. m in October 2024, according to figures from INE. It is followed by the Algarve, which is known for its Mediterranean beaches and golf resorts, with a median house price of €2,321 (US$2,453) per sq. m.

In contrast, Centro and Alentejo have the cheapest housing in the country, with median house prices of €1,125 (US$1,189) per sq. m and €1,114 (US$1,177) per sq. m, respectively.

Portugal's house price to GDP per capita ratio is one of the lowest in Europe. Again, in terms of square meter prices, Portugal has some of the lowest prices for city-center properties in Europe.

Portugal Average Price of Dwellings by Property Type graph

Demand Highlights:

Demand improving again

In the first half of 2024, the total number of housing transactions in Portugal rose by 3.1% to 70,202 units from a year earlier, following a y-o-y decline of 18.7% in the full year of 2023, according to INE figures. Likewise, the total transaction value increased by 6.1% y-o-y to €14.61 billion over the same period, in contrast to an annual fall of 11.9% in the prior year.

In H1 2024:

  • Existing dwellings: the number of transactions rose by a modest 3.2% y-o-y to 56,042 units, after registering a huge annual decline of 21.4% in 2023. Likewise, transaction value was also up by 6.3% y-o-y to €10.6 billion in H1 2024, in contrast to an annual fall of 16.5% in 2023.
  • New dwellings: the number of transactions increased by 2.6% y-o-y to 14,160 units, following an annual fall of 6.1% in the whole year of 2023. Transaction value, on the other hand, rose by 5.6% y-o-y to €4 billion, after registering an annual growth of 2.6% in the previous year.

By region, Centro had the biggest increase in the number of transactions, registering a y-o-y growth of 7.9% in H1 2024, followed by Norte (7%), Alentejo (3.5%), Península de Setúbal (3.4%), Oeste e Vale do Tejo (3.1%), and Grande Lisboa (2.6%). In contrast, housing transactions had fallen in Algarve by 14.7% over the same period.

The autonomous regions of Madeira and the Azores Islands showed mixed results. In H1 2024, housing transactions increased by 5.1% y-o-y in Azores but fell by 9.5% in Madeira.

There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low.

Under Portugal's Golden Visa Program, the country grants a 5-year residency permit to non-EU citizens who invest in the country, including those who buy a minimum of €500,000 worth of property, allowing holders to work or study, and travel to Schengen countries. They could then apply for permanent residency after five years.

However the program went through significant changes recently, and in October 2023, the government announced that it no longer accepts the purchase of real estate or real estate-related funds as qualifying investment.

Portugal Housing Interactions graph

Supply Highlights:

Residential construction activity remains stable

After a long slump in construction, the number of licensed new constructions rose by 21.8% y-o-y in 2015 to 8,491 units, by 36.1% to 11,558 units in 2016, by 29.3% to 14,946 units in 2017, by 44.4% to 21,587 units in 2018 and by another 15.4% y-o-y to 24,905 units in 2019.

The growth in residential construction activity slowed in 2020 due to the adverse impact of the pandemic, with licenses rising by just 5.07% y-o-y to 26,168 units. Activity improved again in 2021, with the number of licensed new constructions increasing by 12% to 29,312 units. Then in 2022, licensed dwellings rose by a modest 3.2% y-o-y to 30,247 units - the first time that it crossed the 30K mark in 14 years.

During 2023, licensed dwellings increased further by 6% y-o-y to 32,053 units, according to INE figures. However, in the first three quarters of 2024, licensed dwellings fell slightly by 1.4% to 24,611 units as compared to the same period last year.

Dwelling completions have followed a similar pattern, rising continuously from 2016 to 2021, registering an average growth of 19.2% annually. Completions continued to increase in recent years, albeit at a much slower pace - by 3% y-o-y to 20,156 units in 2022 and by 6.8% y-o-y to 21,534 units in 2023.

In the first half of 2024, dwelling completions rose by a modest 3.2% to 12,193 units as compared to the same period last year.