Portugal's Residential Property Market Analysis 2026

While rents begin to cool in the largest urban submarkets, sales prices in the Portuguese housing market continue to grow strongly, fueled by resilient demand, persistent supply shortages, and rising construction costs.

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

• Property Prices and Price Index
• Historic Perspective
• Property Demand Trends
• Property Supply Trends
• Rental Market: Rents and Rental Yields
• Mortgage Market and Interest Rates
• Economic and Social Factors

Property Prices and Price Index

Portugal’s housing market remains in a strong price-growth cycle, supported by persistent supply shortages, resilient demand, rising construction costs, and continued pressure in metropolitan and coastal markets. In April 2026, the median bank appraisal value for residential properties in Portugal reached EUR 2,174 (USD 2,545) per square meter, up 16.5% year-on-year, according to Statistics Portugal (INE).

Portugal's house price annual change:

By property type, the median appraisal value for apartments reached EUR 2,546 (USD 2,980) per square meter, up by 21.0% year-on-year, while houses/villas increased by 12.7% to EUR 1,561 (USD 1,827) per square meter. The highest values in both segments remained concentrated in Greater Lisbon and the Algarve, reflecting stronger demand pressure in the country’s main metropolitan and tourism-driven markets.

Median bank appraisal value of residential properties by region:

Official transaction-price data points to the same upward trend. According to INE’s local housing price statistics, the median price of dwellings sold in Portugal reached EUR 2,198 (USD 2,557) per square meter in Q4 2025, up by 17.5% year-on-year. For 2025 as a whole, Portugal’s House Price Index increased by 17.6%, the strongest annual rise in the available series, with existing homes recording stronger growth than new homes, highlighting the intensity of demand pressure in the resale market, where available supply remains particularly constrained.

Asking-price data similarly shows continued upward pressure. According to the property platform Idealista, the median asking price for residential properties in Portugal reached EUR 3,142 (USD 3,668) per square meter in May 2026, up by 10.2% year-on-year and marking a new high in the platform’s series. Lisbon remained the country’s most expensive major market, with median asking prices of EUR 6,124 (USD 7,149) per square meter, followed by Porto at EUR 4,064 (USD 4,744) per square meter.

Data Source: Idealista.

The current price dynamics remain closely linked to Portugal’s structural housing shortage. The Organization for Economic Co-operation and Development (OECD) notes that the market continues to face regulatory barriers to housing investment, weak supply responsiveness, lengthy permit procedures, and affordability pressures. Banco de Portugal similarly warned in its May 2026 Financial Stability Report that supply shortages are putting pressure on house prices at a time when demand remains robust, cautioning that a deterioration in economic and financial conditions could lead to negative adjustments in the residential market.

Looking ahead, BPI Research expects price growth to remain positive but to slow from the exceptional pace recorded in 2025. The bank raised its forecast for Portugal’s House Price Index growth in 2026 to 11.7%, while noting that affordability constraints, early signs of weaker price momentum, some acceleration in new supply, and more cautious expectations among real estate agents and developers should gradually moderate further growth.

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 16,000 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, successive governments introduced several policy measures aimed at increasing the availability of housing. The public housing program has been expanded, with the government targeting 59,000 public homes by 2030, supported by an overall investment of EUR 4.2 billion. Planning measures have also been adjusted, including a simplified procedure allowing municipalities to reclassify some rural land for housing or related uses.

At the same time, policies affecting demand were also revised. In 2023, the Golden Visa program was amended to exclude real estate as an eligible investment category. The broad Non-Habitual Resident tax regime was closed to new entrants from January 2024 and replaced by a more targeted incentive for scientific research and innovation.

Despite these interventions, the structural imbalance between supply and demand remains, sustaining upward pressure on housing prices. In 2025, the median bank appraisal value for residential properties reached EUR 1,949 (USD 2,202) per square meter, representing a year-on-year increase of 17.3% and bringing the average annual growth rate over the 2015-2025 period to about 9.1%.

Data Source: INE.

Property Demand Trends

Domestic Demand Drives Record Sales, While Non-Resident Purchases Continue to Decline

Portugal’s residential demand strengthened in 2025, with sales reaching a new high, supported by resilient domestic demand, lower financing costs, and government measures aimed at helping young buyers enter the market. According to INE, 169,812 dwellings were sold nationwide in 2025, up 8.6% year-on-year and the highest figure in the available series. The total value of housing transactions rose by 21.7% to EUR 41.2 billion, reflecting both stronger sales activity and continued price growth.

Existing dwellings continued to dominate the market, with 136,245 transactions, or around 80% of total sales, up 9.5% year-on-year. Sales of newly built homes reached 33,567 units, increasing by a more moderate 5.3%. Geographically, sales remained concentrated in mainland Portugal, which accounted for around 96% of total transactions. The North, Greater Lisbon, and Center regions jointly represented about 65% of all homes sold, confirming the continued dominance of the country’s main residential markets.

Data Source: INE.

Number of dwellings sold by region:

Domestic buyers were the main driver of the 2025 expansion. Buyers with tax residence in Portugal purchased 161,341 dwellings, up 10.1% year-on-year, and accounted for 95% of all transactions, the highest share since the series began in 2019. This stronger domestic component was supported by more favourable financing conditions and government measures aimed at improving access for younger buyers. Finance Minister Joaquim Miranda Sarmento said in January 2026 that the tax exemption scheme for young first-time buyers had helped more than 70,000 applicants, while public guarantees had been used by around 23,000 buyers, describing the measures as successful in enabling many young people to purchase homes.

By contrast, purchases by buyers with tax residence outside Portugal declined for the third consecutive year. EU-resident buyers acquired 4,416 dwellings in 2025, down 9.6% year-on-year, while buyers resident in non-EU countries purchased 4,055 dwellings, down 17.1%. Commenting on the INE data, Idealista noted that policy changes may help explain the decline in non-resident purchases, including the end of the Golden Visa real estate route and the replacement of the Non-Habitual Resident regime with a more restrictive framework.

Early 2026 data suggests that transaction momentum may be easing after the strong 2025 performance. Confidencial Imobiliário reported that 37,750 homes were sold in mainland Portugal in Q1 2026, down 9.4% from the previous quarter, confirming the weaker activity trend seen since the second half of 2025. Ricardo Guimarães, director of Confidencial Imobiliário, said that international instability and expectations of rising interest rates were emerging as factors affecting demand and housing investment, although transaction volumes remained broadly in line with the average observed since 2019.

Overall, Portugal’s residential demand outlook remains positive but more moderate than in 2025. Domestic demand should remain underpinned by underlying housing needs, more favorable financing conditions, and targeted policies aimed at helping younger buyers enter the market, including tax exemptions and public guarantees. However, affordability pressures, limited available supply, and weaker non-resident purchasing activity are likely to constrain further growth in sales volumes. Banco de Portugal warned that supply shortages are still putting pressure on prices at a time when demand remains robust, but also noted that a deterioration in economic and financial conditions could lead to negative adjustments in the residential market.

Property Supply Trends

Pipeline Improves, but Structural Shortage Persists

Despite a gradual improvement in recent years, Portugal’s housing market continues to face a structural shortage of residential supply. The OECD notes that housing investment has remained weak over the last two decades, with the sluggish supply response reflecting persistent barriers to development, including high construction costs, skill shortages, regulatory constraints, and long delays in obtaining building permits.

New housing delivery continued to recover in 2025, although from still-limited levels. According to INE, 26,714 dwellings in new constructions for family housing were completed during the year, up 5.5% year-on-year and the highest annual total since 2011. Forward-looking indicators also strengthened, suggesting a larger approved pipeline. INE reported that 42,048 dwellings for family housing were licensed in new construction in 2025, representing a 21.4% annual increase. Construction activity remains concentrated in mainland Portugal, particularly in the North and Center regions.

Data Source: INE.

Residential construction activity by region:

Policy measures have also become more focused on expanding supply. In March 2026, the Portuguese government approved a housing reform package that includes a reduced 6% VAT rate for qualifying construction and rehabilitation works for owner-occupied housing or rental housing with monthly rents of up to EUR 2,300. The package also includes tax incentives for rental investment and changes to urban licensing rules aimed at making procedures clearer and faster.

However, market commentary remains cautious about the speed of adjustment. JLL expects the “Construir Portugal” program and the 6% VAT measure to support Build-to-Rent growth, affordable housing supply, and lower development costs. Cushman & Wakefield, however, warns that VAT reduction alone should not be expected to trigger a new construction wave, arguing that the market also needs larger projects, shorter delivery timelines, and conditions that reduce costs and risks for developers.

Overall, Portugal’s residential supply outlook is improving, supported by stronger licensing activity and new policy incentives. However, the conversion of permits into completed dwellings is likely to remain gradual, given construction costs, labor constraints, regulatory complexity, and long development timelines. New supply is therefore expected to increase, but not quickly enough to resolve the country’s structural housing shortage in the near term.

Rental Market: Rents and Rental Yields

Asking Rents Fall Nationally, Regional Dynamics Vary

Asking rates in the Portuguese rental market began to correct from 2025 highs, although structural supply shortages and strong demand keep conditions tight, supporting continued growth in most regional capitals.

Portugal's rent price index:

Based on properties listed on the property platform Idealista, the nationwide year-on-year growth in asking rents previously slowed from double digits in 2023 and early 2024 to just 0.9% in December 2025. This year, it went into negative territory, most recently reported at -2.9% in May 2026. Among major cities, this downward trend has been driven by Viseu (-8.4%), Porto (-7.7), Lisbon (-2.7), and Braga (-0.9%). At the same time, according to Idealista, the remaining 11 of the 15 district or autonomous region capitals analyzed still demonstrated growth in rents, with the most substantial increases observed in Viana do Castelo (17.5%), Castelo Branco (14.8%), Faro (11.2%), and Funchal (10.8%).

The platform’s analysis indicates that while increased activity in home sales, boosted by incentive programs for young people, has led to rents dropping nationally, distinct regional dynamics based on demand-supply balance and affordability thresholds in each submarket have emerged. “The data reveals that the demand for rental homes continues to be well above the available supply in several areas of the country,” said Ruben Marques, spokesperson for Idealista. “Pressure on the market remains high, especially in large urban centers, where there continues to be strong competition among families for each advertised home.”

In parallel, rental inflation in Portugal, as measured by the annual change in actual rentals for housing component of the consumer price index, continues to outpace the overall price growth in the country. Most recently, the indicator was reported at 5.2% in May 2026, while general inflation was at 3.3%. According to 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 (6.7%).

For existing contracts, rent increases can be expected to remain relatively stable 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 2.24% for 2026, only marginally up from 2.16% in 2025.

Data Source: INE.

In nominal terms, according to Idealista, the median asking rent in May 2026 stood at EUR 16.3 (USD 19.0) per square meter nationwide. Among major cities, the highest median rents were observed in Lisbon (EUR 21.8 / USD 25.4) and Porto (EUR 16.4 / USD 19.1).

In this environment, research conducted by Global Property Guide showed gross rental yields for apartments in Portugal at the average level of 4.29% in May 2026, down from 4.57% previously reported in May 2025. The highest potential performance among the surveyed submarkets was estimated for rental properties in Setúbal (4.89%), while the lowest yields were reported in Lisbon (3.76%).

Median asking rents in selected submarkets:

The overall size of the rental market in Portugal has been relatively stable over the last two decades, with Eurostat reporting the share of tenants in the country’s population at 28.8% in 2025, below the eurozone average of 34.9%.

Mortgage Market and Interest Rates

Higher Financing Costs, Decline in Demand for Loans Anticipated

After a year-long hold, the European Central Bank (ECB) announced a 25 bps increase in its policy rates in June 2026, bringing the deposit facility rate to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility rate to 2.65% to address energy-driven inflationary pressures stemming from the Middle East conflict. Commenting on the decision in a press release, the regulator noted that “the outlook remains uncertain, with upside risks for inflation and downside risks for economic growth”, and most economists recently polled by Reuters agree that another key rate increase is likely in September.

Portugal's mortgage loan interest rates:

In the coming months, this shift in the European regulator’s monetary policy can be expected to reflect in higher interest rates in the Portuguese mortgage market (mainly consisting of floating-rate loans), which previously demonstrated a relatively stable dynamic, with the gap between average interest on new and existing loans gradually narrowing. As of April 2026, the average interest rates on loans to households for house purchase stood at 2.85% for new loans (a 21 b.p. decrease since the same period a year ago) and 3.09% for outstanding loans (a 49 b.p. decrease since April 2025).

Data Source: ECB.

Average interest rates on loans to households for house purchase:

The stable interest rate environment in the second half of 2025 and early 2026 supported growth in loan originations. Based on ECB figures, the total value of new loans for house purchase reported by monetary financial institutions in Portugal increased by 17.1% in 2025, with the dynamic driven by pure new loans, which grew 34.0% year-on-year, while renegotiations dropped. In the first four months of 2026, a total of EUR 10.3 billion (USD 12.1 billion) in new housing loans was issued, an 18.5% increase compared to the same period last year. Of those, EUR 7.8 billion (USD 9.1 billion) were pure new loans, representing 12.8% growth against the comparable period in 2024.

In light of more recent developments, however, lenders across the country now anticipate a decline in demand for housing loans to households later this year, as outlined in Banco de Portugal’s most recent lending survey.

Data Source: ECB.

Overall, the banking sector data published by the ECB shows that after decreasing by 1.3% in 2023, the housing loan stock in the country returned to growth, registering a 3.5% increase in 2024 and a 9.7% increase in 2025. As of April 2026, the total value of outstanding housing loans maintained by Portuguese monetary financial institutions stood at EUR 116.7 billion (USD 136.7 billion), now exceeding peak levels previously observed in 2010-2011.

Against this background, the relative size of the mortgage market, as measured by the ratio of outstanding housing loans to GDP at current prices, also picked up from an estimated 35.5% in 2024 to 36.8% in 2025. It is still notably below the peak level of 65.6% previously recorded in 2012, however.

According to the most recent Eurostat figures, 31.5% of the population in Portugal lives in an owned residence with an outstanding mortgage or housing loan.

Data Source: ECB.

Economic and Social Factors

Moderate Growth and Higher Inflation Expected This Year

Portugal’s economy continued to perform solidly in 2025, with real GDP growth reaching 1.9%, above that of some eurozone peers. Severe storms in January-February dampened growth early in 2026, but reconstructions and repairs are expected to subsequently boost activity, leaving the overall annual impact broadly neutral. At the same time, negative spillovers from the Middle East conflict are likely to weigh on growth and increase inflation. The European Commission forecasts growth will reach 1.7% in 2026 and 1.8% in 2027, while the latest economic bulletin from Banco de Portugal expects it to slow to 1.8% and 1.6% over the next two years, respectively.

“The increase in oil prices implies a deterioration in the terms of trade, which, together with high uncertainty, the expected worsening of financial conditions, and lower growth in external demand, weakens the outlook for activity,” the central bank wrote.

Consumer price index (CPI) inflation in the country, which had previously fallen from the average annual level of 5.3% in 2023 to and 2.2% in 2025, reaccelerated in recent months, reaching 3.3% in May 2026, according to INE. This year, pushed by higher energy prices, inflation is projected to rise to an average of 3.0% by the European Commission and 3.1% by Banco de Portugal.

Data Source: IMF.

In the Portuguese labor market, against the background of both labor supply and employment previously rising at a strong pace, unemployment remains at historically low levels, with the seasonally adjusted rate most recently reported by INE at 5.7% in April 2026. While this year’s employment growth is projected to moderate, reflecting a weaker economic outlook and slower migration inflows, which are expected to limit labor supply, the market is set to remain relatively tight.

Data Source: INE.

Overall, Portugal is seen as transitioning into a phase of stable but modest growth, underpinned by strong macroeconomic fundamentals but constrained by persistent bottlenecks, including housing shortages and affordability pressures in major cities, as well as relatively weak productivity growth. The economy is expected to remain resilient over the next year, although the outlook is subject to significant risks that could weaken growth and raise inflation further. According to the International Monetary Fund (IMF) assessment, in addition to risks related to the conflict in the Middle East, domestic labor shortages, climate change, and increased cyber threats constitute important structural risks for the economy.

In March 2026, Fitch Ratings affirmed Portugal’s ‘A’ sovereign rating and revised the outlook for it from stable to positive. The revision was based on expectations of consistent reduction of public debt over the forecast horizon, supported by the country’s prudent fiscal policy.

Sources:

1. Statistics Portugal (INE)
   1. Consumer Price Index, May 2026: https://www.ine.pt/
   2. Monthly Employment and Unemployment Estimates, April 2026: https://www.ine.pt/
   3. House Price Statistics at Local Level, 4th Quarter 2025: https://www.ine.pt/
   4. Survey of Bank Evaluation of Housing, April 2026: https://www.ine.pt/
   5. House Price Index, 2025: https://www.ine.pt/
   6. Construction: Building Permits and Completed Buildings, Q4 2025: https://www.ine.pt/
2. Government of the Portuguese Republic
   1. Statement from the Council of Ministers, March 27, 2026 (PT): https://portugal.gov.pt/
   2. RRF: 10,000 Homes Delivered and Another 8,000 Will Be Available..: https://portugal.gov.pt/
3. Banco de Portugal
   1. Financial Stability Report – May 2026: https://www.bportugal.pt/
   2. Bank Lending Survey – April 2026: https://www.bportugal.pt/
   3. Ecomoic Bulletin – June 2026: https://www.bportugal.pt/
4. Official Gazette of the Republic of Portugal (Diário da República)
   1. Decree-Law No. 117/2024, of December 30 (PT): https://diariodarepublica.pt/
   2. Law No. 56/2023, of October 6 (PT): https://diariodarepublica.pt/
   3. New Urban Lease Regime - NRAU, Law no. 6/2006: https://diariodarepublica.pt/
   4. Notice No. 23174/2025/2, of September 19: https://diariodarepublica.pt/
   5. 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, 11 June 2026: 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. Portugal: Staff Concluding Statement of the 2026 Article IV Mission: https://www.imf.org/
8. Organization for Economic Co-operation and Development (OECD)
   1. OECD Economic Surveys: Portugal 2026: https://www.oecd.org/
   2. OECD Economic Outlook, Volume 2026 Issue 1, Portugal: https://www.oecd.org/
9. Idealista
   1. Home Sales to Non-Residents in Portugal Fall for the Third Year in a Row: https://www.idealista.pt/
   2. Houses for Sale in Portugal: Prices Hit a New High.. (PT): https://www.idealista.pt/
   3. Renting a House is Getting Cheaper Again… (PT): https://www.idealista.pt/
   4. Renting a House in Portugal: Demand Grows 20% in the Last Year (PT): https://www.idealista.pt/
   5. Houses for Rent in Portugal: Supply Falls by 13% at the Beginning of 2026 (PT): https://www.idealista.pt/
10. JLL
    1. Portugal Residential Market Dynamics, Q1 2026: https://www.jll.com/
11. Cushman & Wakefield
    1. Housing Production Requires More Than Reduced VAT…: https://www.cushmanwakefield.com/
12. BPI Research
    1. Developments in the Residential Real Estate Sector, May 2026 (PT): https://www.bancobpi.pt/
13. KPMG
    1. Portugal – Expatriate Tax Regime Ended; New Tax Incentive for Scientific Research and Innovation: https://kpmg.com/
14. Fitch Ratings
    1. Fitch Revises Portugal's Outlook to Positive; Affirms IDR at 'A': https://www.fitchratings.com/
15. Reuters
    1. Portugal’s Support for Young Home Buyers Proving Effective, Minister Says: https://www.reuters.com/
    2. ECB June Hike a Done Deal, Another Likely in September, Economists Say: https://www.reuters.com/
16. The Portugal News
    1. Portugal Real Estate Market is Slowing, But Prices Keep Increasing: https://www.theportugalnews.com/