House prices up 7.74% during 2022

Portugal’s housing market remains healthy, amidst strong demand and a housing shortage. Inflation-adjusted property prices in Portugal rose by 7.74% during 2022, following year-on-year expansions of 8.93% in 2021, 5.72% in 2020, 14.09% in 2019 and 15.65% in 2018. On a quarterly basis, house prices were more or less steady in Q4 2022.

All regions of Portugal have experienced significant house price falls from 2007 to 2013. And despite some recovery in 2009, house prices started to fall again in the last quarter of 2010. Prices only began to recover in Q4 2014, after 13 consecutive quarters of y-o-y house price declines. House prices have been continuously rising since.

 

Construction activity rising again 

As a response to strong demand, residential construction activity is rising again, after slowing sharply in 2020 due to pandemic-related restrictions. The number of licensed dwelling permits in Portugal rose by 5.1% to 29,963 units in 2022, following annual growth of 11% in 2021 and 2.6% in 2020, according to figures from the Instituto Nacional de Estatistica (INE). 

Rents, rental yields: yields are good in Lisbon, at around 3.06% to 10.39%  

Lisbon apartment costs around €299,000 in November 2022

Portugal: typical city centre apartment buying price, monthly rent (2-BR apartments)
	Buying price	Rate per month	Yield
Lisbon	€ 299,000	€ 1,800	7.22%

Recent news: The Portuguese economy expanded strongly by 6.7% during 2022, following a 5.5% growth in 2021 and a huge 8.4% contraction in 2020. The robust economic growth was mainly driven by increases in private consumption and net exports, which benefitted from a strong rebound in tourism after Covid-19 restrictions were lifted.

Recently, however, the Bank of Portugal has lowered its 2023 growth forecast to just 1.5%, from its earlier projection of 2.6%, as high inflation and rising interest rates are expected to hit private consumption. The European Commission’s forecast is even more pessimistic, expecting Portugal’s economic growth to slow sharply to 1% this year and 1.8% in 2024.