Portugal’s Housing Boom: What the 2025 EU Report Means for Buyers, Locals & Investors
Portugal’s property market is thriving, but at what cost?
That’s the question raised by the European Commission’s October 2025 report, “Housing in the EU: Market Developments, Underlying Drivers and Policies” by Guillaume Cousin, Christine Frayne, Vítor Martins Dias and Bořek Vašíček.
The findings confirm what buyers, renters, and investors already sense: prices have soared, affordability is shrinking, and demand remains relentless.
And Portugal sits right at the centre of this transformation.
Portugal among Europe’s fastest-growing property markets
Across the European Union, house prices have nearly tripled since 2000. Between 2014 and 2024, prices grew by around 50% on average, yet in Portugal, Hungary, Lithuania, and Poland, they skyrocketed by more than 200%.
Portugal’s growth places it among the EU’s top-performing and fastest-appreciating housing markets.
Why the surge?
Multiple drivers combine to fuel this growth:
Rising incomes and household wealth expand purchasing power.
Urbanisation and migration are increasing demand in cities with limited housing stock.
Changing family structures and a rise in single-person households.
The boom in short-term rentals and the arrival of institutional investors.
The report identifies Portugal as the EU country where tourism has had the greatest impact on house prices. Short-term rentals have pushed prices and rents higher in Lisbon, Porto, and the Algarve, reducing long-term housing supply and putting additional pressure on residents.
Migration and foreign relocation add to demand, particularly in urban centres, stretching infrastructure and intensifying competition for housing.
The flip side: housing affordability is slipping away
Across the EU, house prices have risen roughly 10% faster than household incomes over the past decade. In Portugal, that gap is even wider, over 20%.
While wage growth has improved, it hasn’t kept pace with property values. As a result, many Portuguese families are priced out of ownership, forced to rent at high prices or remain longer in multigenerational homes.
Rental costs have surged in the main cities, driven by the expansion of tourist accommodation and the scarcity of long-term rentals.
Meanwhile, Portugal’s social housing stock has shrunk, from 2.0% in 2010 to just 1.1% in 2022. Government support exists through tax deductions, rehabilitation grants, and affordable housing programmes, but the impact remains limited.
Tax snapshot:
Transfer Tax (IMT): 3.4%
Recurrent Property Tax (IMI): 0.3%
Capital Gains Tax: 28%
Rental Income: Generally exempt, with annual rent increases capped by inflation during contracts (5–7 years).
Adding to the problem, one in six properties in Portugal stands vacant, often for years, a stark contrast to the ongoing housing shortage.
Immigration, investors, and a tightening market
Portugal’s welcoming immigration policies and attractive residency and tax regimes have positioned it as a global magnet.
For foreign investors, Portugal continues to offer strong value and consistent returns compared to other Western European markets.
For locals and long-term residents, however, the shortage of affordable housing has made renting or buying increasingly challenging, especially in Lisbon and coastal regions.
This has created a dual-speed market: one thriving on international demand, yet struggling to meet domestic needs.
What’s fueling the pressure?
The EU report highlights several structural bottlenecks that are especially relevant to Portugal’s housing market:
Limited new construction – supply lags far behind demand.
Regulatory barriers and slow permits – complex zoning processes delay projects.
Labour shortages in construction and skilled trades.
Focus on renovations and energy retrofits instead of new builds.
Land concentration and speculation – a small number of owners hold prime plots for investment rather than development.
Geography and heritage protections further constrain supply, especially in historic and coastal areas, where building height and density restrictions limit expansion.
The way forward: from short-term fixes to long-term reform
The European Commission calls for a policy reset, not only in Portugal but across the EU.
Lasting affordability, the argument suggests, depends on supply-side reforms rather than temporary demand incentives.
Key recommendations:
Modernise planning and zoning laws for faster, more efficient development.
Invest in social and affordable housing to widen access.
Improve transport and infrastructure to make the outer areas more attractive.
Digitalise the permitting process to streamline construction approvals.
For Portugal, this approach could ease pressure on Lisbon and Porto, while stimulating sustainable growth in emerging regions such as the Alentejo coast and the North.
The bottom line
For investors, Portugal remains one of Europe’s most compelling real estate markets: stable, internationally attractive, and full of opportunity.
For local buyers and renters, however, the challenge is intensifying. Without decisive action, housing could become increasingly unaffordable for Portuguese families.
The task and the opportunity are to find the balance between growth and inclusion.
At Plus Portugal Property, we help our clients navigate this evolving landscape with clarity and confidence.
Whether you’re investing, relocating, or searching for your dream home, our team combines expert insight, local knowledge, and comprehensive support to make your move to Portugal seamless.
