House prices

Portugal’s housing market is showing no signs of cooling.

Year-on-year house prices increased by 5.4% in the euro area, 5.7% in the EU, and... 16.3% in Portugal, according to Eurostat.

Portugal’s Prime Minister has announced a fresh housing strategy aimed at bringing together all key players in the property sector to help resolve the country’s housing crisis and curb price increases.The new government led by Luís Montenegro is prioritising one clear goal: “Ensuring quality housing

There is a significant disparity in Portugal regarding house prices for purchase. In the major urban centres of Lisbon, Porto, and Faro, housing costs are quite high and often out of reach for middle-class families.

People have been buying homes in Portugal at increasingly higher prices, with the average cost reaching 221,272 euros in the summer of 2024.

The global economic context continues to present challenges and uncertainties. However, the luxury real estate market remains resilient.

The Lisbon region has increasingly attracted families to live, visit, and invest. This high demand has been reflected in house prices, as the housing supply has not kept pace with this growth.

The Algarve is the most accessible prime market in Europe for millionaires, closely followed by Bordeaux and Tuscany.

Concerns about house prices (whether for renting or buying) are reaching record levels in the wealthiest countries, surpassing other issues such as health or education.

The growth in luxury home prices worldwide is losing momentum due to high interest rates still impacting many markets, such as those in the US and Europe. However, some cities are experiencing a counter-cyclical trend, with Lisbon among them.

The purchase of homes in Portugal by foreigners fell in early 2024, coinciding with the end of the Non-Habitual Residents (NHR) regime on previous terms and the golden visa programme for real estate investment.

House prices in Portugal continue to increase, having grown by 6.5% over the past year, 2.5% over the past six months, and 2.9% over the past three months, according to the Knight Frank Global House Price Index. Portugal also ranks 14th in the index, ahead of countries such as France, Germany, Switzerland, and the USA.

Difficulties in accessing housing in Portugal and Spain will continue to exist in the short term. This is because, according to Fitch estimates, increases in family income should be “practically equal” to the expected evolution of house prices for 2024 and 2025. In Portugal, the cost of housing could grow by up to 6% per year.

Access to housing remains difficult in Portugal. And in this context, some people are looking for cheaper homes in cities or towns far from the big urban centres, in order to make house prices compatible with family budgets.

The purchase of houses in Portugal has been cooling down, given the high costs of housing, along with high interest rates on loans and low purchasing power, which continue to be felt. And this cooling in demand for houses in the country has been reflected in prices. The National Statistics Institute (INE) reveals this Tuesday, April 23rd, that the set of homes sold in the final stretch of 2023 had a median cost of 1,619 euros per square meter (euros/m2), a value of 7, 9% higher compared to the same period last year. But compared to the previous quarter, house prices in Portugal fell 1.3%, a trend felt in 14 of the 24 most populous municipalities, Lisbon and Porto included.

The uncertain climate marked by rising interest rates and high inflation is to shaking the luxury residential markets around the world, including Portugal. This is because luxury homes in the Algarve continued to increase in value by 12.3% in 2023 compared to the previous year, this being the fourth biggest increase among the 100 cities around the world analysed by Knight Frank.

Portugal continues to be an attractive country to live in, as well as invest in, despite the uncertain economic and political context. But the lack of homes for sale is a structural problem with no end in sight, as new home construction is not keeping up with demand in the country.

The richest families in Portugal earn around 21,000 euros gross per month. And they live in the municipalities of Lisbon and Porto, on their outskirts, and in Loulé, concludes the most recent analysis by the Ministry of Finance.