In the short term, attention is firmly on the rental market as a way of easing the housing access crisis in Portugal. As part of efforts to increase the supply of homes available, the Government is keen to give landlords more incentives to rent out their properties, including reducing the IRS (personal income tax) to 10% under the new tax package and speeding up eviction procedures in cases of unpaid rent.
As an investor, are you thinking about buying a property to rent out, or have you already taken that step? Portugal's 2026 housing reforms are worth looking at if you're planning to buy then rent.
For now, the gross yield on buying a home in Portugal to let stood at 6.2% in the second quarter of 2026. That is 0.7 percentage points lower than in the same period in 2025 (6.9%) and 1 percentage point down on the second quarter of 2024 (7.2%), according to idealista data. This suggests that the risks associated with this type of investment have also decreased.
This indicator measures the return on residential property investment before taxes, charges and other expenses. The fact that it is falling also indicates lower business risk for property investors and households with high liquidity. In practical terms, there is a greater likelihood of being able to rent out the property and even of achieving capital appreciation over time.
The adjustment in returns on buying a home to rent out in the second quarter of the year was also influenced by price trends. Sale prices continued to rise, although at a slower pace, up 8.9% in the year ending in June. At the same time, rents have been declining for several months, down 2.4% in June, as shown by idealista’s price index.
In which cities is it most profitable to invest in housing?
Looking at district capitals and the capitals of the autonomous regions, Castelo Branco and Vila Real currently offer the highest returns when buying a property as an investment, both with a gross yield of 8.1%. That said, investing in these cities involves greater risk, as it may be harder to rent out a property or achieve capital growth.
Next on the list of major cities with the highest gross residential yields are Bragança (7.6%), Santarém (6.6%), Coimbra (6.4%), Leiria (6%), Évora (5.7%), Ponta Delgada (5.6%), Setúbal (5.4%), Braga (5.3%), Funchal (5.2%), and Aveiro and Viseu (both 5%).
At the other end of the scale, the lowest housing yield is found in Lisbon (4.3%), followed by Faro and Porto (4.8%).
It is worth bearing in mind that this indicator also reflects lower investment risk in these larger cities, with a stronger likelihood of securing tenants and seeing the property increase in value, for example.
How much does buy-to-let generate in each city?
District capitals (or autonomous region capitals) | Sale price (euros/m²) | Rent (euros/m²) | Gross residential yield |
|---|---|---|---|
Castelo Branco | 1,094 | 7.4 | 8.1% |
Vila Real | 1,503 | 10.2 | 8.1% |
Bragança | 1,184 | 7.5 | 7.6% |
Santarém | 1,796 | 9.8 | 6.6% |
Coimbra | 2,449 | 13.0 | 6.4% |
Leiria | 1,862 | 9.3 | 6.0% |
Évora | 2,663 | 12.7 | 5.7% |
Ponta Delgada | 2,393 | 11.1 | 5.6% |
Setúbal | 3,143 | 14.1 | 5.4% |
Braga | 2,276 | 10.1 | 5.3% |
Funchal | 3,921 | 16.8 | 5.2% |
Viseu | 1,855 | 7.7 | 5.0% |
Aveiro | 2,792 | 11.6 | 5.0% |
Porto | 4,053 | 16.4 | 4.8% |
Faro | 3,766 | 15.2 | 4.8% |
Lisbon | 6,107 | 21.8 | 4.3% |
This analysis also assessed the profitability of other types of property at the national level. Offices provide a return of 7.8% and retail units 8%, both higher than the gross yield on housing. Garages, meanwhile, generate a return of 5.1%.
Methodology
For this analysis, idealista divided the sale price by the asking rental price set by landlords in the different markets during the second quarter of 2026. The result corresponds to the gross yield generated by renting out a home to its owner.
These figures provide an overview of the current state of the market and serve as a basic starting point for investors looking to purchase property assets to generate income.
