Portugal’s housing crisis “becoming unsustainable”, warn banks

Portugal’s housing market is showing no signs of cooling. Prices continue to climb month after month, and now some of the country’s top banking executives are warning that the situation is becoming increasingly “unsustainable”.

There’s growing concern about the lack of affordable housing – particularly in urban areas – and both banks and the government agree: house prices are unlikely to fall any time soon. This is everything you need to know about Portugal's housing crisis. 

No short-term solution in sight

Miguel Pinto Luz, Portugal’s Minister for Infrastructure and Housing, recently acknowledged that the country’s housing crisis has no immediate solution. He confirmed that prices are not expected to drop in the coming months, despite ongoing efforts to improve access to housing.

Over the past week, Portugal’s leading banks – including Santander, BPI, Caixa Geral de Depósitos and BCP – released their mid-year results, and all sounded the alarm: property prices will keep rising, and the shortage of housing is making access increasingly difficult.

Pedro Castro e Almeida, CEO of Santander Portugal, described the housing situation as “much worse” than before, saying it’s starting to become “unsustainable”. The root of the issue, according to João Pedro Oliveira e Costa (CEO of BPI), is simple: demand far outstrips supply. “We’re seeing efforts to build and renovate housing, but it’s nowhere near enough to meet current needs,” he told Público.

A supply problem – and rising demand

Paulo Macedo, head of state-owned Caixa Geral de Depósitos, pointed to delays in public housing projects and a construction focus on the luxury market, which is pushing prices even higher.

Adding to the pressure, recent government initiatives aimed at helping young people buy their first home – such as public guarantees and tax exemptions – have fuelled demand, without doing much to increase supply.

“The incentives aimed at younger buyers have boosted demand,” said the BPI CEO. Even so, Miguel Maya, CEO of BCP, believes the government guarantee scheme has had “a clearly positive impact” – though it doesn’t solve the broader supply issue.

Government response underway

The Housing Minister has stressed that while prices won’t drop overnight, the government is taking gradual steps to ease the crisis. “Don’t expect housing prices to change next month, or in two or three months,” he said. “But we are making steady progress towards ensuring everyone has a home where they can build their lives.”

He also announced that 20,000 new homes will be delivered in Lisbon by the end of 2025, which could provide some much-needed relief to the capital’s overheated market.

What does this mean for buyers?

Despite concerns about affordability, banks in Portugal are not showing signs of pulling back from mortgage lending. In fact, they continue to offer attractive and competitive financing options – which can be good news for international buyers.

As property prices rise, buyers are taking out larger loans, which supports the banking sector’s activity. Importantly, the number of mortgage defaults remains very low, with no red flags for now.

However, experts warn that if house prices continue to rise and supply remains tight, the financial pressure on both buyers and banks could increase in the future.

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