Real estate in Portugal: from dynamism to moderation

Ever since 2020, the real estate sector in Portugal has undergone an intense transformation. Prices have skyrocketed, international demand has firmed up, rental prices have risen sharply, and social tensions have come to the fore, especially in major cities. 
The house price index rose by 9.1% in the space of a year, according to the National Statistics Institute (INE), with the market overvalued since 2017, according to the Bank of Portugal, as the pace of price rises has far outstripped income and economic growth. It is this discrepancy that fuels the feeling that ‘the market has grown more than it should’– andthat sooner or later it will have to be corrected. In the meantime, rental figures confirm the pressure on the market: rental prices remain at record highs and long-term supply remains scarce due to the impact of tourism and the preference for short-term rentals. The public perception of a housing crisis is therefore well founded.
But we are beginning to see signs of change. The measures announced by the Portuguese government, namely the reduction in VAT on construction – a huge incentive for investors and construction companies – or the reduction in taxation to 10% for landlords who set the rental value at a maximum ceiling of €2,300, may actually lead to real solutions.
Looking ahead to 2026, we can envisage a number of scenarios, including the possibility of a moderate downswing, with house prices rising between 2% and 6%, reflecting a more mature market, stabilised interest rates and a slight increase in supply. On the other hand, and in a more optimistic yet less likely scenario, we may see a return to near double-digit growth if there is a rapid decline in interest rates and renewed appetite for foreign investment.
In my opinion, the trend will be towards moderation, despite the instability we are experiencing in Europe and around the world. The Portuguese real estate market will still be dynamic, but 2026 will be the year when the market starts to better reflect the real conditions of the economy and the purchasing power of families. Decision-makers will still have an urgent task on their hands: to fast-track affordable housing projects, manage the balance between tourism and residential living, and quickly come up with solutions for a market that is still in crisis.

Paulo Abrantes
Managing director of Grupo Decisões e Soluções