Algarve and Alentejo report further Housing Price Growth

A surge in demand from both overseas buyers and domestic movers continues to lift housing prices across Portugal’s southern half, extending a trend that has pushed the cost of property far beyond pre-pandemic levels. New figures compiled for May and reviewed on Tuesday, 01 Jul 2025 show the average asking price in the southern districts—Algarve and Alentejo combined—has climbed to €259,000, a monthly bump of four percent and a striking twenty-three percent jump from a year earlier. Nationally, the median listing now stands at €414,000, up eighteen percent year-on-year, underscoring how strongly the south is influencing the broader market.

Coastal premiums versus inland bargains

Nowhere is the gulf between sea-view luxury and interior affordability clearer than in the Algarve’s capital district of Faro, where typical sale prices have reached €535,000 after a steady one-percent uptick in May and a twenty-two-percent leap over twelve months. Long-standing planning limits along the shoreline, coupled with record tourism numbers and a steady influx of remote workers from northern Europe and North America, have kept inventory tight. In nearby Setúbal, a district that straddles the southern bank of the Tagus and offers rail access to Lisbon, listings average €440,000—still below Faro but twenty-two percent higher than a year ago. Travelers prepared to trade a beach address for rolling plains will find very different numbers in Beja, deep in the Alentejo. At €120,000, Beja remains the most economical district south of the capital despite clocking a twenty-six-percent annual increase.

Renting remains the faster-moving segment

For newcomers looking to test the waters before buying, rents have moved almost as briskly. Across Portugal the typical advertised rent is holding around €1,300 a month, four percent above May 2024. Southern districts are cheaper on paper at €895, yet they have risen faster—five percent in a single month and twelve percent over the year. Faro again tops the table: tenants there now face a median of €1,300, two percent more than in April and a substantial thirty-seven percent above last spring. Setúbal follows closely at €1,250, while Évora—a UNESCO-listed university city—sits at €895 after a recent five-percent spike. Even traditionally quiet Portalegre felt the heat, recording a fifteen-percent jump in May to €575, though it remains the cheapest option in the region.

How the south compares with the rest of the map

Using square-metre benchmarks often favoured by Portuguese agents, the south’s priciest ground lies in Faro at roughly €3,558 per m², marginally below Lisbon but ahead of Porto. Setúbal averages €2,700 per m², according to end-2024 data analysed by property portal Idealista, while Beja hovers near €1,209 per m². These levels echo a national pattern: coastal districts and major tourist hubs command premiums, whereas inland areas and smaller cities lag behind. Over the past twelve months every mainland region recorded positive growth, with the North leading at sixteen percent and the Alentejo—home to Beja and Évora—posting eleven-plus-percent gains. The Algarve, despite already high absolute values, still advanced by just under ten percent.

What is fuelling the climb?

Several forces are converging. Mortgage rates, though trending upward from their 2021 lows, remain historically moderate in euro-zone terms, pushing many long-term renters to weigh ownership. Portugal’s simplified digital-nomad visa, introduced in late 2024, has lured higher-earning professionals who often start as renters and convert to buyers once established. Meanwhile, government efforts to repurpose short-term holiday lets for residential use have yet to unlock significant supply, especially in coastal municipalities where tourism accounts for a sizable share of GDP. Construction pipelines are improving but still face labour shortages, lengthening delivery timelines.

Implications for foreign residents and investors

For expatriates arriving in 2025, the message is twofold. First, sticker shock is real in marquee spots such as Faro, Lagos or Comporta, and the gap versus Lisbon is narrowing. Second, Portugal’s interior continues to offer relative value, good road and rail links, and, in many cases, easier access to long-term rentals. Agents report that investors priced out of Lisbon and Cascais are now scouting Évora and Beja for buy-to-let opportunities, betting that tourism spill-over and university demand will keep occupancy high. Because most leases are still indexed to the national inflation rate, tenants signing today should budget for annual rent updates, although recent official data hint at a gradual slowdown in those increases.

Looking ahead

Economists contacted by The Portugal Report expect further moderation in price growth during the second half of 2025 as new stock reaches the market and the European Central Bank maintains a cautious stance on interest rates. Yet few foresee outright declines in the south, where year-round sunshine and new international flight routes continue to broaden the buyer pool. For foreigners relocating this summer, the advice is simple: research district-level data, visit both coast and interior, and move quickly when the right property appears—competition, particularly for long-term rentals near the beach, is unlikely to fade anytime soon.