New rental contracts cost 10% more as housing reforms take effect
Portuguese tenants signing new leases in the second quarter of 2026 faced rents 10.2% higher than a year earlier, according to data released by the National Institute of Statistics (Instituto Nacional de Estatística). The median price for new contracts reached 10.17€ per square metre, accelerating from the 9.1% annual increase recorded in the first three months of the year.
The figures, published by the statistics authority, confirm that new rental prices rose across all mainland and island regions. For someone seeking a 75-square-metre apartment at the national median, this means roughly 760€ per month in rent — compared to about 690€ for the same space a year ago.
Where rents rose fastest
The Grande Lisboa sub-region recorded the highest median rent in the country, at 15.24€ per square metre. The Autonomous Region of Madeira followed at 12.78€/m², with the Península de Setúbal at 11.99€/m², the Algarve at 11.56€/m² and the Área Metropolitana do Porto at 10.83€/m².
Among municipalities with more than 100,000 residents, Guimarães posted the sharpest annual jump at 20.7%. Lisbon maintained the highest municipal median rent at 17.79€/m², though its yearly increase of 5.1% fell below the national average.
Regional data from September 2026 shows district capital cities experienced diverging pressures. Aveiro led annual price increases at 22.1%, followed by Viana do Castelo at 17.5% and Bragança at 12.6%. Lisbon, which remains the most expensive city to rent in Portugal, recorded an 8.8% rise.
Certain inland and coastal regions also saw pronounced growth. The Alentejo Litoral registered a year-on-year increase of 21.6%, followed by Terras de Trás-os-Montes at 17.6%, Madeira at 17.4%, Lezíria do Tejo at 17.0%, and the Algarve at 15.2%.
What explains the surge
Economists point to persistent supply shortages as rents climb. Demand for rental housing grew 36% in the second quarter compared with the previous year, with each listing receiving dozens of enquiries. High purchase prices continue to push prospective buyers into the rental market, intensifying competition.
Inflation and maintenance costs have also contributed, even as overall price pressures have eased. Materials, services and property insurance all factor into landlords' calculations.
A shift in demand toward less densely populated areas has driven increases in interior municipalities, as tenants seek more affordable alternatives to major urban centres.
How the new rules affect tenants and landlords
Parliament approved a housing reform package in September 2026, following Council of Ministers approval in July. For existing contracts, the 2026 rent update coefficient was set at 2.24% — the maximum landlords may increase. However, landlords who did not apply updates in 2024 and 2025 may apply them cumulatively, potentially reaching increases above 11% over three years.
For new contracts, the removal of rent controls is a significant change. The reform eliminates previous caps on new lease values, allowing free negotiation between parties. The government's "Construir Portugal" strategy aims to encourage property owners to place more homes on the market.
The legislation also accelerates eviction procedures, reducing the rental arrears period required to initiate proceedings from three months to two. Authorities argue this strengthens legal certainty for landlords and helps mobilise vacant properties. The measure remains controversial — Luis Mendes of the Lisbon Tenants' Association (Associação dos Inquilinos Lisbonenses) noted that evictions for non-payment represent a residual share of the roughly one million existing contracts.
Support measures and tax incentives
The government has introduced sweeteners alongside the liberalisation. Tenants may now deduct up to 900€ annually from their IRS tax return for rent paid, rising to 1,000€ in 2027. A new Housing Emergency Fund (Fundo de Emergência Habitacional) will support vulnerable households.
Landlords who join the Simplified Affordable Renting Regime (Regime Simplificado de Arrendamento Acessível) benefit from income tax exemption on rents set at up to 80% of the municipal median. Additional incentives include exemptions from property tax (IMI) and stamp duty, plus a reduced 6% IVA rate on construction or rehabilitation work for rental housing.
Tenants in pre-1990 contracts who are over 65 years old or have a disability of 60% or greater retain specific protections.
The debate continues
The Lisbon Tenants' Association has strongly criticised accelerated evictions and the end of rent controls, describing the reforms as harmful to vulnerable residents. The group advocates maximum rent thresholds to combat overheating prices.
Economists Pedro Lino and Vera Gouveia Barros have acknowledged that annual updates aim to protect landlords' real income amid inflation, though they warn the broader increases may deepen financial strain on tenants. The government maintains that removing regulatory barriers will ultimately increase supply and ease prices over the long term.
The reform still requires completion of the legislative process to take full effect, though certain fiscal measures were published in May 2026.
