Portugal Home Prices Soar 19%, Outpacing Local Paychecks
Soaring home values, sluggish wage growth and a persistently tight rental market have turned the Portuguese housing conversation from a Lisbon-centric concern into a truly nationwide debate. Fresh data from the National Institute of Statistics (INE) show that the average dwelling now costs €2 065 per square meter—up an eye-catching 19 % year-on-year in the second quarter. Behind that headline figure lurk regional imbalances, foreign-capital dynamics and the thorny question of whether public policy can keep first-time buyers from being priced out.
Prices accelerate beyond wage growth
INE calculates that the €2 065/m² milestone represents a quarterly jump of 5.2 % and the sharpest annual surge since 2022. In the same 12-month window, average salaries increased by just 4.3 %, widening the affordability gap. Economists at Banco de Portugal warn that the average taxa de esforço—the share of income households devote to mortgage payments—could climb above 40 % in Lisbon by early 2026 if trends hold. For comparison, the European Central Bank estimates a euro-area average near 24 %.
Lisbon and Porto pull ahead, interior lags
The capital remains the priciest market at €4 308/m², nearly double the national mean, while Porto reached €3 236/m² after a 17 % rise. By contrast, Vila Real and Guarda counties still trade below €900/m² despite modest gains. Analysts attribute the widening urban-rural divide to limited new construction along the coast and a migration of university graduates toward tech-heavy job clusters around the Tagus and Douro river estuaries.
Foreign buyers and golden visas reshape demand
Although Portugal suspended new golden-visa applications tied to residential property in October 2023, INE figures indicate that non-resident buyers still accounted for 13 % of transactions in Q2 2025, up from 10 % a year earlier. Consultancy JLL estimates that French, British and American nationals together injected more than €880 M into the market over the quarter. Real-estate brokers say cash purchases shield these investors from the recent rise in Euribor-linked mortgage rates, giving them a competitive edge over local families.
Interest-rate hikes fail to chill market
Mortgage costs have climbed swiftly: the average variable-rate loan now carries a 4.1 % interest rate versus 3.3 % last summer. Yet demand has not collapsed. Caixa Geral de Depósitos reports that its new-loan volume slipped only 2 % year-on-year, evidence that pent-up demand and expectations of future capital gains still outweigh higher financing costs. Some analysts draw parallels with Spain’s pre-2008 period, but most banks point to stricter post-crisis lending rules as a key risk mitigator.
Government weighing new fiscal tools
The minority government of Prime Minister Luís Montenegro is considering capping annual IMI (municipal property tax) increases at inflation plus 1 percentage point for primary residences. It is also mulling a targeted subsidy for households with variable-rate mortgages that exceed 35 % of net income. Meanwhile, a proposed overhaul of Alojamento Local rules—aimed at converting short-term tourist lets back into long-term rentals—faces pushback from the hospitality lobby and several coastal municipalities.
What it means for households planning to buy
Financial planners advise prospective buyers to stress-test budgets against interest rates of up to 5 % and to factor in rising insurance and maintenance costs. With construction starts still lagging household formation, few expect prices to fall materially in the next 12 months. The key unknown is whether the European Central Bank will pivot to rate cuts in early 2026, a move that could reignite bidding wars. Until then, the watchword for most Portuguese families remains prudência: negotiate hard, lock in fixed rates where possible, and keep a close eye on parliament’s autumn budget debates.