Portugal Homebuyers Squeezed by 6.8% Price Hike, Santarém & Islands Lead

Home values refused to hit pause at the end of 2025. Instead, the median asking price for a dwelling in Portugal logged yet another record, squeezing buyers just as mortgage costs stabilized. December’s figures show an annual rise of 6.8 %, driven by a handful of mid-sized districts and the Atlantic islands rather than by Lisbon or Porto.

What changed in one month?

• 6.8 % yearly jump pushed the national median to €3 019/m²

• 2.6 % quarter-on-quarter increase capped the fastest Q4 in three years

• Santarém and Beja delivered the steepest gains on the mainland

• Porto Santo and Faial topped the island league tables

• Lisboa and Porto saw a milder 4.8 % uptick, still expensive but less frenetic

• Vila Real was the sole district in the red, slipping -6.1 %

• Rental demand shifted higher, yet lease prices climbed a modest 4 %

Regional pulse: where the market ran hottest

The eye-catcher was Santarém, where advertised values rocketed 27.1 % year-on-year, a reminder that proximity to Lisboa’s commuter belt is paying off. Beja followed with 20 %, buoyed by foreign buyers hunting larger properties amid Alqueva’s growing agro-tech cluster. On the coast, Setúbal (17.2 %) and Viana do Castelo (13.1 %) outpaced the Algarve, signaling that secondary seaside locations remain under-supplied. Island territories were even more dramatic: Porto Santo surged 42.6 %, while São Miguel and Terceira hovered near 20 %. Such spikes underscore how holiday-home demand, remote-work migrants and tourism licences funnel capital into small markets with limited stock.

Why the pressure persists

Several intertwined forces kept prices on the boil:

Chronic housing shortage: licensing times near 20 months and scarce urban land curb new builds.

Mortgage rate plateau: Euribor edged lower in late 2025, prompting buyers to lock in credit before any rebound.

Household savings buffers amassed during the pandemic continue to flow into bricks-and-mortar, considered a hedge against inflation.

Golden Visa legacy: although rules tightened, past approvals still translate into ongoing transactions.

Labour supply constraints: construction wages rose 11 % in 2025, keeping build costs elevated.

Tourism rebound: record 34 M overnight stays pushed investors toward short-term-let stock, shrinking owner-occupier options.

Delayed public housing projects: the new Soil Law mandates 70 % affordable units in future developments, but the pipeline is only scheduled to hit the market from 2027.

Regional branding: councils such as Castelo Branco actively marketed digital-nomad visas, adding premium demand to lower-priced territories.

Affordability: the widening gulf

While property values accelerated, pay packets didn’t keep pace. The average full-time salary reached €1 602/month, yet a 90 m² starter flat in Greater Lisboa now carries an advertised tag of roughly €270 000. That implies a price-to-income ratio above 10, among the highest in the EU. The national Price-to-Rent index hit 190.5 in mid-2025, meaning households choosing to buy need almost double the historical share of income to service a loan. Analysts at Banco de Portugal warn that if wages trail property inflation by more than 3 % in 2026, first-time buyer numbers could fall to a 15-year low. The government’s temporary interest-rate subsidy scheme, introduced last July, has so far reached fewer than 18 000 mortgages, a fraction of the market.

Looking ahead to 2026

Industry voices diverge. Estate portals forecast a softer 3-4 % national rise as pent-up supply reaches completion in Braga and the Algarve. Developers counter that labour bottlenecks and building-material costs, which increased 9 % last year, will keep asking prices firm. Meanwhile, the executive’s pledge to accelerate licensing via a one-stop digital platform may only lift output in 2027. For Portuguese families weighing whether to buy or rent in 2026, the consensus boils down to timing cash flow: if interest-rate cuts materialise by summer, competition could intensify, making today’s pricey listings look, paradoxically, like tomorrow’s bargains.