Portugal’s Home Prices Top €3,019/m², Growth to Slow in 2026

Portugal’s housing market has closed the year with prices at fresh highs, extending a multi-year rally that has tested the budgets of families from Braga to Faro. Advertised sale values jumped 6.8 % year-on-year in December, pushing the nationwide median to €3,019 per m². While analysts still see momentum carrying into early 2026, most now expect the pace to ease to a more sustainable cruise speed.

Quick view

• €3,019 /m² – new national median for listings

• Santarém +27.1 % – fastest-rising district capital in 2025

• Lisboa €5,995 /m² – remains the priciest market

• 1 single drop – Vila Real slipped -6.1 %

• Forecast for 2026: +2 % to +4 % growth, milder but still positive

A new record, explained

The current high watermark is the culmination of persistent demand, tight supply, and cheaper mortgages. Lower Euribor fixings throughout 2025 trimmed monthly instalments just enough to lure additional buyers, even as construction bottlenecks kept fresh stock from reaching the market. The national economy, projected to expand about 1.9 % next year, provided further tailwind, reinforcing real-estate’s reputation as a safe harbour for excess savings.

Investors—both local and foreign—continued to view bricks and mortar as a hedge against inflation, particularly after returns on bank deposits remained modest. Simultaneously, incentives such as the IMT waiver for first-time buyers under 35 helped unlock dormant demand in the millennial age bracket.

A map of winners and losers

Not all post-codes moved in unison. Santarém proved the outlier, recording an eye-catching 27.1 % leap and confirming the trend of mid-sized inland cities stealing the limelight from the coastal giants. Beja (+20 %) and Setúbal (+17.2 %) rounded out the podium, while Castelo Branco, Guarda and Portalegre each landed gains above 14 %.

At the other end, Lisboa and Porto posted comparatively tame increases of 4.8 %, indicating that affordability ceilings may finally be acting as a natural brake. The sole capital in negative territory was Vila Real (-6.1 %), where an uptick in new-build supply coincided with softer demand.

Why Santarém is running hot

Several factors converged to propel Santarém to the top of the appreciation table:

Spill-over from Lisbon’s overheated market, sending commuters upriver in search of space and lower prices.

Limited inventory; a modest pipeline of new projects meant extra bidders chased the same listings.

Improved rail links cutting travel time to the capital to roughly one hour.

A wave of young buyers benefiting from the state-backed guarantee scheme, particularly active in properties below €200,000.

The result is a median price that, although still modest by Lisbon standards (€1,703 /m²), is now marching upward faster than anywhere else in mainland Portugal.

Can your wallet catch a break in 2026?

Most research houses surveyed by Idealista and Confidencial Imobiliário anticipate a marked slowdown to 2-4 % growth this year. Three elements underpin the expectation:• Fresh supply: multiple public-land tenders, especially in the Lisbon Metropolitan Area, are expected to yield affordable units from late 2026 onwards.• Mortgage dynamics: even though Euribor is likely to dip further, banks are tightening spreads, limiting overall purchasing power gains.• Cost-of-living squeeze: wage growth is running behind headline inflation, dampening households’ ability to stretch bids.

Yet forecasters warn that any relief will be uneven. Tourism-heavy zones like the Algarve or the islands may continue to command premiums, while mid-tier inland districts look set for another year of double-digit jumps—albeit from a lower base.

What Lisbon and Porto still tell us

Lisbon’s median of €5,995 /m² and Porto’s €3,885 /m² underscore an uncomfortable truth: the two biggest cities remain out of reach for many local wage earners. Rents mirror the pressure, climbing roughly 4 % nationwide last year and more in the prime neighbourhoods of both metros.

In Porto, the local council’s attempt to ring-fence part of the historic centre for long-term residents has so far produced modest results, as investors channel capital toward short-lets outside the restricted zones. Lisbon’s new administration, meanwhile, has signalled it will streamline planning approvals in 2026, betting that faster permits can tame prices without heavy-handed caps.

The policy cocktail shaping the market

Government and regulators spent much of 2025 rolling out measures aimed at cooling excessive speculation while nurturing supply:• IVA cut to 6 % on construction up to €648,000—in force until 2029.• Higher IMT rates for non-resident buyers, except emigrants.• IRS deductions expanded for tenants and tax breaks for landlords offering “renda moderada”.• Bank of Portugal’s 4 % systemic risk buffer maintained, obliging lenders to hold additional capital against mortgage portfolios.• New scrutiny of non-performing loan sales to prevent aggressive collection practices.

Market players expect the supply-side incentives to trigger a tangible impact only toward the end of 2026. Until then, constrained stock and a still-healthy economy are likely to keep prices elevated relative to incomes.

What it means for buyers and renters

For would-be homeowners, the coming months could offer a narrow window to negotiate before pent-up demand revives in spring. Securing a fixed-rate mortgage while Euribor trends lower may provide insulation against future volatility.

Tenants face a different challenge: landlords remain in a strong bargaining position, and lease renewals in Lisbon and Porto regularly carry increases above the official 7.62 % cap, often disguised through contract rewrites. Exploring secondary cities or interior towns—many now connected by upgraded rail and fibre networks—can yield monthly savings north of 35 %.

Investors, finally, must weigh the rising IMI base value—set to move to €712.5 /m²—against still-robust capital-appreciation prospects, particularly in the Azores, Madeira and fast-gentrifying pockets of Setúbal.

In short, Portugal’s property ladder remains steep, but 2026 might be the first year in a while when the rungs stop drifting further apart. Whether that respite is enough to restore genuine affordability will depend on how swiftly cranes appear on the skyline—and how effectively policy can keep them there.