Portugal’s Housing Values Surge Past €2,000/m²: Sellers Cheer, Buyers Crunch Numbers

Portugal’s housing market has crossed another psychological barrier: for the first time, banks now value an average square metre of residential property above €2,000, a milestone that sharpens both optimism among sellers and anxiety among buyers. Fresh figures from the national statistics office show that October saw yet another double-digit annual surge, stretching an already tight market and rekindling the debate over whether household income can keep pace.

Reading the numbers behind the record

October’s median bank appraisal reached €2,025 per m², an all-time high since the data series began in 2011. The jump represents 17.7 % growth compared with the same month last year and an extra €30 relative to September. Roughly 33,900 valuations fed into the calculation. Although that sample was slightly larger than a month earlier, it remained lower than a year ago, hinting that some families may be hesitating in the face of rising prices. Yet the headline figure still climbed, extending a sequence of 23 consecutive month-on-month increases.

Apartments pull away, houses lag

The gulf between multifamily units and standalone homes continues to widen. Bank experts now place the typical apartment at €2,345 per m², translating into an annual leap of more than 22 %. Within that segment, one-bedroom flats breached €3,000 per m² for the first time, while the far more common two- and three-bedroom models reached €2,425 and €2,010 respectively. Detached houses, valued at €1,472 per m², rose at a slower 11.8 % pace, showing that plots of land outside major hubs are not appreciating as feverishly as vertical properties in dense urban cores.

Lisbon, Algarve and an emerging Setúbal

Regional patterns remain stark. Greater Lisbon keeps the crown with a median of €3,058 per m² for apartments and €2,711 per m² for houses, while the Algarve follows closely, buoyed by international demand. A more surprising standout is the Setúbal Peninsula, which posted the fastest annual growth—nearly 30 % for apartments and 26.7 % across all typologies—underscoring the spill-over effect from the capital. At the opposite end, the Alentejo registered the only monthly dip, both in overall valuations and specifically in flats, suggesting local incomes are pushing back against further escalation. The Centre remains the country’s bargain basement, where apartments still hover around €1,533 per m².

Why appraisals keep climbing

Several forces are colliding. A chronic shortage of new housing permits is pushing supply well below demographic demand, while steady inflows of foreign capital—some chasing holiday rentals, others seeking Portugal’s tax incentives—add extra pressure. Mortgage rates, though higher than in the 2020 trough, have not risen enough to cool interest, and unemployment remains near historical lows. Economists also point to construction costs, up by double digits since the pandemic, as another driver baked into valuations.

Credit puzzle for would-be owners

A higher appraisal can theoretically unlock a larger loan-to-value envelope because banks typically finance up to 90 % of whichever is lower: purchase price or appraisal. In practice, lenders are screening applications more tightly, mindful of household debt-service ratios that regulators want capped near one-third of net income. So while a bigger valuation reduces the up-front deposit, it can simultaneously inflate the monthly instalment, especially with mortgage maturities rarely allowed beyond 30 years under current Bank of Portugal guidance. For many families, that means the dream of ownership still hinges on wage growth catching up.

Conservative appraisers vs market reality

Industry insiders note that bank assessments consistently trail asking prices by 10–20 % in Lisbon, Porto and premium coastal strips. This deliberate buffer gives lenders some cushion if the market cools, but it also means that even record-breaking appraisals can leave buyers scrambling to fill a cash gap. Agents say the mismatch is one reason private sellers often refuse to budge on negotiations—they know the official estimate will almost certainly come in lower, so they anchor high.

What to watch next

With the government revisiting its controversial More Housing package and local authorities debating fresh property taxes aimed at curbing short-term rentals, the policy environment could start to shape pricing as much as pure supply-demand mechanics. Analysts caution that the twentieth-straight month of double-digit growth is not sustainable indefinitely, yet few foresee an abrupt reversal while immigration remains robust and tourism earnings hit records. November’s data, due in late December, will reveal whether the upward march is finally slowing—or merely pausing before another climb.