Portugal’s Rent Price Growth May Be Cooling Down

Snapshot of a Cooling Yet Costly Rental Market

Portugal’s rental market is finally losing some heat, yet tenants are still paying more each month. June’s national median stood at €16.7 per square metre, only a touch below May, signalling that while momentum is slowing, affordability remains elusive for many newcomers and long-time residents alike.

National Trends: Growth Softens, Prices Edge Higher

Fresh figures from the Idealista price index show that rents grew 3.5 % year-on-year in June, down from the 4.4 % annual jump recorded one month earlier. On a quarterly basis prices were up 1.1 %, but a rare 0.3 % slip between May and June hints that landlords may be bumping up against what tenants can bear. Analysts attribute the softer pace to a modest rise in available listings and to the first impacts of the government’s “Mais Habitação” package, even though supply still trails demand in most metropolitan areas.

Winners, Losers and the Usual Suspects

Price movements remain uneven across the country. Coimbra led the pack with a blazing 21 % annual surge, a reflection of tight stock in a popular university town increasingly favoured by digital nomads. Faro, Setúbal and Viana do Castelo each posted double-digit gains, while Lisbon and Porto managed comparatively tame rises of 3.1 % and 2.7 %, respectively. Only Aveiro and Castelo Branco registered mild declines, suggesting that smaller inland cities may be where negotiations tilt in favour of renters for the first time in years.

Where Rents Sit Today

Even after a slowdown, the capital is still in a league of its own. Lisbon averaged roughly €20 per square metre in June, which translates to about €1,400 a month for a typical 70 m² flat. Porto followed at €16–18 €/m², and the island capital of Funchal held steady near €15 €/m². Budget hunters continue to find the best deals in Castelo Branco, Viseu and Santarém, all hovering under €9 €/m², but limited public transport links and fewer English-speaking services can be trade-offs for expatriates.

The Policy Backdrop: Caps, Incentives and Paperwork

Authorities have rolled out a series of measures aimed at cooling prices without scaring off landlords. For 2025, annual rent updates on ongoing contracts are capped at 2.16 %, far below last year’s 6.94 %. From August, tenants will be able to report their lease directly to the tax office, a move designed to bring more agreements out of the shadows and ensure eligibility for state subsidies. Meanwhile, owners who shift short-term lets to long-term housing enjoy tax holidays until 2029, though industry groups say the carrot has so far delivered only a trickle of new listings.

Data Cross-Check: National Statistics vs. Market Portals

Idealista’s asking-price numbers differ from the rents actually paid on new contracts tracked by the national statistics institute (INE). INE’s first-quarter report put the median at €8.22 €/m², up 10 % year-on-year but well below portal figures because it captures a broader mix of locations and older leases. Still, both sources agree on one thing: growth has slowed markedly in Lisbon and Porto, with contracted rents in the capital dipping 1.5 % during the first three months of 2025.

Takeaways for Foreign Residents

For anyone planning a move, the market is shifting from frenetic to merely competitive. Expect to negotiate more assertively outside Lisbon’s historic centre, where supply has ticked up thanks to new build-to-rent projects and tax-favoured conversions of holiday lets. Energy-efficient properties command modest premiums but can cut monthly utility bills—an important consideration as power prices remain high. Finally, keep an eye on local municipalities: some, such as Braga and Leiria, have adopted extended property-tax exemptions that can encourage landlords to price units more keenly.

What Lies Ahead

Most economists foresee single-digit rent increases for the rest of 2025, provided the new fiscal incentives convince additional owners to enter the long-term market. Yet with net inward migration still robust and mortgage costs elevated, demand is unlikely to fade. In short, the golden rule endures: act quickly when the right flat appears, but bargain harder than you would have six months ago.