The real estate industry in Portugal has shown remarkable resilience compared to other economic sectors. Despite a decline in turnover of up to 70% in some industries, as a consequence of the recent health & economic crisis, the Portuguese real estate market has experienced steady growth. Sales have exceeded the previous years, and housing prices have continued to rise since 2015, according to the Portuguese National Statistics Institute (INE).
The median value per square metre has also increased, reaching the highest value in October 2021, which is already 17% higher than in October 2019. However, there are concerns about the sustainability of this growth, prompting questions regarding the foundation of these valuations. In this article we will discuss further the housing shortage crisis in Portugal, and why the country is a prominent market for profitable foreign investment opportunities.
The housing crisis in Portugal - current market situation
Eurostat has reported that housing prices in Portugal have surged by over 80% in the past twelve years, surpassing the European Union's average. The escalation is more severe in major cities like Porto and Lisbon, where both property purchase and rental values have increased significantly in recent years. The primary factor driving this increase is the insufficient supply to meet the high demand. Experts in the industry attribute this situation to the fact that only one house has been constructed for every ten sold since 2018.
Recent data provided by INE also confirms the increase in house prices during the third quarter of 2022. According to the institute, the median house price for dwelling sales in Portugal was €1,492 per square meter, representing a 13.5% year-on-year growth rate - still, the amount is lower than when compared to the previous quarter's 17.8% growth rate. The Algarve, the great Lisbon, and the great Porto showcase the highest median house prices. In the third quarter of 2022, housing prices decelerated in 12 of the 24 municipalities with more than 100,000 inhabitants, including Guimarães, Porto, Cascais, Leiria, Loures, and Braga, which had more accentuated decreases than the country average. Lisbon experienced a slight acceleration in housing price growth.
"Mais Habitação" - political propaganda or actual solution for housing shortage?
On the 16th of February, the Portuguese government announced the pack “Mais Habitação” a programme created to fight real estate speculation and high increases in rents. The proposition will be in public discussion until the 24th of March, before being sent to the Portuguese Parliament, although it has already faced several criticisms from politicians, public opinion, and specialized entities.
One of the biggest critics of the new habitation programme presented by the executive is Lisbon's mayor Carlos Moedas. The politician expressed his disapproval of the housing shortage announcements, criticizing the government's approach and stating that it was "very serious" that local authorities were not consulted. He went on to express his opposition to what he referred to as "the posture of imposition and prohibition" arguing that such measures should not be imposed by the State. According to the mayor, municipalities should address the housing issue and the solution to the problem cannot be achieved through imposition, prohibition, or obligation.
The President of the Madeira Regional Government, Miguel Albuquerque, has also criticised part of the new programme, suggesting a harmonious approach to the discontinuation of the Golden Visa Programme in Portugal. Miguel argues that not all regions and municipalities are encountering problems of saturation and high prices experienced by Lisbon and Porto. He emphasizes the importance of focusing on the areas that require investment, growth, and development, both in the real estate sector and other industries.
Also criticising the new housing plan, the Lisbon Property Owners Association (ALP) has cautioned that the proposed measures by the Executive could lead to a significant allocation of resources towards legal battles, and potentially even bring an end to lease contract renewals and evictions. The ALP has stated that the government's plans are unconstitutional and may create a sense of alarm among property owners.
Portugal Golden Visa - is it righteously blamed for the housing crisis?
Within the "Mais Habitação" pack, the Portuguese government announced the end of the Golden Visa Programme in Portugal. Active since October 2012, the Executive government in Portugal accused the programme of being responsible for speculation and the housing crises the country is facing currently. However, the Golden Visa Programme is a positive economic tool that already attracted more than 6 billion euros to the country’s economy. The housing crisis in Portugal stands as a complex issue that affects the Portuguese economy and population, especially in major cities like Porto and Lisbon. The high demand for housing - generated by an enormous increase in tourism, coupled with a lack of residential real estate supply, has driven prices up significantly. While the real estate industry has shown extraordinary strength and stability, the Portuguese Government target the Golden Visa as the enemy in this battle, even though the data shows different. The "Mais Habitação" pack does not significantly face the real problem; instead, it threatens new foreign investments in the country in real estate sectors not related to the main problem, the residential housing crisis. While the proposition of ending the Golden Visa is still not fully approved by the Parliament, new investments through the programme can be made in Portugal's major cities, helping the parishes to refurbish their ageing infrastructure.
Due to the good headlines in the press, the Golden Visa Programme became an easy target to take the blame for the increase in property prices and the housing crises. The reality, though, shows otherwise, with the property prices shooting up in Lisbon being directly connected to the tourism industry. The enormous increase in visitors Portugal received in the past decades, from 13.1 million arrivals in tourist accommodation in 2006, to 27.1 million in 2019 (numbers pre-COVID), shows this impact.
The preliminary data released on 31 January 2023 by the National Institute of Statistics shows that tourist accommodation establishments registered 26.5 million guests, approaching for the first time the numbers in 2019. The United Kingdom remained the outbound market in 2022, accounting for 19.3% of overnight stays, almost tripling compared to 2021 (+191.9%; and -4.0% compared to 2019). German markets followed with 11.5%, Spanish (with 10.8%) and French closing the list with 9.3%. The most significant evolution registered stays with the North American market, which increased by 327.4% when compared to 2021 and +26.9% compared to 2019.
Although the tourism industry has a great impact on house pricing in Portugal, the government cannot abdicate this incoming. In 2019, the total contribution of travel and tourism to the gross domestic product in Portugal was 41.4 billion U.S. dollars, and in 2021 it came to 25.5 (economic recovery after the lockdown in 2020 due to the pandemic. The contribution of travel and tourism to the GDP of Portugal increased from 9.4 % in 1999 to 19.1 % in 2018 growing at an average annual rate of 4.03%. This increase in the Tourism Industry affected mostly prices in Lisbon, Porto and the Algarve, making the Portuguese Real Estate market a profitable investment.
Portugal Homes - Project Development & Construction
Understanding the investment opportunities in the country, Portugal Homes created the Project Development & Construction department for our investors who seek to purchase and renovate buildings for investment purposes. By offering a complete service, we ensure our clients have safety and profit while proceeding with rehabilitation. From the first regulations to the end of the renovation process, Portugal Homes grants a smooth process to investors. Over the past five years, the Project Development & Construction department has completed ten projects, including residential, commercial, and touristic properties such as hotels and resorts in Portugal.
In 2022-2023, our major accomplishments are the rehabilitation and construction of the Portimão Hotel, a seven-floor building, with 2956 sqm and fully licenced under the new 2022 regulations for the Algarve. The 280,000€ investment grants a freehold, a guaranteed 5% net yield for the first 5 years, a guaranteed buyback and a fully furnished space.
Another development exclusive from Portugal Homes is the Fonte Santa four-star resort in the Algarve's Golden Triangle; a renowned area for its excellent golf courses and luxurious holiday spas and Michelin-starred restaurants. The Fonte Santa offers a 5% Guaranteed return for 5 years, freehold and a guaranteed buyback. It comprises 122 units, swimming pools, a pool bar, gardens, a tennis and paddle court, and extensive amenities, and is set to be fully completed by the end of 2024.
In February 2023, Portugal Homes launched a new development in Lisbon City Centre: Mátria co-working space. This incredible opportunity in the Centre of the Portuguese Capital features a commercial space with 50 units equipped with amenities such as a coffee shop, a gym, private meeting rooms, and locker storage areas. It is an ideal workplace and meeting point for digital nomads and startup entrepreneurs in Lisbon, Portugal. Golden Visa investment of €352,100, offering 4% guaranteed yield options, a guaranteed buyback and a 1/65 share of the building.
Portugal Homes as part of the solution
The housing shortage crisis in Portugal is a complex problem that requires long-term solutions, being crucial for the country to invest in its residential infrastructure to address the situation. Portugal has a history of being a prominent real estate market for foreign investment. This is the path the country should follow if it wants to renew its infrastructure and solve the shortage of houses. By comprehending this situation, Portugal Homes maintain its development projects, bringing modernity to facilities in Lisbon, Porto and the Algarve. Constructing a better Portugal for all citizens, expats and residents living here is part of our goal as a company.
Read more about Real Estate Investment Options:
350K Golden Visa in Portugal
500K Golden Visa in Portugal
Lisbon is among the best for real estate investments in Europe