The Portuguese government’s recent efforts to curb foreign investment in the housing market appear to be having little effect so far, as demand continues to drive price increases in Lisbon and elsewhere.
Housing Shortage Persists Despite Policy Changes
The end of the “golden visa” program and Non-Habitual Resident (NHR) tax incentives were intended to reduce speculative buying by wealthy foreigners and cool Portugal’s red-hot housing market.
However, real estate professionals say these changes have not significantly dampened interest.
“Despite these changes, we have seen an increase in the number of requests for information from our foreign clients,” said Paulo Silva, head of Savills Portugal. “There simply aren’t enough houses to meet demand, even with the slowdown in sales.”
This persistent housing shortage means prices continue their upward march, putting home ownership increasingly out of reach for many Portuguese citizens.
Lisbon Prices Hit New Highs
In Lisbon, the lack of supply to meet demand has pushed prices to new heights this year.
According to real estate portal Idealista, the average cost per square meter for homes in Lisbon hit a new record of €5,426 in November, a 5.8% increase versus last year.
“This is the second biggest increase in Europe, after Athens [+11.8%], the hottest real estate market among major European cities,” noted Idealista.
Following Lisbon, prices rose 5% in Stockholm, while Madrid and Milan saw steady growth above 3%.
By contrast, prices fell 6.1% in Paris and nearly 3% in Berlin over the same period.
Even after years of rapid growth, Lisbon’s prices remain around half those in other major European hubs like Paris and Zurich.
This relative affordability for foreign buyers, combined with Portugal’s sunny climate and relaxed lifestyle, continues to power demand.
Locals Priced Out of Market
For most citizens, however, Lisbon’s housing market is now out of reach despite their country’s lower average wages compared to Western Europe.
The current shortage of affordable rentals forces many to live in substandard housing on the outskirts of the city.
This growing inequality has sparked public protests over the housing crisis in Lisbon and other cities this year.
In response, Prime Minister António Costa has pledged more affordable housing and an end to programs fueling speculation.
NHR Regime, Golden Visas Phased Out
The NHR tax scheme, introduced after Portugal’s bailout ended in 2014, allowed foreigners moving to the country to pay reduced rates on income for 10 years.
The golden visa program granted residency permits to foreign nationals buying property worth at least €500,000.
The government announced the gradual phase-out of these programs earlier this year, hoping to cool housing demand.
The cited need to remedy the housing crisis was behind these decisions.
However, interest from abroad persists, suggesting Portugal remains an attractive destination regardless of the incentives.
Many predict the country’s lifestyle, climate, and relatively low prices will continue drawing foreign buyers.
Housing Market Faces Uncertainty
Looking ahead, it is unclear whether Lisbon’s housing boom will be sustainable.
While today’s price growth mirrors much of Europe, concerns exist over a potential bust down the line.
Portugal’s central bank recently told lenders to set aside more provisions for possible housing market losses.
This cautionary move came after a 22% year-on-year drop in national home sales in the first half of 2022, per Jones Lang LaSalle data.
With affordability stretched for locals and foreign investor appetite potentially cooling in the years ahead, Lisbon’s record housing prices could face downward pressure.
For now, however, the market retains momentum despite the government's policy shifts.
Impact on Travelers and Immigrants
The persistently high housing costs in Lisbon could influence some foreigners’ decisions on moving to or visiting Portugal.
For European Union (EU) citizens, the lack of affordable long-term accommodation may deter potential residents like families, workers, and students.
The competitive rental market also poses challenges for short-term travelers like digital nomads on extended stays.
Moreover, with property purchases out of reach for many, foreign investors’ appetite could lessen.
However, Portugal remains a top destination for immigrants despite the housing crisis.
The upcoming EU Entry/Exit System (EES) and ETIAS visa waiver for Europe, set to launch in May 2025, are not expected to significantly stem interest.
Barring major policy changes, the country’s benefits like safety, climate, and lifestyle should continue attracting new foreign residents.
However, housing limitations could mean fewer settlements in Lisbon itself.
Housing Shortage Adds Immigration Pressures
The housing crisis spotlights the complex balancing act needed for immigration policy during times of high demand.
While Portugal aims to welcome foreigners to address population declines, resources like housing cannot support unlimited growth.
Some groups like foreign students do not directly increase housing demand.
However, the ongoing influx of new residents enabled by Schengen and the upcoming ETIAS system is contributing to Lisbon’s housing crunch.
Limiting immigration may relieve pressures on the strained housing market.
However, Portugal’s economy and public services need working-age immigrants to fill vacancies and offset an aging citizenry.
Careful management of immigration flows will be required to prevent public backlash while acquiring the new skills and taxpayers the country requires.
The housing crisis shows Portugal must ensure it has adequate infrastructure to integrate rising immigrant numbers in the years ahead.
Lisbon’s Housing Boom May be Near its Peak
Portugal’s recent efforts to discourage foreign real estate investment have not meaningfully slowed the housing frenzy in Lisbon so far.
With demand still outstripping scarce supply, home prices continue rising beyond the means of most citizens.
However, some uncertainty exists over whether current trends will persist amid lower sales.
While government incentives are fading, for now, Lisbon remains a magnet for foreign buyers lured by its culture, climate, and relative affordability.