Housing in Portugal: Rents Are Falling, But the Crisis Is Far from Over

Rents in Portugal fell 1.4 percent in February compared with the same month last year, marking a continued slowdown that the government has been quick to claim as evidence its policies are working. Housing Minister Miguel Pinto Luz told parliament this week that the sector is showing "signs of recovery," pointing to increased supply and a deceleration in rent growth — from 5 percent to just 1 percent in Lisbon.

The numbers tell a more complicated story.

The Good News

There are genuine bright spots. Construction investment has risen 5.5 percent, reaching 28 billion euros. The government's planned reduction in personal income tax on rental income — from 25 percent to 10 percent — is expected to incentivise more landlords to put properties on the market. And average asking rents have dipped by around 2 percent nationally, the first meaningful decline in years.

Outside Lisbon and Porto, 20 of the 50 most-searched municipalities now offer rents below 1,000 euros per month, suggesting that the market outside major urban centres may be stabilising.

The Bad News

For anyone trying to buy rather than rent, the picture is grimmer. Data from the Bank of Portugal shows that young adults aged 18 to 35 accounted for 58 percent of all new mortgage contracts in 2025 — an 11-point jump from the previous year. That might sound positive, but it comes against a backdrop of rising Euribor rates driven by the Middle East energy crisis. Mortgage payments are set to increase by 13 to 23 euros per month starting in April, and analysts warn the ECB may raise rates twice this year if the conflict persists.

Meanwhile, wealthy foreign buyers continue to reshape the top end of the market. A widely cited investigation this week found that purchases of second homes by foreigners now represent 45 percent of foreign property transactions, with Americans, British, and Brazilians topping the list. In Cascais, the price per square metre rose from 6,570 euros to 7,309 euros between March 2025 and January 2026.

The Protests

In Porto on Thursday, demonstrators marched demanding an end to evictions without housing alternatives, rent regulation, limits on mortgage payments to 35 percent of household income, and the conversion of empty public buildings into affordable housing. The government's recent proposal to speed up eviction proceedings for non-payment has drawn sharp criticism from housing rights organisations, who argue that faster evictions without alternatives will simply push vulnerable tenants onto the street.

The View from the Ground

For the growing community of foreign residents in Portugal, the housing market remains the single biggest source of frustration and anxiety. Whether you arrived five years ago on a D7 visa or are a recent hire at a Lisbon tech company, the fundamental challenge is the same: too many people chasing too few homes in the places where jobs and services actually exist.

The government insists the tide is turning. Tenants and buyers, for the most part, are still waiting to feel it.