Portugal House Prices Set for Another 15% Jump in 2026, Fitch Warns

Foreign Demand and Low Supply Push Affordability Crisis Deeper

Portugal's property market shows no signs of cooling, with global ratings agency Fitch forecasting another 15% price increase in 2026 — following an already record-breaking 18% surge in 2025.

The prediction, delivered during a webinar on Portugal's economic outlook, underscores a growing affordability crisis as wages fail to keep pace with skyrocketing home prices.

"We do not expect a reversal in house prices because supply is limited and demand remains strong — both domestic and international," said Juan Garcia, Senior Director at Fitch.

Why Prices Keep Climbing

Fitch identified three key drivers behind the relentless price growth:

• Strong domestic demand: Portuguese buyers continue competing for limited inventory, particularly in Lisbon, Porto, and the Algarve
• Persistent foreign investment: European and international buyers remain active despite higher prices
• Severely constrained supply: New construction has failed to keep pace with demand, creating intense upward pressure

The imbalance between supply and demand has reached critical levels in Portugal's most sought-after markets. Funchal, in Madeira, now commands average rents of €1,956 per month — making it the most expensive municipality in the country.

By contrast, only a handful of municipalities outside major urban centres still offer rents below €1,000.

Wages Can't Keep Up

While prices surge, nominal wage growth continues to lag far behind. Fitch warned that this gap is making homeownership increasingly unattainable for many Portuguese residents.

"Nominal house price growth is outstripping income growth, making it increasingly difficult for many Portuguese residents to buy property," the report stated.

Despite these affordability concerns, Fitch sees no short-term correction on the horizon.

Banking Sector Remains Stable

One potential bright spot: Portugal's banking sector appears insulated from the risks that typically accompany rapid property price growth.

Julien Grandjean, Director of Bank Ratings at Fitch, noted that the Bank of Portugal enforces strict mortgage lending rules, including:

• Conservative loan-to-value ratios
• Increasing use of fixed and mixed interest rate mortgages
• Rigorous income verification standards

"Lending standards add another layer of prudence to the system," Grandjean said, reducing the risk of a housing bubble fueled by reckless borrowing.

What This Means for Expats

For foreign buyers and expats considering a move to Portugal, Fitch's forecast presents both opportunities and challenges:

Buyers:

• Entry prices will likely be even higher by mid-2026
• Competition from domestic and international buyers remains fierce
• Outside Lisbon and Porto, more affordable options still exist — but are shrinking fast

Investors:

• Continued capital appreciation is likely in the near term
• Rental yields remain strong in high-demand areas
• Long-term hold strategies may benefit from sustained growth

Renters:

• Rental pressure is expected to intensify as homeownership becomes harder
• Lisbon and Porto rents are stabilising, but remain high (Lisbon rent growth slowed from 5% to 1%)
• Smaller cities like Coimbra, Braga, and towns in the Silver Coast offer better value

No Relief in Sight

Portugal's government has introduced various housing measures, including rent controls and incentives for new construction. But supply constraints — driven by labour shortages, bureaucratic delays, and zoning restrictions — continue to hamper progress.

With foreign demand resilient and domestic buyers increasingly priced out, Portugal's property market appears set for another year of strong growth — and deepening inequality.

Key figures from Fitch's forecast:

• 18% house price growth in 2025
• 15% projected increase in 2026
• Strong demand from both domestic and foreign buyers
• Limited supply continues to constrain the market

For anyone planning to buy in Portugal, the message is clear: prices are unlikely to fall anytime soon.