Portugal Must Triple Housing Construction to Close 300,000-Home Deficit

Portugal faces a structural housing deficit of approximately 300,000 homes, accumulated over the past decade, and the country will need to triple its annual production from around 20,000 to at least 70,000 units per year by 2029 to close the gap. That was the stark message delivered by the Portuguese Association of Real Estate Developers and Investors (APPII) during a parliamentary hearing this week before the Infrastructure, Mobility and Housing Committee.

The numbers paint a picture of a market under extraordinary strain. House prices have surged 78 percent between 2012 and 2021, with further increases of 9 percent in 2024 and 16.3 percent in 2025. In Lisbon, more than half of the homes currently listed for sale carry price tags above 500,000 euros, placing them well out of reach for the average Portuguese household, let alone newcomers trying to establish themselves in the capital.

The supply side of the equation is equally troubling. In 2024, Portugal sold 155,000 homes but licensed only about 35,000 new builds, a volume less than half of what was recorded two decades ago. APPII president Hugo Santos Ferreira placed the blame squarely on Portugal's notoriously slow licensing process. Each year of delay in obtaining a construction licence can add roughly 500 euros per square metre to the final cost, meaning a 75-square-metre apartment could become 37,500 euros more expensive simply because of bureaucratic inertia.

The association welcomed two legislative proposals approved on 20 February, one introducing tax relief measures to encourage housing supply, the other streamlining licensing, urbanisation, and urban rehabilitation. Both passed with support from the PSD, CDS-PP, and IL, though the opposition's abstentions suggest the political consensus around housing reform remains fragile.

For the hundreds of thousands of foreign residents who have made Portugal home in recent years, the housing squeeze is not an abstract policy debate. It shapes daily life: the difficulty of finding a rental in Lisbon or Porto at a reasonable price, the competition with short-term tourist lettings, the challenge of putting down roots in a market where demand vastly outstrips supply. APPII argues that institutional investors need "objective criteria, contractual stability, and free transferability of investments" to commit to build-to-rent projects, the kind of large-scale rental housing that could ease pressure across the market.

But warnings accompanied the optimism. APPII cautioned that new administrative steps or weakening mechanisms such as tacit approval could increase uncertainty and discourage investment, precisely the opposite of what the sector needs. "The discussion about housing has to start with licensing," Santos Ferreira said. "Without predictability, without legal certainty, and without an effective reduction in bureaucracy, we will continue to have projects stalled for years and houses that do not reach the market."

Whether Portugal can actually deliver on a tripling of construction output remains an open question. The construction sector itself faces labour shortages, and the recent storm season has diverted significant resources toward rebuilding. But the direction is clear: without a dramatic acceleration in homebuilding, the affordability crisis will only deepen.