House prices in Portugal are projected to rise slowly from 2025 to 2027, despite falling mortgage interest rates. Explore the Portugal’s real estate market trends.
In the realm of Portuguese real estate, the trajectory of house prices is poised to ascend, albeit at a more languid pace than in previous years. Projections indicate that from 2025 to 2027, we may witness a deceleration in the appreciation of property values, despite the anticipated decline in mortgage interest rates that has been a hallmark of recent economic trends.
The resurgence in home purchasing activity is expected to be fueled not only by the diminishing costs of mortgage financing but also by unprecedented employment levels across various European economies, a rebound in household incomes, a reduction in consumer debt, and a burgeoning population, particularly in urban locales. However, this robust demand is likely to encounter significant headwinds due to a persistent shortage of housing stock. The sluggish pace of new construction, hampered by labor shortages, bureaucratic red tape, and the protracted timelines associated with traditional building methods, continues to exacerbate the supply-demand imbalance.
In this context, the financial rating agency S&P has projected that house prices will continue to rise at an average rate of 3% between 2025 and 2027. This marks a notable deceleration compared to the 9% surge observed in 2024. Specifically, forecasts suggest an increase of merely 4.5% this year, followed by 3.6% in 2026 and 3.2% in 2027. This trend can be attributed to the constraining effect of the housing shortage on transaction volumes, as elucidated by various real estate professionals in discussions with idealista.
Conversely, there is a possibility of achieving a more equitable balance between housing demand and supply across several European nations, which could mitigate the steep price escalations that have characterized recent years. Analysts at S&P have noted that mortgage rates continued to ease during the fourth quarter of 2024, while building regulations have tightened to align with energy efficiency mandates, thereby incentivizing new residential construction. These dynamics are expected to exert a lasting influence on demand over the forthcoming two years, even as supply constraints are anticipated to gradually alleviate.
The decline in mortgage interest rates has emerged as a common thread among the 11 European countries analyzed, stimulating home purchases. However, certain nations, including Portugal, Italy, the Netherlands, Spain, and Ireland, experienced more pronounced increases in property prices during 2024. In Portugal, this phenomenon can be traced back to a resurgence in building permits, which have reached levels not seen since 2009. While this development is encouraging, the housing supply remains woefully inadequate to satisfy the burgeoning demand, which has been exacerbated not only by falling interest rates but also by the exemption of IMT for younger buyers.
Looking ahead, demand is poised for further escalation, particularly with the introduction of public guarantees on real estate credit aimed at individuals up to 35 years of age. Consequently, nominal house prices in Portugal have surged from 7.8% in 2023 to an impressive 9% in 2024, underscoring the complexities and challenges that lie ahead in the ever-evolving landscape of real estate.
