The European Commission warns that Portuguese homes are now 35% overvalued—higher than anywhere else in the EU. Learn why prices have soared, who’s affected, and what experts say must change.
Portugal’s Housing Market Most Overvalued in EU, Warns European Commission
Portugal has officially become the European Union’s leader in housing overvaluation, with property prices now estimated to be 35% above their real value, according to a new report by the European Commission. This makes Portugal the only EU country to see overvaluation worsen in 2024—a stark warning for both residents and policymakers.
Prices Soar Far Past European Average
The warning from the EU highlights how housing prices in Portugal have not only outstripped local wages but also far exceed the European average. Over the last decade, property values in Portugal skyrocketed by more than 200%—one of the fastest rises in Europe. Even when adjusted for inflation, the increase sits at over 50%, which is double the rate seen across most of the continent.
This surge has been keenly felt by Portuguese families, many of whom now find home ownership, or even affordable renting, almost out of reach. As the report points out, the ratio of house prices to household income is now 20% higher than it was ten years ago—a direct hit to the middle class and younger generations.
Shortage of Housing and the Rise of Tourism to Blame
One of the main factors driving relentless price hikes is a chronic shortage of homes. New construction levels have reached historic lows, largely due to slow permit processes—often exceeding 30 weeks—and heavy bureaucracy. It’s not just red tape: the construction sector itself faces challenges, including low productivity and a lack of skilled workers, which means fewer new homes are being built.
Tourism is another important factor. The boom in short-term rentals and local accommodation platforms like Airbnb has pulled much-needed long-term rental properties off the market. Many owners prefer to rent to tourists for bigger profits, making it harder for local families to find places to live.
Lisbon: A European Capital Where Renting Swallows Incomes
Nowhere are these trends more evident than in Lisbon, where it can take more than 80% of a family’s monthly income to rent a modest two-bedroom apartment in the city center. That’s a steeper burden than in even famously pricey cities like Paris. Such figures illustrate just how acute the housing crisis has become for ordinary Portuguese households.
Renovations Over New Homes: Investment Misses the Mark
Interestingly, although real estate investment has bounced back to levels last seen before the 2008 financial crash, much of this money is going into renovating old buildings, not building new ones. The result? Improved façades, but little real relief for the families desperate for more housing.
Experts Call for Urgent Structural Reforms
The European Commission’s report is unequivocal: Portugal is suffering from deep, structural problems that are stoking runaway prices. These include a shortage of available land, persistent red tape, insufficient skilled labor, and an over-dependence on the tourist trade.
Experts are calling for immediate, coordinated action. To bring the market back into balance, they urge policymakers to simplify the bureaucratic process, incentivize new construction, and prioritize affordable housing for locals over short-term vacation rentals.
Without urgent and lasting reforms, Portugal’s housing market is set to remain among the most expensive and least accessible in Europe—shutting out a generation from the dream of owning or even renting their own home.
