Portugal Real Estate: Renting Costs 21% More Than Buying

Discover how the Portugal real estate market shows renting a two-bedroom house is 21% pricier than buying, as mortgage rates continue to fall.

In the wake of a prolonged period characterized by elevated interest rates, the landscape of mortgage financing has witnessed a notable decline over the past several months. This downward trend has, in turn, alleviated the financial burden associated with new mortgage contracts. Remarkably, current data reveals that the cost of renting a two-bedroom residence has escalated to a staggering 21% above the monthly mortgage payment required to acquire the same property.

However, the prospect of homeownership is not without its challenges. To secure a mortgage in the prevailing economic climate, prospective buyers must amass an average savings of €32,585, as elucidated in a recent analysis by idealista. This requisite capital serves as a down payment, a critical component in the mortgage approval process. In Portugal, the median rental price for a two-bedroom apartment stands at €1,026 per month, juxtaposed against a projected monthly mortgage payment of €1,001 for the same property in the second quarter of 2024. Thus, the stark reality emerges: renting a home incurs a cost that is 21% higher than the corresponding mortgage payment.

Despite this financial disparity, many families find themselves ensnared in a web of high rents, stagnant wages, job insecurity, and an overall elevated cost of living, which collectively hinder their ability to save for a home. The current financial milieu suggests that the likelihood of the banking sector relaxing its stringent risk criteria remains slim. Consequently, the path to improved housing accessibility appears to hinge on the implementation of policies designed to exponentially increase the supply of rental and purchase properties, thereby fostering a more balanced and healthy real estate market.

A closer examination of district capitals reveals pronounced variances in the rental versus mortgage payment equation. Notably, Santarém emerges as the most pronounced example, where the average monthly rent of €797 eclipses the mortgage payment of €429 by an astonishing 86%. Additionally, eight other cities exhibit a similar trend, with renting proving more costly than mortgage payments: Guarda (75% more expensive), Castelo Branco (58%), Setúbal (23%), Évora (22%), Portalegre (21%), Bragança (4%), Viana do Castelo (2%), and Vila Real (2%). Conversely, in Faro, the rental market offers a reprieve, with rents being 32% lower than mortgage payments. Other cities where renting is more economically viable than mortgage payments include Aveiro (-21%), Ponta Delgada (-13%), Lisbon (-12%), Viseu (-11%), Leiria (-11%), Funchal (-10%), Braga (-7%), and Coimbra (-2%). In Porto, the disparity is negligible, with a mere -0.4% difference.

When scrutinizing the broader landscape of districts and islands, the discrepancies between rental costs and monthly mortgage payments become even more pronounced. In Guarda, for instance, renting is a staggering twofold more expensive than mortgage payments. Following closely are Portalegre (78% more expensive), Évora (75%), Beja (72%), Vila Real (60%), Castelo Branco (59%), Santarém (46%), Bragança (43%), Viseu (35%), and Coimbra (23%). Below the national median, one finds Viana do Castelo (20%), Setúbal (15%), Lisbon (14%), Leiria (11%), the island of São Miguel (10%), Porto (6%), and Braga (5%).

In a curious twist, Faro stands out as a beacon of affordability, with rents being 21% cheaper than the corresponding mortgage payments, trailed by the island of Madeira (-10%) and Aveiro (-9%), according to the insightful analysis provided by idealista. Thus, the intricate tapestry of Portugal real estate market continues to unfold, revealing both opportunities and challenges for prospective homeowners and renters alike.