Portugal’s real estate market faces significant challenges, especially in its rental sector, according to a newly published OECD Economic Survey on the country’s performance and prospects. The report, released today, points to deep-seated issues in housing supply, lagging rental market development, and rising foreign investment fueling demand.
Fragmented and Underdeveloped Rental Market
The OECD highlights that only 12% of Portuguese households report living in rented accommodation—a strikingly low figure among developed countries. The situation is further complicated by widespread informality, with up to 60% of rentals estimated to be unregistered and operated outside official channels.
The organization criticizes previous efforts to improve rental supply as being undermined by persistent regulatory fragmentation, rent regulation (especially the ongoing freeze of pre-1990 rents), and policy uncertainty that discourages both national and international investors.
Energy Efficiency and Housing Quality Concerns
Despite Portugal’s generally mild climate, the OECD survey warns that poor housing quality exacerbates energy poverty, impacting health and overall well-being. Many homes are inefficient, meaning they require more energy to maintain comfortable living conditions—a stubborn problem for many Portuguese families.
Delays and Costs Hamper New Construction
Another barrier to market normalization is the slow and complex permitting process for new construction. The report documents a wide gap in waiting times for building permits: 272 days in Funchal, but up to 548 days in Coimbra, 545 days in Lisbon, and 453 days in Porto. These bureaucratic hurdles, along with land price hikes and labor shortages, have contributed to weak housing investment over recent decades.
High Vacancy and Second-Home Rates
Paradoxically, Portugal has one of the highest housing stocks per capita in the OECD but struggles with inefficiency. A significant share of homes sit vacant—about 12% as of 2021—or are used as holiday homes (19%). Lisbon’s urban center had nearly 15% of properties empty and another 9% registered as holiday lets. Such imbalances put additional strain on the long-term rental market and overall housing affordability.
Limited Social Housing, Increasing Demand
Public investment in social housing remains among the lowest in the OECD—just 0.1% of GDP in 2022. This comes as household numbers soared by 13% from 2010 to 2023, mainly due to shrinking household sizes and demographic shifts.
Surging Foreign and Tourist Demand
Lower property prices by international standards have attracted foreign buyers, who accounted for about 10% of real estate transaction value between 2019 and 2024. These purchases tend to focus on higher-end properties, buoyed by Portugal’s “gold” visa program. At the same time, tourism growth and the rapid expansion of short-term rental platforms like Airbnb have intensified supply pressures: Lisbon alone saw Airbnb listings increase from 18,277 in September 2019 to 21,181 by December 2024, now constituting 7.6% of its housing stock.
Bottom Line:
The OECD urges Portugal to introduce concrete policy reforms that can streamline regulations, accelerate permitting, boost affordable rental supply, and improve housing quality—measures seen as essential to ease the country’s housing crisis and ensure decent living conditions for its residents.
