House prices in Portugal - explanations & tips

The housing market in Portugal is known for its great variety and differences. Indeed, the country and its people are not particularly wealthy, but house prices are very much dependent on supply and demand, partly due to the influence of foreigners and tourism. Pedro tells you more about how to determine prices in Portugal.

What determines house prices in Portugal?

Portugal (like Spain) has a huge difference between coastal regions and inland regions. Actually, the rule of thumb is simple: the closer to the coast, the higher the price. This is mainly due to the influence of wealthy buyers in Portugal as well as the increase in foreign buyers and investors! These, partly due to tourism, have greatly influenced the housing market in Portugal. Indeed, the coast of this Mediterranean country is a popular destination for many Western Europeans and also an increasing number of Americans.

This has caused a solid price rise in sought-after regions such as the Algarve, Lisbon and Porto due to foreign demand. The more demand there is for (temporary) housing supply by wealthy individuals, the more investors buy Portuguese property as a smart investment, thereby driving up the price.

In addition, the Portuguese economy has its own influence on the housing market. During times of economic growth and after recovering from the financial crisis, prices rose sharply, especially in tourist and urban areas. But during less stable periods, the housing market can also really collapse altogether. During these times, prices often drop rapidly, especially outside popular regions.

House prices in Portugal are always subjective. For example, modern new construction on the coast (often aimed at foreigners) is always more expensive than classic Portuguese cottages, often located further from the sea or in fishing villages.

House prices in Portugal by region

House prices vary considerably by region in Portugal. This depends mainly on the location, tourist attraction and the property supply available. Here is an overview of the most popular and most expensive regions compared to the cheaper alternatives:

• The most expensive regions are particularly large cities such as Lisbon and Porto. In addition, the southern region is Algarve an exception in Portugal with relatively high prices. These are known for their high house prices, driven by tourism. On average, prices here are above €3,000 per square metre. In addition, the cities often attract expats and digital nomads who want to live or invest in Portugal, further driving up prices. Southern Faro is known as an area with a lot of tourist development, including in the luxury segment. You will find many British buyers here, but also French and Germans.
• Affordable regions are almost always inland. Often prices are considerably lower, sometimes no higher €700 per square metre. Mind you, these places are often far away from mass tourism, and also a lot less accessible and developed! This means that if you are looking for tranquillity and possibly a cash purchase, you can still find good deals here.

So depending on where you look, house prices in Portugal can vary greatly. Choosing a particular region very much depends on what you are looking for and your goal with the property!

Overview of average prices per m2 per region

* These prices are based on offers aimed at foreign buyers. It does not represent all real estate in Portugal.
Source = green-acres.pt

Factors affecting Portuguese house prices

Tourism and expats: house prices in Portugal are strongly influenced by the attraction of tourists and expats. Especially in coastal regions and on islands such as Madeira and the Azores, the demand for (second) homes is driving up prices. Regions like the Algarve and Lisbon are perfect examples. The large number of tourists makes it attractive for investors to buy and rent out holiday homes, which in turn further increases prices.

Regulation and taxation: National and local rules in Portugal also play a role in the property market. Some popular regions, such as Lisbon, have strict rules on short-term rentals to tourists, which has a direct effect on property values. These rules limit the number of permits, which sometimes means owners can earn less from rentals. Taxes such as transfer tax and IMI (annual property tax) also affect both the purchase price and returns on Portuguese property.

Future expectations and economic situation

The Portuguese property market, as elsewhere, has peaks and troughs. Stable growth is expected for 2024 and 2025, with good price increases, especially in popular regions. How quickly or sharply these prices rise or fall depends on factors such as the general economic outlook, inflation, and foreign demand, including from the Netherlands and Belgium.

So realise well that you, as well as other foreign buyers, greatly influence house prices in Portugal. Both adversely and positively.

What does this mean for a mortgage in Portugal?

The higher the property prices in Portugal, the more likely you are to need to finance with e.g. a mortgage. Often prices in tourist areas are too high to buy purely from surplus value in the Netherlands or Belgium finance.
There is then an additional mortgage in Portugal needed. Whether you can afford that, then, remains to be seen. Fortunately, Pedro can work that out with you, via our mortgage indication Portugal!

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Tips for buyers in Portugal: how to make a smart property choice?

Would you like to start buying a house in Portugal after reading this article? For example, a flat in the city or just a holiday home in the Algarve? Whether you're buying as an investment, a second home or a relocation, it's smart to take a few things into account. Here are some tips from Pedro for you:

1. Determine which regions suit you - every region is different. Do you mainly want to live there yourself and love peace and nature? Then you will be fine exploring inland or the less popular coastal areas. Do you want to buy a holiday home or investment, which mainly needs to be rented out? Then the popular cities and coastal regions are a better option, because here you can expect an okay occupancy rate. Inland, this can be considerably disappointing! However, you pay for it in m² price, so the trade-off is entirely up to you!
2. Future expectations location - Do you particularly want to buy an investment property? Then check what the market expectations are in the region. Look at factors such as tourist appeal, planned infrastructure projects (such as new highways or area development) and the influence of expats. This can help you estimate how the value of your property will develop.
3. Take into account additional costs - Besides the purchase price, you should also think about costs and taxes, such as transfer tax, notary fees, registration fees and the annual property tax. These costs can add up to a nice percentage of the purchase price and maintenance costs. It's important to factor these in! Fortunately, Pedro can help you with a calculation, You calculate a complete overview of costs in Portugal here.
4. Engage local experts - the property market in Portugal works differently from the Netherlands or Belgium, with rules that may differ from region to region. Pedro therefore recommends using a local estate agent familiar with local regulations. Or ask via holapedro legal procurement assistance to, so Portuguese professionals guide you in the process.
5. Limit risks in rental plans - if you plan to rent out your Portuguese property, check out the specific rental rules in your region before you buy. Especially in tourist areas and cities, there are sometimes strict rules for renting to tourists, including permits and tax regulations.

There are plenty of Dutch or Belgian buyers who have expired money when buying, due to wrong decisions or assumptions. Pedro will help you avoid becoming one of them!

What can you expect from Portuguese house prices?

The Portuguese property market remains dynamic, with differences by region and factors greatly influencing the price. The region and the difference between urban/coastal and inland is currently the most important factor affecting house prices in Portugal. The signs show that for now, demand remains constant from both domestic buyers and foreign investors. But be well aware that nobody can predict the (economic) future or crisis, least of all economists.

In short, whether you are looking for a holiday home, investment or new life in Portugal, you will find a property for every budget in this southern country. Not always in your preferred region, but if you are willing to make concessions, you will definitely succeed! With the right preparation, a clear understanding of the market and possible help from experts through holapedro, you can make a smart choice in the Portuguese housing market.

Getting started with your home purchase in Portugal?

Start with Pedro's mortgage indication to see if you have enough financial room to afford the house prices in Portugal! Or let Pedro help you with your questions regarding your Portugal purchase. Better to ask directly than to make mistakes!

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Or put your question to Pedro

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