Despite the stabilization of material costs, the shortage of labor, estimated at more than 90,000 workers, continues to increase construction expenses. This sustained upward trend has seen house prices more than double since 2015.

Between 2015 and 2023, the accumulated increase in housing prices reached 105.8%. The average bank appraisal value in the first 10 months of this year rose 11% compared to the same period last year. Foreign investment in the real estate sector exceeded 2.5 billion euros in 2024, while net migration added over 155,000 people in the previous year, further fueling demand.

The supply side remains constrained, with only 28,000 new housing units licensed in 2024, an insufficient number to balance rising demand. Lower interest rates and government initiatives, such as tax exemptions for younger buyers, have further boosted demand, but delays in administrative approvals and programs like the Recovery and Resilience Plan (PRR) have exacerbated the supply crisis.

The recently launched "Construir Portugal" program aims to address these issues through fiscal incentives, urban planning reforms, and affordable housing support. The State Budget for 2025 includes an additional 2.8 billion euros to accelerate the construction and renovation of social housing, targeting 59,000 units by 2030. However, analysts warn that the impact of these measures will only be felt in the medium term, leaving immediate challenges unaddressed.

Projections indicate that housing prices in Portugal will continue to rise despite stabilized interest rates. The future of the housing market will depend on the effective implementation of supply-side policies, particularly those focused on affordable housing. Urban planning strategies and efficient management of public and private resources will be key to addressing the needs of the population and ensuring market sustainability.

Innovative approaches, such as modular and industrialized construction, are seen as promising solutions to reduce costs and stabilize prices. Nevertheless, labor shortages and bureaucratic hurdles remain short-term risks that could hinder progress.

Strengthening public housing policies and investing in innovation could lay the foundation for a more balanced market in the future. Success will ultimately depend on translating strategies into tangible results, ensuring that housing becomes more accessible to a broader segment of the population. The ongoing adjustments in the real estate market highlight the urgency for structural reforms to address affordability and supply challenges effectively.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes