Lisbon Buyers Need 90 Months' Pay for 50m²: Why More Homes Won't Fix Portugal

For investors

• Policy risk matters. CBRE’s recommendations show what authorities might do; they also highlight firebreaks where policy could swing. Investors should stress-test deals under scenarios of rental regulation reform, taxation changes and licensing acceleration.
• Avoid homogenous portfolios. Holiday-rental-heavy holdings are exposed if policies shift to prioritise primary residence use or tighter short-term rental rules.
• Design and mix are value drivers. Well-designed smaller units that match demand will outperform large luxury apartments in terms of occupancy and yield.

For expats and renters

• Renting will remain an important option. But be prepared for competition in Lisbon and Porto and for higher rents in desirable neighbourhoods.
• Understand local tenancy rules and watch for regulatory change. A move to a predictable, landlord-friendly rent regime could raise rents in the medium term.

Design, household composition and why mix matters

A striking point in the CBRE study is the mismatch between the existing stock and household needs. Portugal's high ratio of vacant or non-primary-use dwellings sits alongside a large share of single-person households. Two design and product consequences come through:

• The market needs more smaller units that are affordable and flexible, including co-living or micro-apartment formats where justified.
• Quality matters. Low-quality volume housing is a poor solution: it reduces neighbourhood liveability and can increase maintenance costs over time.

From an investor standpoint, the demand signal is clear: smaller, well-located, efficiently designed units are likely to see stronger sustained demand from local tenants than oversized units aimed at holiday markets.

Risks and trade-offs policymakers and markets face

Changing course is not simple. The following trade-offs are visible:

• Speed versus inclusion: Faster permitting can deliver homes quicker but risks sidelining community consultation and affordable-housing requirements.
• Market confidence versus tenant protection: Restoring landlord confidence can increase available rental stock, but loosen tenant protections too far and political pushback will follow.
• Short-term supply versus long-term demographics: Policies that favour immediate construction can be mismatched to demographic changes that reshape demand profiles over decades.

Investors should model these risks. Buyers should assume regulatory change is likely and plan for scenarios where rent levels and tax treatment shift.

Lisbon and Porto: the urban hotspots

Lisbon and Porto show the most acute symptoms of the national problem. In Lisbon the median bank valuation of €2,523/m² pushes a 50 m² purchase to 90 months of average net salary, compared with 61 months in 2011. That is a major deterioration of affordability.

These urban areas also have high shares of non-primary residences because of tourism and investor demand. Any policy that focuses on reallocating existing stock toward primary use or that limits short-term rentals will affect markets quickly. For buyers, that means local policy changes are a near-term risk and opportunity: properties currently priced for short-term income could see price adjustments if rules tighten, but converted long-term rentals could stabilise local communities and yield predictable cash flow.

What a realistic policy package looks like

From the CBRE study and from our reading, a realistic policy package would include:

• Streamlined licensing plus binding targets for a share of new units to be affordable or smaller in size.
• A stable rental regulatory regime with indexed contracts, clearer eviction processes and tax incentives for long-term rentals aimed at local residents.
• Measures to repurpose idle stock: incentives to convert vacant or holiday units into permanent housing and penalties for long-term vacancy where abuse is evident.
• Investment in planning capacity so courts and administrative bodies can resolve disputes faster and approvals do not stall development.

If implemented with care, these steps could nudge the market toward better supply composition, not merely higher unit counts.

My bottom-line read for the market

Portugal's housing problem is structural and multi-dimensional. More construction is necessary but not sufficient. The market needs policy changes that reallocate existing stock, encourage the right product mix, speed delivery and align incentives for landlords with the public interest.

For buyers and investors the immediate takeaway is practical: focus on product-market fit and scenario planning. For policymakers the test is harder: can they speed approvals while protecting tenants and ensure that new supply serves households rather than only investors?

One concrete fact to keep in mind when assessing deals: in 2024 Portugal built 27,000 homes while recording 170,000 sales. That imbalance explains why prices have moved beyond the reach of typical wages and why a new mix of measures is required.

Frequently Asked Questions

Q: Is building more homes the quickest way to make housing affordable in Portugal? A: No. While more homes help, factors such as the high share of non-primary residences, the mismatch of unit sizes and slow permitting mean that volume alone will not restore affordability.

Q: How bad is the wage-to-price gap in Portugal? A: In 2024 the average net salary was €1,266 and the median bank valuation was €1,721/m² nationally, rising to €2,523/m² in Lisbon. These ratios translate into far more months of work needed to buy a modest apartment than a decade ago.

Q: What should investors watch for in terms of policy change? A: Key signals include reform of rental rules, changes to short-term rental regulation, steps to incentivise conversion of idle stock to primary housing, and any moves to simplify licensing that include affordability conditions.

Q: Are there opportunities for expats and small investors? A: Yes. Demand for smaller, well-located rental units is strong given household composition. Targeting smaller-unit, long-term rental strategies outside high-tourism pockets carries lower policy risk and can deliver stable returns.