Portugal: a symbol of Europe's growing housing crisis.

With house prices rising 30 percent over the past five years, living spaces in Portugal's capital have become more expensive than inMilan, Madrid and Berlin. This makes new housing unaffordable for most locals and shows that the issue of supply often trumps interest rates in determining prices.

Portugal policy changes

The Portuguese government has begun to change course: it has ended the golden visa program and approved a plan to cut tax breaks for new residents. Despite this, however, demand has only increased. "We have seen an increase in inquiries from our foreign clients," said Paulo Silva, head of consultancy Savills in Portugal. "There just aren't enough apartments to meet demand, even with the slowdown in sales. "

Rising real estate prices in other cities

Many other cities are also facing rising real estate prices. Six of the ten cities tracked by the Bloomberg City Tracker show growth. Athens has a 12% year-on-year price increase, while Stockholm is up more than 5%, a six-month streak of increases.

Portugal has become a point of attraction for investors after undergoing an international bailout in 2014. At the time, the government abolished rent controls and introduced the so-called golden visa - a pathway to residency for a €500,000 investment in real estate - along with tax breaks to attract new residents. That's where the influx of foreign buyers began. One of them is Swiss billionaire Claude Berda, founder of French broadcasting group AB Groupe.

The problem of affordable housing in Portugal

For many Portuguese families, whose salaries are among the lowest in Western Europe, the dream of buying their own home has been replaced by expensive and low-quality rentals in remote suburbs. Rising inequality has caused tension and thousands of people have taken to the streets to express their anger over the housing crisis in Lisbon and other Portuguese cities. The socialist government promised to increase the amount of affordable housing and end programs for foreigners. However, exiting the Portuguese market may not be easy. "At the end of the day, the sunny climate, stunning beaches, lifestyle and relatively low cost of living will continue to attract foreign investor interest," said Square Asset Management CEO Pedro Coelho.