Portugal’s Housing Shortage Is Structural — Build-to-Rent Seen as the Only Way to Add Scale

Portugal’s property market faces a structural shortage — and VAT cuts won’t fix it

Portugal’s property Portugal market is facing a structural housing shortage that will not be solved by one-off tax measures. That is the blunt conclusion of the first specialist report on residential development in Greater Lisbon and Greater Porto from Cushman & Wakefield. The consultancy’s study warns that demand pressure combined with a chronic lack of new supply is making housing less affordable, especially in the mid-market segment, and recommends Build-to-Rent as the model able to deliver the scale the market needs.

We read the report closely and translated its findings into what they mean for buyers, investors and expats. The headline: policymakers must treat Build-to-Rent (BTR) as a distinct product with its own fiscal, regulatory and planning rules if Portugal is to increase housing supply quickly enough to prevent affordability from deteriorating further.

Why Cushman & Wakefield says the shortage is structural

Ana Gomes, Partner and Head of Research at Cushman & Wakefield Portugal, describes the problem as “serious” and “multifaceted.” The firm’s research looks back over a decade of development, licensing and demographic change across the main municipalities of Lisbon and Porto.

Key context from the report and C&W background:

• This is the first dedicated report on residential development in Greater Lisbon and Greater Porto and will be published every two years as a benchmark of market change.
• Cushman & Wakefield is a global firm with about 53,000 employees across nearly 350 offices in 60 countries, and reported $10.3 billion in revenue in 2025. Their local analysis has weight because it combines market intelligence with global comparisons.

The report’s central point is that short-term fiscal gestures, such as reducing VAT for construction, will not by themselves trigger the large projects required to change supply dynamics. Instead, the market needs models that produce large volumes of new housing at lower unit costs and in shorter timelines.

What the report found: the numbers and territorial patterns

Cushman & Wakefield examined transactions, construction, licencing and demographic trends, and reached several concrete findings. These frame where opportunities and risks lie.

Major findings highlighted by C&W (summarised):

• Transactions remain dominated by existing homes; new development supplies have limited capacity to meet rising demand.
• Lisbon and Porto are structurally stronger markets, able to retain working-age populations and support higher values, which helps new developments proceed—albeit with smaller unit sizes.
• Peripheral municipalities show more households but weaker purchasing power, creating mismatch between housing needs and affordability and limiting absorption for new projects.
• Mid-market affordability is worsening because of lack of new development at scale, particularly in middle-price segments and in suburban locations nearing affordability limits.
• Some suburban areas are ageing, which might free up housing stock for rehabilitation, offering an alternative to pure new-build supply.

Put simply: more homes are needed where the buyers and renters are, and the current production model is not delivering them. There is a widening gap between urban centres that attract and hold younger workers, and peripheries where household numbers are up but incomes are lower.

Build-to-Rent: what it is, why it matters and why Portugal lags

Build-to-Rent is housing developed and held specifically for rental, with long-term professional management. Across Europe, BTR has become a major vehicle to add supply at scale because it aligns developers, institutional capital and rental operators around a single product.

Why BTR matters for Portugal:

• BTR can generate larger projects and more continuous pipelines of units than piecemeal build-for-sale schemes.
• Professional rental platforms can target the mid-market where affordability is under pressure and where owner-occupation is increasingly out of reach for many households.
• BTR projects often include management standards, tenant services and longer-term maintenance that keep stock viable and attractive to residents.

Why Portugal has not yet seen a BTR boom:

• The model requires favourable fiscal and regulatory conditions: tax incentives, planning flexibility, and rules that treat rental-first development differently from speculative sale-led projects.
• Costs are a constraint. Construction costs, financing terms and rent affordability together make the underwriting of large BTR projects challenging today.
• The market and policy mindset still treat new housing primarily as build-for-sale, which makes it harder to assemble the regulatory package BTR needs.

Cushman & Wakefield’s recommendation is clear: BTR must be recognised and regulated as a distinct product, with dedicated fiscal, planning and urban rules to reduce developer risk and construction costs.

Government measures so far — what they do and why they may not be enough

The report reviews recent Portuguese measures aimed at increasing supply, most notably the “Construir Portugal – Arrendamento e Simplificação” programme. The package includes new tax incentives and tools designed to support development and rental.

What the programme offers:

• Tax incentives aimed at encouraging rental supply and speeding up construction approvals.
• Support mechanisms to reduce administrative complexity for developers.

Cushman & Wakefield’s critique is practical: these measures can help but only if they generate projects at scale and actually lower costs for developers. A VAT reduction, for example, can improve margins but does not address the need for larger project pipelines, longer-term financing or rent-to-income dynamics.

In short, a VAT cut is a welcome tool for reducing some costs but it is not a substitute for structural changes that enable institutional investment and long-term rental platforms.

What this means for buyers, investors and expats — practical steps

We translate the report into actionable guidance for the three main audiences reading this portal.

For investors (domestic and international):

• Consider Build-to-Rent as a strategic allocation: BTR is the product to watch if you want scale and institutional appetite. Look for opportunities where public incentives align with land availability and planning flexibility.
• Stress-test returns for higher construction costs and conservative rent growth: many expected yields assume a stable policy environment and stronger rental growth than current affordability supports.
• Seek partnerships with local developers or operators who understand municipal licensing and the subtleties of Portuguese planning practice.

For homebuyers and owner-occupiers:

• Expect limited new-home availability in the mid-market unless BTR and other scale measures accelerate. That means competition for existing units will remain strong in Lisbon and Porto.
• If you are priced out, consider suburbs with real rehabilitation potential where ageing stock can be upgraded to modern standards. The report notes that some suburban ageing could release stock for renovation projects that do not rely on new land supply.

For expats and renters:

• Short-term rental supply will stay tight in key urban districts. Professional BTR stock can offer better-managed, longer-term tenancies than fragmented private letting.
• Expect pressure on rents in the mid-market; negotiate on lease terms and look for newer buildings where management and maintenance lower your total living cost.

Across all groups: focus on location fundamentals, not on headline tax measures.