Your rent or mortgage payment in Portugal is likely inflated. The European Commission just confirmed it, stating the Portuguese housing market is overvalued by a staggering 35%. This is not just a statistic. It is a warning that the price you are asked to pay is disconnected from the property’s real value, creating a trap for unsuspecting renters and buyers.
But this report is not a dead end. It is a map. It reveals exactly why prices are stretched, from tourism pressure to a lack of new construction. Understanding these forces gives you leverage. This guide breaks down the official findings into a practical survival plan, with clear checklists for renters and buyers to protect your money and secure your future in Portugal.
Why Brussels says your rent is inflated
The European Commission’s report pinpoints several key factors driving the overvaluation. These are not abstract economic theories. They are market forces that directly impact the price you pay for an apartment in Lisbon or a house in the Algarve. Knowing them helps you identify and avoid risk.
Tourism and short term rentals
Portugal is the EU country where tourism has the single largest impact on housing prices. The rise of platforms like Airbnb removes properties from the long term rental market, shrinking supply and pushing prices up, especially in city centers and coastal areas. This creates a “tourist premium” that locals and new residents are forced to pay.
Lack of new construction
The report highlights that construction licensing in Portugal is one of the slowest in the EU, taking up to 31 weeks. This bureaucratic delay, combined with a shortage of labor, means the supply of new homes cannot keep up with demand. When supply is artificially low, prices for existing homes become inflated.
Institutional investors and vacant homes
A significant portion of urban housing is owned by large investment funds, not individuals. During the era of low interest rates, these funds bought up properties, further increasing prices. Compounding this, Portugal has one of the highest rates of vacant properties (imóveis devolutos) in the EU. These homes sit empty, contributing to scarcity while investors wait for values to rise.
Actionable Takeaway: The price you see is not always the true value. It is often a reflection of tourism demand or low supply, not local fundamentals.
A checklist for renters in Portugal
If you are renting, you are on the front line of this overvalued market. Use this checklist to protect yourself from overpaying and to secure your legal standing.
1. Benchmark your rent before you sign
Never accept the first asking price without verification. Use property portals like Idealista to check the average price per square meter for similar properties in the same neighborhood. If the asking rent is 15% or more above the average, question it and be prepared to negotiate or walk away.
2. Verify your lease is registered with Finanças
This is non negotiable. An unregistered rental contract (contrato de arrendamento) is invisible to the state, offers you zero tenant protection, and will be rejected as proof of address for any AIMA visa or residency application. Your landlord is legally required to register the contract and pay stamp duty (imposto de selo). You can and should verify this on the Finanças portal.
3. Scrutinize condo fees and utility inclusions
Hidden charges are a common way to inflate your real monthly cost. Before signing, demand a clear, written breakdown of what is included in the rent. Ask specifically about condominium fees, water, electricity, and gas. If they are not included, ask for the average monthly cost from the past year to build a realistic budget.
Actionable Takeaway: A registered lease and a fair, benchmarked price are your best defense against financial traps and visa rejection.
A checklist for buyers in Portugal
Buying into an overvalued market carries long term financial risk. A price drop could leave you with negative equity. Proceed with extreme caution and use these steps to validate your purchase.
1. Stress test your mortgage at a higher rate
Your bank may approve you for a mortgage at today’s interest rate, but can you afford the payments if rates rise by two or even three percentage points? Use a mortgage calculator to model this scenario. If the higher payment would break your budget, you cannot afford the property.
2. Get a second, independent valuation
A bank’s valuation is for their risk management, not your financial peace of mind. It is often aligned with the sale price to facilitate the loan. Always pay for a second, independent property valuation from a certified appraiser. If their valuation comes in significantly lower, you have a powerful tool for renegotiating the price or a clear signal to abandon the deal.
3. Analyze the “tourist premium”
If you are buying in a popular area like central Lisbon, Porto, or the Algarve, calculate what portion of the price is due to tourism. Analyze the potential long term rental yield. If the property would not be profitable as a standard long term rental, you are likely overpaying for a home whose value is dependent on a volatile tourism market.
Actionable Takeaway: Do not let emotion or market hype guide your purchase. Use hard data and conservative financial modeling to make a decision.
Bottom line
Don’t get caught in a financial trap. Use this guide to protect your money and get your housing documents reviewed by a trusted partner before you sign.
FAQ
What does “housing is overvalued” mean?
It means that property prices are significantly higher than what economic fundamentals, like average income and rental yields, would suggest. The European Commission’s 35% estimate indicates a large gap between price and actual value.
Will rent prices go down in Portugal?
It is unlikely in the short term. While the market is overvalued, the underlying issues of low supply, high demand, and slow construction persist. Prices are more likely to stagnate at high levels or rise more slowly.
How can I check if my lease is registered in Portugal?
You can log into your personal account on the Finanças portal. Under the “Arrendamento” section, you should be able to see any rental contracts where you are listed as the tenant. If it’s not there, it’s not registered.
Is now a bad time to buy a house in Portugal?
It is a high risk time. Buying in an overvalued market means you could lose money if a price correction occurs. If you must buy, it is critical to follow strict financial checks, get independent valuations, and avoid properties in bubble-prone tourist zones.
What is the Portuguese government doing about the housing crisis?
The government has introduced measures like reducing VAT on construction for affordable housing and offering tax incentives to landlords who rent their properties below a certain “moderate rent” threshold. However, critics argue these measures primarily benefit landlords and developers, not tenants.
Can I use a short term rental or Airbnb for my visa application?
No. For D visas and residence permits, AIMA requires proof of stable, long term accommodation. This means you need a registered rental contract with a minimum duration, typically 12 months. A short term booking is not sufficient and will lead to rejection.
Why are there so many empty homes in Portugal if there is a housing crisis?
This is a complex issue. Many vacant properties are tied up in inheritance disputes, are in poor condition, or are owned by investors who prefer to keep them empty while waiting for property values to increase rather than dealing with the rental market.
Sources:
Palma, A. F., & Euronews. (2025, October 15). Casas em Portugal são das mais sobrevalorizadas, segundo relatório da Comissão Europeia. Euronews.
Jornal de Negócios. (2025, October 15). Bruxelas alerta que casas estão sobrevalorizadas em 35%. Jornal de Negócios.
