Portugal may need a decade to resolve the housing crisis

Portugal may need at least a decade to recover from the housing deficit accumulated over the past few years, Executive Digest reports.

The Bank of Portugal estimates that, between 2015 and 2025, the difference between housing needs and the construction of new homes resulted in a shortage of approximately 300,000 properties. This means that, at an annual rate of around 30,000 homes, it would take ten years to make up for this deficit, assuming housing demand does not increase further.

The Portuguese Confederation of Construction and Real Estate (CPCI) estimates that there is currently a shortage of 380,000 homes in Portugal, a figure higher than the estimate from the Bank of Portugal.

Increasing housing supply is only part of the challenge. New projects can take an average of six years from the initial investment decision to the delivery of the property.

Construction time and labour

One of the main obstacles to increasing housing construction is the shortage of labour. Manuel Reis Campos, president of CPCI, estimates that the sector needs an additional 80,000 to 90,000 professionals, at a time when employment in construction remains about 30% below 2008 levels.

Immigration has helped counterbalance this shortage, with an additional 8,000 workers expected to be recruited through the so-called “green lane” in 2026 alone.

Despite this, housing construction has shown signs of recovery. In 2025, nearly 27,000 new homes were completed, the highest number recorded since 2010. Building permits have also increased and, according to data available up to August 2026, reached levels not seen since 2008.

Government exceeds PRR target

According to a press release by the Portuguese government published on 1 September 2026, Portugal completed 31,700 homes under the Recovery and Resilience Plan (PRR), exceeding its original target of 26,000 by 5,700 properties.

The government also announced €2.011 billion in funding for an additional 33,000 homes by 2030, alongside financing initiatives intended to support public and affordable housing.

The announcement also outlined support for young homebuyers, including tax exemptions and public mortgage guarantees.

Housing prices and demand

Population growth, tourism, short-term rentals, and the attraction of high-income foreign residents have driven significant demand for housing.

According to data presented by Expresso, house prices have more than doubled in the last decade, while rents have increased by 119%.

Economist Vera Gouveia Barros believes that the imbalance has transformed the market into a kind of auction that places the negotiating power primarily on the side of those who sell or rent. In addition, the slow pace of licensing, the scarcity of available land for construction, and the difficulty in mobilising resources further exacerbate the housing shortage.

Another pressure on the market is purchases made by people with tax domicile abroad. In the first half of 2026, these buyers paid an average of €435,000 per property, 70% more than buyers domiciled in Portugal.

Government housing measures

By 2030, the Executive has committed to delivering 133,000 homes, with an investment exceeding €10 billion.

However, public housing still represents only 2% of the Portuguese housing stock.

Among the measures aimed at stimulating construction is the reduction of VAT from 23% to 6% on homes for sale up to €648,000 or intended for moderate rental, with rents up to €2,300. The real estate sector admits, however, that it will take at least two to three years for these houses to reach the market, Executive Digest reports.

Another possibility is utilising existing but unoccupied housing. According to 2023 data from the National Institute of Statistics, Portugal had 723,000 vacant dwellings, of which 348,097 were available for sale or rent.

The Government has proposed a reduction in income tax from 25% to 10% for landlords who charge moderate rents, between 400 and 2,300 euros, regardless of the location and type of property. The legislative review, which has already been approved in general, remains under parliamentary debate and foresees changes to rent limits, security deposits, and eviction procedures for non-payment.