Portugal eliminated its annual shortfall of new homes compared to household growth in 2025, but still faces an accumulated deficit of around 300,000 homes.
Source: Adobe Stock
Author: Redaction
Housing supply outpaces demographic pressure
The housing market in Portugal recorded a significant shift in 2025. After more than a decade in which the construction of new homes failed to keep pace with the growth in the number of households, the annual housing deficit was finally halted. This development results from a combination of increased housing supply and reduced demographic pressure, creating a new balance between demand and construction.
In recent years, the housing shortage contributed to a sharp rise in house prices and rents. However, the latest data indicate that the pace of construction has started to move closer to market needs. In 2025, thousands of new homes were completed and the number of housing permits reached its highest level since 2008, strengthening prospects for growth in housing supply.
At the same time, the slowdown in migration flows helped reduce pressure on the housing market, contributing to greater stability between demand and housing availability.
Accumulated deficit continues to shape the market
Despite this reversal in trend, the housing market remains affected by the accumulated deficit built up over the past decade. The gap between the number of homes needed and those actually built is estimated to have reached around 300,000 dwellings, a figure that continues to influence prices and affordability.
The lack of available housing remains one of the main challenges for many families, particularly in major urban centres. Although the situation has improved on an annual basis, the impact of the accumulated shortage remains visible in high rents and purchase prices.
Social housing is emerging as one of the tools with the greatest potential to strengthen housing supply. In Portugal, the weight of this segment remains limited compared with other European countries, reducing its ability to respond to the housing needs of lower-income households.
Construction accelerates but remains below past levels
Construction activity has been gradually recovering, reflected in the increase in permits and the growing number of new projects. Even so, current construction levels remain significantly below those recorded around 15 years ago, when the country was producing a much larger volume of housing.
Among the main obstacles to expanding housing supply are labour shortages, the lack of available land, complex licensing procedures and rising construction costs. These factors continue to limit the sector’s ability to respond to market needs.
Recent developments suggest, however, that demographic pressures on housing may gradually ease over the coming years, provided supply continues to grow sustainably and keeps pace with demand.
House prices remain supported by fundamentals
The rise in housing prices recorded over the last decade does not appear to be linked to excessive credit growth. Although house prices increased significantly, bank lending expanded at a much more moderate pace.
This suggests that rising housing prices were driven mainly by the imbalance between supply and demand, rather than by uncontrolled credit expansion. Furthermore, the parallel evolution of house prices and rents points to a market supported by real economic fundamentals.
With the annual housing deficit now halted, the main challenge is to strengthen construction and consistently increase housing supply, making it possible to gradually correct the accumulated shortage and improve access to housing in Portugal.
Deutsch
Português
English
Français
Español
Nederlands
Русский
中文(简体)
