Portugal’s Housing Crisis: A Wages Problem, Not a Housing Shortage

In a recent public forum held in Barreiro, Paulo Raimundo, the Secretary-General of the Portuguese Communist Party (PCP), made a striking statement:"Portugal does not have a shortage of houses; it has a problem of low wages."

While the country has experienced a real estate boom fueled by foreign investments and growing demand, the core of the crisis isn’t a lack of available homes—it’s the widening gap between stagnant wages and soaring property prices. This imbalance has left many Portuguese citizens struggling to afford housing, even as construction cranes dominate city skylines.

But how did Portugal get here, and what’s the path forward?

Between 2013 and 2023, house prices in Portugal skyrocketed by 83% in real terms—nearly triple the growth rate of neighboring Spain, where prices rose by just 28% over the same period.Lisbon remains the most expensive city, with average property prices reaching €5,718 per square meter in the city center, followed by Porto at around €3,705 per square meter.

Despite this surge in property values, wages have remained largely stagnant. In fact, in the first quarter of 2022, house prices outpaced wages by 47.1%, making Portugal the OECD country with the largest gap between income and housing costs.

This stark disparity highlights a fundamental issue:Portugal’s housing crisis is not about the lack of homes—it’s about the lack of affordable ones.

Market Contrast - Luxury apartments VS Low Wages

While foreign investment has undeniably contributed to economic growth, it has also driven up housing prices, particularly in prime locations like Lisbon, Porto, and coastal regions popular with expats.However, the average Portuguese worker’s salary hasn’t kept pace with this inflation, creating a housing market that feels increasingly out of reach for many locals.

Key Factors Contributing to the Crisis:

• Wage Stagnation: Salaries have not risen in line with the cost of living, forcing many to spend a disproportionate share of their income on housing.

• Foreign Investment Surge: Tax incentives and residency programs, such as the Golden Visa, have attracted wealthy international buyers, inflating property values.

• Urban Pressure: High demand in Lisbon and Porto has pushed prices beyond the reach of middle-class families, leading to urban sprawl as residents move to more affordable outskirts.

• Speculative Development: Real estate projects increasingly cater to luxury buyers and tourists, leaving fewer options for affordable housing.

The growing gap between wages and housing costs is reshaping Portuguese society. Young professionals are delaying homeownership, staying in rentals longer, or even moving abroad for better opportunities, contributing to a “brain drain”.

For many families, the financial strain is significant, with a large portion of income going toward housing, leaving less for essentials like healthcare, education, and savings.

Rising costs are also changing communities, displacing long-term residents and eroding the social fabric of historic neighborhoods, especially in cities like Lisbon and Porto.

What’s Next for Portugal’s Housing Market?

Without decisive intervention, housing prices are projected to continue rising until at least 2026, driven by:

• Structural challenges in the construction sector (rising material costs, labor shortages).

• Sustained foreign demand, particularly from expatriates and investors seeking stable returns.

• Limited affordable housing developments targeting local, middle-income families.

Proposed Solutions: Bridging the Gap

Experts and policymakers suggest several strategies to address the root causes of the crisis:

1. Wage Enhancement:

   • Implement policies to increase salaries in line with productivity and living costs.

   • Encourage collective bargaining and strengthen labor rights to support fair wages.

     
     

2. Affordable Housing Initiatives:

   • Invest in public housing projects specifically designed for low- and middle-income families.

   • Promote mixed-use developments that integrate affordable units with private real estate projects.

     
     

3. Regulation of Foreign Investment:

   • Introduce measures to manage the impact of foreign buyers on local housing markets.

   • Reevaluate programs like the Golden Visa to ensure they benefit the broader economy, not just real estate speculation.

     
     

4. Tax Incentives for Locals:

   • Offer tax breaks or financial incentives to first-time homebuyers, especially young professionals and families.

   • Provide subsidies for rental housing to reduce cost burdens on tenants.

     
     

5. Urban Development Reforms:

   • Focus on revitalizing underused urban areas to increase housing supply without displacing existing communities.

   • Encourage sustainable development practices that balance growth with affordability.

     
     

What Can Expats and Investors Do?

For expatriates living in Portugal or considering a move, understanding these dynamics is key to making informed decisions about housing and investments:

• Expats Seeking Housing:

  • Research different neighborhoods beyond city centers for more affordable options.

  • Consider the long-term impact of property investments, both financially and socially.

    
    

• Investors:

  • Focus on sustainable, community-oriented developments that contribute positively to the housing ecosystem.

  • Partner with local stakeholders to ensure projects meet both market demands and local needs.

    
    

• Young Professionals and Families:

  • Stay informed about government programs supporting first-time homebuyers.

  • Explore co-living or cooperative housing models as cost-effective alternatives.

    
    

Our Partners Can Help You Navigate the Housing Market

Whether you're looking to buy property, invest, or plan your financial future in Portugal, our trusted partners specialize in:

• Real Estate Consulting

• Financial Planning and Investment Advice

• Legal Support for Property Transactions

• Relocation and Expat Services

We’re here to help you make the best decisions, whether you're navigating the property market as an expat or seeking opportunities as an investor.