Solving Portugal’s housing crisis requires complete structural overhaul

Tinkering around the edges won’t cut the mustard when it comes to solving Portugal’s housing crisis – it needs a complete structural overhaul.

This is according to the real estate consultant CBRE, which states that simply increasing supply won’t be enough.

According to the study Oikos – The Long Game for the Portuguese Residential Sector, developed by CBRE, a leading real estate services consultancy, the complexity of the interconnected causes that led to the current situation demands a profound and transformative response, not just incremental measures.

The study reveals that the current scenario is influenced by a chronic demographic imbalance where Portugal, with a decline in the fertility rate over decades, is moving towards an inverted population structure.

CBRE’s diagnosis highlights that immigration has become the sole driver of population growth since 2016, registering positive net migration reaching 144,000 individuals in 2023.

Although this flow provides labour and generates Social Security surpluses, it also creates an immediate demand for housing that the market cannot absorb.

However, there is also the paradox that Portugal has one of the largest housing stocks per household in the world, totaling 5.97 million dwellings for 4.1 million families.

Nationally, about 31% of the built stock is not used as a primary residence, and in the two metropolitan areas, the same metric is around 20% in both Lisbon and Porto. The study points to historical reasons for this artificially scarce supply, with the historical disincentive to renting being particularly relevant.

According to CBRE, accessibility is further conditioned by the growing gap between wages and prices. While the average net salary in Portugal was €1,266 in 2024, the median bank valuation reached €1,721 per square meter.

In Lisbon, this imbalance is noticeable, with valuations of €2,523 per square meter, meaning that approximately 90 months of average salary are needed to acquire just 50 m², a significant increase compared to the 61 months recorded in 2011.

This pressure is exacerbated by a low licensing environment; in 2024, only 27,000 new homes were built compared to 170,000 new sales, a construction volume far below the 113,000 units recorded in 2000.

Given this scenario, CBRE suggests a transition to a model where the State can reduce its regulatory burden, allowing the private sector to assume greater responsibility and agility.

The study points to the need to make demographics a top priority in public policies, focusing on real incentives for birth rates, aiming for structural demographic stability.

A profound reform of the rental sector is another essential pillar identified in the study, suggesting the abandonment of historical freezes in favor of a stable regulatory and fiscal framework that restores confidence to landlords.

Alongside this measure, it is considered vital to combat bureaucratic friction to accelerate supply, through the simplification of licensing processes, along with fiscal stability and increased speed in resolving legal disputes.

As part of the new measures approved for the sector, which aim to bring new existing supply to the market for real estate developers, the study anticipates that success will no longer depend on scarcity but will focus on intrinsic value and product differentiation.

Aspects such as design quality and the calibration of typologies will be vital, since 25% of households are now composed of a single person, but the stock continues to be dominated by large houses that are inadequate for the new needs.

CBRE concludes that this new environment creates space for the development of well-executed affordable housing, where the combination of efficient design and speed of execution will allow for scalability and align the sector with the major objectives of public policies.

Source: CBRE/Oikos; Credits: Campo Novo development, Lisbon.