Supply and licences priorities to solve housing crisis – houses expected to increase by 5%-10% over 12 months

Portugal’s current housing crisis stems primarily from a combination of structural and cyclical factors but experts agree that the solution lies in increasing housing supply through public policy reforms, greater regulatory predictability, and closer cooperation between the State and the private sector.

These are among the key findings of the newly launched ‘Housing Affordability & Public Policy Barometer’, developed by the Real Estate Futures Center at Porto Business School (PBS).

The study, which gathers insights from real estate sector experts, also marks the launch of the Real Estate Futures Center—PBS’s new impact center dedicated to applied research and the development of solutions for a more sustainable, productive, and affordable real estate market.

The results reveal a strong consensus regarding the nature of the current housing crisis.

For 61.1% of respondents, the situation arises from a balanced mix of structural and cyclical factors, while 31.5% view the problem as primarily structural—linked to supply shortages, slow licensing processes, and a lack of available land.

Only 6.5% attribute greater weight to cyclical factors, such as interest rates, inflation, or rising construction costs.

Supply shortage, permitting, and construction costs dominate the diagnosis

Among the factors contributing most to the current housing crisis, experts highlight the shortage of supply relative to demand as the most significant—scoring highest (4.50 points on a scale of one to five)—followed by slow permitting processes (4.45), construction costs (4.17), the lack of predictability in urban planning processes (4.11), and policy instability (4.03).

Next in line are the insufficient supply of public or affordable housing, demographic shifts and changing household compositions, a lack of economically viable urban land, pressure from international demand, taxation on development, ownership, and transactions, financing costs, regulatory and technical requirements, and, finally, low confidence among investors and developers.

Labour shortage: the main barrier to new housing production

When asked about the primary obstacle to new housing production, experts identify the labour shortage as the biggest hurdle currently facing the sector.

This is followed by high construction costs, regulatory uncertainty, slow permitting processes, a lack of economically viable land, commercial risk, taxation, and, finally, difficulty accessing financing.

Experts anticipate further rise in housing prices

Regarding market trends over the next 12 months, the majority of experts anticipate that housing prices in Portugal will continue to rise by between 5% and 10%.

Next is the expectation of increases of up to 5%, while a smaller number believe prices will remain stable or could even rise by more than 10%. Scenarios involving price drops garner very little support.

Expectations that prices will continue to rise are based primarily on the perception that new construction will remain insufficient to meet existing demand.

Contributing factors include persistently high construction costs, reduced household purchasing power, an economic slowdown, and the view that current public policies are inadequate to significantly alter the supply-demand balance in the housing market.

Other cited reasons—though less significant—include demand resilience, financing costs, and increased supply.

Streamlining the licensing process: the most effective short-term measure

Among the measures likely to have the greatest impact over the next two years, effectively streamlining licensing processes stands out as the most relevant initiative, with an average score of 4.17.

This is followed by a reduction in VAT on affordable housing construction (3.96), greater urban planning predictability (3.94), tax incentives for affordable housing development (3.89), public-private partnerships for housing (3.85), a reduction in operational/regulatory costs (3.81), the industrialisation of construction (3.71), the mobilisation of public assets (3.70), tax incentives for long-term rentals (3.54), and, finally, subsidised financing lines (3.40).

Structural reforms: stability and coordination between the State and the private sector

Regarding the structural reforms needed to address the housing problem in the medium and long term, participants place the highest importance on greater coordination between the State, municipalities, and the private sector—which received the highest rating (4.26). This is followed by a stable fiscal policy aimed at increasing supply (4.25), a major overhaul of the permitting process (4.14), increased productivity and the industrialisation of construction (4.07), more predictable urban planning (4.04), and a long-term policy agreement on housing (4.03).

Also valued are the expansion of public housing, the use of predictive urban planning and data-driven planning, public-led urban development and land availability, and the development of new rental models.

Private sector and technological innovation seen as part of the solution

The study also reveals that the private sector is expected to play a central role in promoting affordable housing through strengthened public-private partnerships, institutional investment in ‘build-to-rent’ projects, and the promotion of housing supported by public incentives.

AI, BIM and Industrialised construction

From a technological standpoint, experts identify modular and industrialised construction as the innovation with the greatest potential to boost housing production, followed by off-site construction, Building Information Modelling (BIM) methodology, and artificial intelligence applied to design and permitting.

In the view of the participants, these solutions could increase productivity, reduce costs and construction timelines, and accelerate the delivery of new housing.

According to Bento Aires, director of the new Real Estate Futures Center at Porto Business School, “the Barometer demonstrates that the housing crisis requires a long-term strategy based on stable public policies, more efficient permitting processes, and a strengthened capacity to increase the supply of affordable housing.”

New Real Estate Futures Center Aims to Anticipate Sector Transformation

The presentation of the newly launched ‘Housing Affordability & Public Policy Barometer’ also marked the official launch of the Real Estate Futures Center—a new impact-focused center at Porto Business School dedicated to anticipating and accelerating the transformation of the real estate sector in Portugal.

Built upon three strategic pillars—Housing & Urban Futures, Sustainable & Resilient Real Estate, and Digital & Productive Real Estate—the centre aims to bring together academia, businesses, and policymakers.

It seeks to foster applied research, innovation projects, and public policy recommendations that contribute to a more sustainable, productive, and affordable real estate market.

Source: PBS

Photo: Patrícia Gonçalves Costa, Secretary of State for Housing