Conclusions and outlook: 2030 and 2035

In this chapter

The current situation

Prices kept rising in 2026: +17.8% in the first quarter and +16.5% in the second, year on year (secondary source, to be confirmed in INE releases). Rents on new contracts rose 9.1% in the first quarter. The cost of building a new home accelerated again with the energy shock linked to the conflict in the Middle East: +7.5% in August 2026.

The Banco de Portugal projects average growth in housing investment of about 2% a year in 2026–2028, below 2024–2025, against a background of slower population growth, slowing real disposable income and continuing affordability challenges1. The IMF considers that prices “look stretched” relative to their long-term drivers, but that the risk of a short-term correction is contained2.

What brought us here

The crisis results from several forces that added up. Some date from before 2015; others are recent. None of them, on its own, explains it.

• Collapse of construction — from 79,564 homes a year (2000–2010) to 16,283 (2015–2025). Strong evidence.
• Demographic demand shock — +824,914 residents between 2021 and 2025, almost all through immigration, for 95,294 new homes. Strong evidence.
• Rigid supply — the Banco de Portugal estimates that demand passes through more to prices where supply is less elastic. Strong evidence.
• Construction costs — +33% between 2020 and 2025; labour +41%. Strong evidence.
• Residual public housing — about 2% of the stock. Strong evidence.
• Foreign demand, tourism and short-term rentals — effect concentrated in the Algarve, Lisbon, Madeira and the historic centres. Local evidence.
• Low interest rates, smaller households and demand incentives — moderate contributions.

2030 and 2035: three scenarios

The benchmark for needs is a study by the European Commission’s Joint Research Centre (JRC): by 2035, Portugal needs about 465,000 new homes, mostly in the Lisbon and Porto regions3. At the 2025 pace, the decade would produce about 273,000.

Cumulative new homes, 2026–2035: two construction scenarios and estimated need

Cumulative dwellings completed · number · illustrative scenarios (own calculation) and JRC estimate

• A · Slow recovery
• B · Supply acceleration
• Estimated need (JRC)

• A · Slow recovery — ≈ 161,000 homes by 2030 and ≈ 336,000 by 2035; ≈ 130,000 would be missing. Prices and rents keep growing faster than earnings. Author's analysis
• B · Faster supply — ≈ 185,000 by 2030 and ≈ 435,000 by 2035, close to the need. Price growth approaches income growth by the end of the decade. Author's analysis
• C · Shock and adjustment — higher interest rates and less immigration cool demand, but construction also falls: shortage postponed, not solved. Author's analysis

Conclusions

1. Well supported: Portugal builds a fifth of the new homes it built at the start of the century, and the recovery since 2015 has been slow.
2. Well supported: between 2021 and 2025 the population grew by about 825,000 people and about 95,000 new homes were completed.
3. Well supported: when supply does not respond, more demand translates mainly into price.
4. A relevant but local contribution: non-resident foreign demand and short-term rentals.
5. Shared responsibility: the collapse of construction predates 2015; the slowness of the response spans several governments. Author's analysis
6. The structural challenge: without building about 46,000 homes a year for a decade, where demand is growing, a lasting improvement in affordability is unlikely. Author's analysis