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Can more housing supply improve affordability? A subnational perspective from Portugal

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  • Ribeiro, Diogo
  • de Almeida Vilares, Hugo
  • Carvalho, Luís

Abstract

We investigate the impact of housing supply on affordability in rapidly appreciating subnational markets in Portugal. Our spatial econometric model confirms a negative relation between housing stock and prices, yet predicts that, on average, maintaining the construction pace of the 2000s would lower prices by only 3%, while doubling it would bring a 6% reduction. We also find significant price impacts from short-term rentals and international demand. Simulations indicate that a policy mix combining moderate supply growth with sensible limitations in those domains could more effectively alleviate affordability pressures in high-demand regions, bringing spatial nuance to the ‘supply scepticism’ debate.

Suggested Citation

  • Ribeiro, Diogo & de Almeida Vilares, Hugo & Carvalho, Luís, 2025. "Can more housing supply improve affordability? A subnational perspective from Portugal," LSE Research Online Documents on Economics 130587, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:130587
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    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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