Property investment and housing affordability in Lisbon and Porto

This study describes how the housing markets in Lisbon and Porto have developed over the past decade, in terms of property investment and housing affordability. Like many cities in Europe, Portugal’s two biggest cities have witnessed significant changes in their housing markets. Foremost, both cities have become increasingly attractive to tourists, as well as investors. Foreign direct investment in real estate and construction doubled in the last 10 years. These capital inflows strongly contributed to the regeneration and revitalization of inner city neighbourhoods. At the same time, these developments are associated with an increasing socio-spatial segmentation of the residential market. In 2019, the average number of months until a dwelling is sold or rented has decreased to record low values. In parallel, the years of income needed for families to acquire a home substantially increased. In central Lisbon and Porto, as well as adjoining municipalities in the metropolitan area, the percentage of average monthly income spent on rental costs for the lower classes, can increase above 69%. A number of policies have been implemented to attract (foreign) investment and to stimulate renovation, as well as to support and increase housing affordability. Moreover, in response to its impact on house prices and evictions of residents, short-term accommodation for tourists has been progressively regulated since 2014. Nonetheless, in general, housing affordability in both cities decreased for the middle classes and the younger generations, whereas locally driven incomes are not compatible with the more globally driven house and rental price developments.