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Lisbon's property market is experiencing significant price appreciation with ongoing supply constraints and changing investment dynamics.
Property prices in Lisbon have risen by approximately 38% over the past five years, driven by persistent housing shortages, robust demand from both domestic and foreign buyers, and evolving government policies affecting the real estate sector.
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Lisbon's property market shows signs of gradual cooling rather than an imminent bubble burst, with price growth moderating from double-digit to single-digit annual increases.
While affordability challenges persist and new regulations have impacted certain market segments, strong economic fundamentals and continued housing shortages suggest sustained demand through 2026.
| Market Indicator | Current Status (2025) | Trend Direction |
|---|---|---|
| Annual Price Growth | 5% year-on-year | Moderating from previous highs |
| Average Property Price | €5,720/m² | Steady increase |
| Rental Yields | 5.65% gross average | Slight decline from 6% peak |
| New Housing Supply | 900 units expected in 2025 | Insufficient to meet demand |
| Mortgage Rates | 3.3-4.5% average | Stabilizing after previous increases |
| Time on Market | 5 months average | Increasing from previous years |
| Unemployment Rate | 5.8-6.5% | Historic lows supporting demand |
What's been the year-on-year change in Lisbon property prices over the last five years?
Lisbon residential property prices have increased by approximately 38% over the past five years, with the most recent data showing a 5% year-on-year growth in 2024-2025.
The median asking price in Lisbon reached €5,720 per square meter as of mid-2025, representing a 1.8% year-on-year increase from the previous period. The average transaction price sits slightly lower at around €5,610 per square meter.
Across Portugal, house prices increased an average of 8.29% annually from 2015 to 2024, with major cities like Lisbon experiencing cumulative five-year appreciation approaching 48%. This represents a significant moderation from the double-digit annual growth rates seen in previous years, indicating the market is beginning to stabilize.
The current single-digit growth rate suggests the Lisbon property market is cooling from its previous rapid appreciation phase, though prices continue to trend upward due to persistent supply constraints and steady demand.
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How do current property prices compare to local wages and household incomes?
Property prices in Lisbon are significantly disconnected from local earning capacity, creating substantial affordability challenges for residents.
Average net wages in Lisbon range between €1,375 and €1,490 per month, while house prices are approximately 6 times higher than annual gross household income. This ratio makes housing relatively unaffordable compared to other European cities.
Prime central Lisbon properties range between €5,560 and €6,934 per square meter, a price level that far outpaces local wage growth. The disconnect between property values and local purchasing power has widened considerably over the past five years.
This affordability gap primarily affects local buyers, who increasingly rely on mortgage financing or are priced out of certain neighborhoods. Foreign buyers with higher incomes or cash reserves continue to drive demand in premium segments.
The income-to-price ratio indicates that Lisbon's property market is increasingly supported by external capital rather than local economic fundamentals.
What is the average rental yield right now in Lisbon compared to a few years ago?
Gross rental yields in Lisbon currently average around 5.65% as of mid-2025, representing a slight decline from peak levels near 6% achieved in 2022-2023.
The decrease in rental yields reflects faster property price appreciation compared to rental rate increases. Despite this moderation, Lisbon maintains its position as one of the most profitable European capitals for buy-to-let investment.
Rental yields across Portugal overall have edged downward as price growth continues to outpace rent increases, but the country still offers attractive returns compared to other Western European markets. The yield compression indicates a maturing market where capital appreciation has been the primary driver of returns.
Current yields remain competitive for international investors, particularly when compared to major cities like Paris, London, or Amsterdam where yields often fall below 4%.
The slight yield decline suggests that future returns may depend more on capital appreciation than rental income, requiring investors to factor in longer-term market dynamics.
How many new housing units are being built in Lisbon each year, and is supply keeping up with demand?
Housing supply in Lisbon remains critically insufficient to meet demand, with only 900 new residential units expected for delivery in 2025.
Nationally, Portugal licensed 28,000 new residential units in 2024, but Lisbon's share represents a small fraction that fails to address the capital's housing shortage. The number of properties for sale in Lisbon dropped 10% year-on-year in early 2025, further tightening available inventory.
The persistent undersupply stems from multiple factors including labor shortages in construction, high material costs, and lengthy planning approval processes. These structural constraints prevent the market from responding adequately to demand pressures.
The supply-demand imbalance continues to support price growth and creates favorable conditions for property owners and investors. Without significant increases in new construction, the housing shortage is likely to persist through 2026.
This supply constraint represents one of the fundamental factors preventing a property market crash, as limited inventory supports price stability even amid changing economic conditions.
What's the current level of foreign investment in Lisbon real estate, and is it growing or shrinking?
Foreign investment in Lisbon real estate remains significant but is stabilizing rather than accelerating following recent policy changes.
Despite the removal of real estate eligibility from the Golden Visa program, Lisbon's luxury and prime property markets continue to attract international buyers, particularly Americans, Britons, and Middle Eastern investors. These buyers focus on high-end properties and premium neighborhoods.
Foreign capital continues to be a key driver of the Lisbon property market, though the pace of foreign residential investment has moderated compared to the rapid growth seen during the height of the Golden Visa program.
The policy changes have redirected some foreign investment toward other asset classes or regions, but Lisbon's fundamental attractiveness as an investment destination maintains steady international interest.
Current foreign investment levels suggest continued external demand that supports property prices, though without the speculative surge associated with visa-driven purchases.
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How much mortgage lending has increased in Lisbon recently, and what are the current interest rates buyers face?
Mortgage lending in Portugal surged 37% in 2024 before stabilizing in 2025, with current interest rates averaging between 3.3% and 4.5%.
Fixed-rate mortgage loans typically fall at the higher end of this range, while variable rates may offer slightly lower initial costs. The lending surge in 2024 responded to temporarily lower interest rates before the current stabilization period.
Loan-to-value ratios remain favorable for qualified borrowers, with loans up to 80-90% LTV available for residents and 65-75% for non-residents. These lending conditions continue to support property purchases for eligible buyers.
Current mortgage rates represent a moderate level that supports continued property purchases without creating excessive leverage. The stabilization of lending growth suggests the market is finding equilibrium after the previous surge.
Interest rate levels remain manageable for most qualified buyers, though they represent an increase from historically low rates that previously stimulated additional demand.
What percentage of Lisbon properties are being bought in cash versus with financing?
A significant share of Lisbon property transactions, especially in the luxury segment, involve cash purchases, though exact percentages fluctuate based on market conditions and buyer profiles.
Cash transactions are particularly common among foreign buyers who often have access to capital from property sales in their home countries or accumulated wealth. This trend is most pronounced in premium neighborhoods and higher-value properties.
Local buyers increasingly rely on mortgage financing amid high property prices and rising interest rates. The financing-dependent segment of the market shows greater sensitivity to interest rate changes and lending conditions.
The dual nature of the market creates different dynamics for cash versus financed segments, with cash buyers often able to complete transactions more quickly and negotiate better prices.
The prevalence of cash transactions in luxury segments provides some insulation from interest rate fluctuations that might affect mortgage-dependent buyers.
How long are properties in Lisbon staying on the market before they sell today compared to last year?
Properties in Lisbon currently take an average of 5 months to sell, representing an increase from previous years as buyer caution and rising prices affect market liquidity.
This lengthening in time on market indicates that buyers are becoming more selective and taking longer to commit to purchases. The extended sales period suggests increased price sensitivity and more thorough due diligence by potential buyers.
Compared to the rapid sales cycles seen during peak demand periods, the current market allows for more negotiation and consideration time. This shift reflects a more balanced dynamic between buyers and sellers.
The longer sales periods may also indicate that some properties are initially priced above market acceptance levels, requiring price adjustments or extended marketing periods to attract buyers.
This trend suggests a normalization of market conditions rather than distressed selling, as properties eventually sell but require more time and potentially some price flexibility.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Portugal versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What's happening with short-term rental demand in Lisbon, especially through platforms like Airbnb?
Lisbon's short-term rental market shows mixed performance with high occupancy rates but declining revenues due to increased regulation and market saturation.
The city recorded an average Airbnb occupancy rate of 82% from June 2024 to May 2025, with annual revenues around €30,000 per listing. However, year-on-year revenue fell by 4.2% as strict local regulations and oversupply of listings dampened returns.
Nearly 14,000 active Airbnb listings operate in Lisbon, creating substantial competition among hosts and pressure on pricing. The government has enacted policies to restrict new short-term rental licenses to support long-term rental supply.
These regulatory changes aim to address housing shortages by converting short-term rentals back to long-term residential use. The policy shift represents a significant change that affects property investment calculations.
While existing short-term rental properties may maintain reasonable occupancy rates, the restricted licensing environment limits expansion opportunities and may gradually reduce the sector's impact on overall property demand.
How have government policies such as rent controls, Golden Visa changes, or tax incentives impacted demand?
Recent government policy changes have moderately cooled speculative demand while addressing housing affordability concerns, though fundamental supply constraints prevent significant price reductions.
The ending of real estate eligibility for Golden Visas and stricter short-term rental regulations have slowed luxury and speculative demand. Academic studies indicate the original Golden Visa program added a 10-15% premium to Lisbon's higher-end house prices.
Policy changes are too recent to have meaningfully reduced property prices, as the effects take time to filter through the market. The fundamental supply shortage continues to support price levels despite reduced speculative activity.
Rent control measures and short-term rental restrictions aim to improve housing availability for residents, though these policies may also discourage some types of property investment and development.
The policy environment reflects government efforts to balance investment attraction with housing affordability, creating a more regulated but potentially more sustainable market structure.
What's the unemployment rate and economic growth trend in Lisbon and Portugal overall?
Portugal achieved historic low unemployment rates of 5.8-6.5% in 2025, with Lisbon outperforming national averages on employment and GDP growth.
Lisbon's GDP is projected to grow by approximately 1.8% in 2025, outpacing the country as a whole. The city serves as Portugal's economic outperformer due to strong tourism, technology, and services sectors.
The robust employment market supports housing demand from local workers and attracts domestic migration from other Portuguese regions. Low unemployment rates provide a solid foundation for mortgage qualification and rental demand.
Economic growth in key sectors creates positive conditions for property investment, as employment stability supports both residential demand and commercial real estate prospects.
The strong economic fundamentals distinguish Lisbon from other European cities facing economic challenges, providing underlying support for property market stability.
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What are local experts and real estate agencies forecasting for Lisbon property prices over the next 12–24 months?
Most experts forecast Lisbon property prices will rise by 3-7% annually through 2026, with premium neighborhoods and new developments likely to see above-average growth.
Rental yields are expected to remain attractive compared to other Western European capitals, likely sustaining continued investor interest. However, affordability pressures and potential new supply may moderate price inflation relative to previous years.
The consensus view suggests continued price appreciation at a more sustainable pace rather than the rapid growth seen in earlier years. This moderation reflects market maturation and policy impacts rather than fundamental weakness.
Premium segments and well-located properties are expected to outperform the broader market, while more affordable areas may see slower price growth as local buyers face affordability constraints.
Expert forecasts indicate a stable market environment with continued growth rather than dramatic appreciation or decline, suggesting the property bubble concerns may be overstated given underlying demand and supply fundamentals.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Lisbon's property market shows signs of gradual moderation rather than an imminent bubble burst, with price growth slowing to sustainable levels while maintaining underlying demand support.
The combination of persistent housing shortages, strong economic fundamentals, and continued investor interest suggests the market will remain stable through 2026, though affordability challenges may limit local buyer participation.
It's something we develop in our Portugal property pack.
Sources
- Benoit Properties - Portugal House Prices Rise
- LinkedIn - Lisbon Property Market 2025
- Global Property Guide - Portugal Price History
- Idealista - House Prices vs Salaries
- Global Property Guide - Portugal Rental Yields
- Pearls of Portugal - Housing Market 2025
- INVESTROPA - Lisbon Price Forecasts
- Traverse International Finance - Portugal Mortgages
- Airbtics - Airbnb Revenue Lisbon
- Trading Economics - Portugal Unemployment