Authored by the expert who managed and guided the team behind the Portugal Property Pack
Yes, the analysis of Lisbon's property market is included in our pack
Lisbon's property market in 2025 presents both exceptional opportunities and significant challenges for investors. Property prices have nearly doubled since 2020, reaching between €5,600 and €6,800 per square meter, while rental yields range from 3.8% to 6.5% depending on location.
The Portuguese capital attracts international investors with strong rental demand from digital nomads and expats, but faces increasing regulatory restrictions on short-term rentals and high transaction costs that can significantly impact returns.
If you want to go deeper, you can check our pack of documents related to the real estate market in Portugal, based on reliable facts and data, not opinions or rumors.
As of September 2025, Lisbon apartment prices average €5,600-€6,800 per square meter, representing a near doubling from 2020 levels. Net rental yields after taxes and costs typically range from 2% to 3.5% for foreign investors.
While gross rental yields can reach 6.5% in emerging neighborhoods, strict Airbnb regulations and high transaction costs of 7-10% significantly impact investment returns.
| Investment Metric | Current Range | Key Considerations |
|---|---|---|
| Average Price per sqm | €5,600 - €6,800 | Prime areas reach €10,000-€12,000 |
| Gross Rental Yield | 3.8% - 6.5% | Higher yields in emerging neighborhoods |
| Net Rental Yield | 2% - 3.5% | After 28% tax and management costs |
| Transaction Costs | 7% - 10% | Including IMT, stamp duty, legal fees |
| Capital Appreciation | 6% - 8% annually | Expected to moderate from recent highs |
| Mortgage Rates (Non-residents) | 3% - 4% | 60-70% LTV typically available |
| Total Return Projection (10-year) | 6% - 8% IRR | Combining rental income and appreciation |
How much are average property prices per square meter right now in Lisbon, and how do they compare to five years ago?
As of September 2025, Lisbon property prices average between €5,600 and €6,800 per square meter for apartments, representing an extraordinary price surge over the past five years.
The most dramatic increase occurred between 2020 and 2025, when median city center prices jumped from approximately €3,000-€3,500 per square meter to current levels. This represents nearly a 100% increase in just five years, making Lisbon one of Europe's fastest-appreciating property markets.
Prime locations and luxury new-builds in central districts now command between €10,000 and €12,000 per square meter. Areas like Chiado, Príncipe Real, and premium waterfront developments have seen the steepest price escalations, driven by international demand and limited supply.
The price acceleration intensified particularly from 2020 to 2023, with annual growth rates of 10-15% during this period. Growth has moderated slightly in 2024-2025 to approximately 7-8% annually, but prices remain at historic highs.
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What are the typical gross rental yields in different Lisbon neighborhoods, and which areas perform best?
Gross rental yields in Lisbon vary significantly by location, with citywide averages ranging from 3.8% to 4.3% for standard apartments as of September 2025.
The highest-performing neighborhoods for rental yields include Marvila, Lumiar, Oeiras, Intendente, parts of Benfica, and Campo de Ourique, where well-positioned 2-bedroom apartments can achieve gross yields of 6% to 6.5%. These emerging areas benefit from lower purchase prices combined with strong rental demand from young professionals and international residents.
Studios and smaller units typically generate higher yields across all areas, ranging from 4.2% to 5.1% gross, due to their lower acquisition costs and consistent demand from students and short-term residents. Prime central districts like Chiado, Bairro Alto, and Avenidas Novas often yield below 4% due to their premium purchase prices.
Peripheral areas and value-oriented neighborhoods consistently outperform luxury districts in yield terms, though they may offer less capital appreciation potential. The yield differential between emerging and established areas has narrowed as gentrification spreads across the city.
How much can I realistically expect to net after taxes, maintenance, and management costs on a rental property in Lisbon?
Foreign investors can expect net rental yields of 2% to 3.5% after all taxes and expenses, which represents a significant reduction from gross yields.
| Cost Category | Typical Rate | Impact on Yield |
|---|---|---|
| Non-resident income tax | 28% (flat rate) | -1.1% to -1.8% |
| Property management | 7-10% of rental income | -0.3% to -0.6% |
| Maintenance & repairs | 5-10% of rental income | -0.2% to -0.4% |
| Condominium fees | €50-€150/month | -0.2% to -0.5% |
| Insurance | €200-€500/year | -0.1% to -0.2% |
| IMI property tax | 0.3-0.8% of taxable value | -0.1% to -0.3% |
| Vacancy periods | 4-7% annual vacancy | -0.2% to -0.4% |
A practical example: a property generating 4.3% gross yield will typically net between 2% and 2.5% after the 28% non-resident tax, management fees, maintenance costs, and other expenses. Properties in higher-yielding emerging districts may achieve net returns up to 4% in optimal scenarios.
The 28% flat tax rate on rental income for non-residents represents the largest single cost reduction, though some expenses like maintenance and improvements can be deducted before tax calculation.
What is the average occupancy rate for short-term rentals versus long-term rentals in Lisbon today?
Short-term Airbnb rentals in Lisbon achieve an average occupancy rate of 82%, equivalent to approximately 299 nights per year, with peak performance during May and April.
Long-term rentals maintain higher occupancy rates of 93% to 96% in well-located properties, benefiting from persistent housing demand and limited rental supply throughout the city. The rental market remains tight with low vacancy rates due to continued population growth and international migration.
Seasonal variations significantly impact short-term rental performance, with summer months (June-August) typically achieving 90%+ occupancy while winter months may drop to 70-75%. Long-term rentals maintain more stable occupancy throughout the year.
The gap between short-term and long-term occupancy rates has narrowed as Airbnb supply has increased and regulations have tightened, making long-term rentals increasingly attractive from a cash flow stability perspective.
How strict are the local rules on Airbnb and short-term rentals, and how do they affect potential returns?
Lisbon has implemented some of Europe's strictest short-term rental regulations, with new Alojamento Local (AL) licenses completely frozen in 19 core neighborhoods as of September 2025.
New Airbnb permits are absolutely prohibited in areas where more than 5% of residential properties are already registered as short-term rentals, including prime tourist districts like Baixa, Alfama, Bairro Alto, and most historic parishes. These bans are permanent and affect property resale values in these zones.
Existing AL licenses can continue operating, but transferring or relicensing properties in restricted zones is virtually impossible, creating a two-tier market where properties with grandfathered permits command premium prices. Investors purchasing properties without valid AL permits in restricted areas cannot convert them to short-term rentals.
Fines for illegal short-term rental operations can be substantial, and the city actively monitors compliance through online platforms and neighbor reports. Properties in unrestricted outer neighborhoods can still obtain new AL licenses, but these areas typically generate lower rental rates.
These regulations directly impact investment returns by limiting income potential and reducing resale liquidity for properties in tourist-heavy central areas.
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What taxes do I have to pay as a foreign investor when I buy, rent out, and eventually sell property in Lisbon?
Foreign property investors in Lisbon face a comprehensive tax structure that significantly impacts overall returns across the entire investment lifecycle.
Purchase taxes include IMT (transfer tax) with progressive rates up to 7.5% for properties above €633,453, plus a higher rate for non-resident investors. Stamp duty adds 0.8% of the declared property value, while notary, registry, and legal fees typically total an additional 1.5-3% of purchase price.
Rental income is subject to a flat 28% tax rate for non-residents on net income after allowable deductions. The annual IMI property tax ranges from 0.3% to 0.8% of the official taxable value, which is typically below market value. Properties valued above €600,000 may also be subject to AIMI wealth tax.
Capital gains tax on property sales is 28% for non-residents, calculated on the difference between sale and purchase prices. Unlike Portuguese residents, foreign investors cannot benefit from reinvestment exemptions that reduce or eliminate capital gains tax.
Additional costs include 0.6% stamp duty on mortgage loans for financing, and various legal and administrative fees for property transfers and loan settlements.
How easy is it to secure financing as a non-resident, and what are the average mortgage rates available right now?
Non-resident financing in Portugal is available from major Portuguese banks, but comes with stricter terms and higher down payment requirements compared to resident borrowers.
Loan-to-value ratios for non-EU citizens are typically limited to 60-70%, requiring down payments of 30-40% of the property value. EU citizens may qualify for slightly better terms, with LTV ratios potentially reaching 80% in some cases.
Current mortgage rates as of September 2025 average 3-4% for variable rates and 3-6% for fixed rates, depending on the borrower's profile and loan duration. Most banks offer Euribor-linked variable rates with margins of 1-2% above the base rate.
The financing process typically requires extensive documentation including proof of income, tax returns, bank statements, and employment verification from the home country. Processing times can extend 6-8 weeks, and banks may require Portuguese tax numbers and local bank accounts.
Stamp duty of 0.6% applies to the loan amount, adding to overall financing costs. Some banks also require mortgage life insurance and property insurance as loan conditions.
What have been the historical capital appreciation rates in Lisbon, and what are the forecasts for the next five to ten years?
Lisbon property prices have delivered exceptional capital appreciation over the past decade, with values more than doubling since 2015 and growing 10-15% annually from 2020 to 2023.
The most recent growth has moderated to 7-8% in 2024-2025 as the market reaches new price levels and affordability constraints begin to impact demand. Despite this moderation, Lisbon continues to outperform most European capital cities in terms of price appreciation.
Market analysts forecast continued positive growth of 6-8% annually through 2026, driven by ongoing infrastructure investment, international demand, and persistent housing shortages in central areas. However, increased housing supply planned for 2027 and beyond may moderate price growth to more sustainable levels.
The key drivers supporting continued appreciation include Lisbon's growing status as a European tech hub, the Non-Habitual Resident tax program attracting wealthy foreigners, and major infrastructure projects like airport expansion and metro extensions. However, affordability concerns and potential regulatory changes to foreign investment programs represent downside risks.
Long-term forecasts suggest annual appreciation may settle into a 4-6% range after 2027 as the market matures and supply increases, still representing solid real returns above inflation.
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.
How does the demand from digital nomads, expats, and students impact rental prices and stability in Lisbon?
The influx of digital nomads, international expats, and students has fundamentally transformed Lisbon's rental market, driving up prices and creating new demand patterns across different neighborhoods.
Digital nomads and remote workers, attracted by Portugal's D7 visa and favorable tax programs, typically seek furnished apartments in well-connected areas, pushing up rents in neighborhoods like Santos, Estrela, and Avenidas Novas. This demographic often pays premium rents for short-to-medium term contracts and quality amenities.
The international student population, particularly in business and technology programs, creates consistent demand for studio and 1-bedroom apartments near universities and metro lines. Student housing demand remains relatively stable year-round, providing predictable rental income.
Long-term international residents and expat families have expanded rental demand beyond traditional central areas into emerging neighborhoods like Marvila, Olivais, and outer districts, contributing to rental price growth and increased occupancy rates across the city.
This international demand has increased rent stability and reduced seasonal variation in many areas, as foreign tenants often commit to longer lease terms compared to local renters and are less sensitive to modest rent increases.
What are the biggest risks to Lisbon property returns right now—legal, economic, or tourism-related?
The primary risk to Lisbon property returns comes from regulatory changes, particularly the ongoing tightening of short-term rental regulations that can significantly impact property values and income potential.
Legal risks include the expansion of Airbnb restrictions to additional neighborhoods, potential rent control legislation for long-term rentals, and possible changes to the Non-Habitual Resident program that attracts foreign investment. The government has signaled intentions to prioritize housing affordability over investor returns.
Economic risks center on the high entry prices that may limit future appreciation potential, rising interest rates that increase financing costs, and potential oversupply in certain submarkets as developers respond to high prices with increased construction activity.
Tourism-related risks affect properties dependent on short-term rentals, as economic downturns, travel disruptions, or shifts in tourist preferences could impact occupancy rates and rental income. The concentration of tourism in certain areas also makes these properties vulnerable to local policy changes.
Market liquidity risks exist for properties without short-term rental permits in tourist-heavy areas, as the pool of potential buyers shrinks and resale values may suffer. Currency risk also affects foreign investors if the euro weakens against their home currencies.
What are the transaction costs, fees, and stamp duties I need to factor in when buying property in Lisbon?
Total transaction costs for property purchases in Lisbon typically range from 7% to 10% of the purchase price, representing a significant upfront investment beyond the property cost.
| Cost Category | Rate/Amount | On €500,000 Property |
|---|---|---|
| IMT (Transfer Tax) | Up to 7.5% (progressive) | €15,000 - €37,500 |
| Stamp Duty | 0.8% of property value | €4,000 |
| Legal Fees | 1-2% of property value | €5,000 - €10,000 |
| Notary & Registry | €500 - €1,500 | €1,000 |
| Mortgage Stamp Duty | 0.6% of loan amount | €1,800 (70% LTV) |
| Bank Fees & Valuations | €1,000 - €3,000 | €2,000 |
| Total Transaction Costs | 7-10% of purchase price | €35,000 - €50,000 |
The IMT transfer tax represents the largest single cost, with progressive rates that can reach 7.5% for properties above €633,453, and higher rates may apply for non-resident investors or second homes. Properties below €92,407 are exempt from IMT, but such properties are rare in Lisbon.
Legal representation is mandatory in Portugal and typically costs 1-2% of the property value. These fees cover due diligence, contract negotiation, and representation at the final deed signing.
Ongoing costs include annual IMI property tax of 0.3-0.8% of the taxable value, and potential AIMI wealth tax for high-value properties or investors holding multiple properties above combined thresholds.
If I invest €500,000 in Lisbon property today, what is the most likely return scenario over the next ten years?
A €500,000 property investment in Lisbon can realistically generate total returns in the 6-8% annual IRR range over ten years, combining rental income and capital appreciation.
Based on current market conditions, such a property would likely generate gross rental income of €20,000 to €30,000 annually (4-6% gross yield), translating to net rental income of €10,000 to €17,500 after taxes and expenses (2-3.5% net yield).
Assuming 6% annual capital appreciation, the property could appreciate to approximately €900,000 over ten years. This represents total capital growth of €400,000, while cumulative net rental income over the decade could total €100,000 to €175,000.
The total return scenario includes capital appreciation of approximately 80% plus net rental yield of 20-35% over the ten-year period, resulting in total returns of 100-115% before factoring in leverage effects.
With 70% financing at current rates, the leveraged returns could potentially reach 10-12% IRR, though this amplifies both returns and risks. The success of this scenario depends on maintaining rental demand, avoiding major regulatory changes, and achieving projected appreciation rates.
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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 property investment presents compelling opportunities for investors seeking European real estate exposure, with strong rental demand and continued price appreciation expected through 2026.
However, high transaction costs, restrictive short-term rental regulations, and elevated entry prices require careful analysis and realistic return expectations for optimal investment outcomes.
Sources
- MonoEstate - 2025 Lisbon Property Market Guide
- InvestRopa - Lisbon Price Forecasts
- ImmoLusitania - Portugal House Prices Report
- Global Citizen Solutions - Portugal Real Estate Market
- Global Property Guide - Portugal Rental Yields
- PortuTax - Rental Income Tax Guide
- Airbtics - Airbnb Revenue Lisbon
- Rental Scale Up - Lisbon Short-term Rental Bans
- Traverse International Finance - Portugal Mortgage Guide
- Property Market Index - Portugal Forecast