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The real estate market in Lisbon: 2024 forecast

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As we step into the year 2024, the real estate landscape in Lisbon continues to evolve, presenting both challenges and opportunities for investors, homeowners, and industry stakeholders.

In this article, we will give you a clear picture of what's happening in Lisbon's real estate scene for the year ahead.

If you need a full and more detailed report, with fresh data and actionable advice, please note that you can get our property pack for Portugal. This pack will also give you unlimited access to our team of experts, allowing you to ask them anything related to the housing market in Lisbon specifically.

How's the economy in Portugal doing?

Current state

The real estate market in Lisbon, and Portugal as a whole, has experienced significant changes over the years, influenced by the country's economic stability, government policies, and global trends.

Historically, Portugal's economy has had its ups and downs. Following the 2008 global financial crisis, Portugal, like many European countries, faced economic challenges.

However, since the early 2010s, the economy has been recovering steadily. This recovery has been partly fueled by the real estate market's growth, especially in cities like Lisbon and Porto.

In the real estate sector, there's been a noticeable shift. Initially, the market was more locally driven, but over recent years, there's been an influx of foreign investment. This change was largely due to Portugal's Golden Visa program, which offers residency to non-EU investors buying property above a certain value.

This program attracted many foreign investors, particularly from Brazil, China, and other non-EU countries, boosting the real estate market significantly.

The housing market in Lisbon, specifically, has seen substantial growth. Prices have risen, partly due to this foreign investment and also because of the city's growing popularity as a tourist destination.

Short-term rentals for tourists, facilitated by platforms like Airbnb, have become extremely lucrative, although this has also led to challenges for local residents seeking affordable housing.

Government policies have had a notable impact. The Golden Visa program, for instance, spurred investment but also led to concerns about housing affordability for locals.

In response, the government has implemented measures to protect local housing markets, including restrictions on short-term rentals and changes to the Golden Visa program to direct investment away from saturated urban areas.

More recently, there have been regulatory changes. The Portuguese government has been trying to balance attracting foreign investment with ensuring housing affordability for residents. Changes to the Golden Visa program, rental laws, and tax incentives are part of this balancing act.

For example, there's been a push to promote rehabilitation of old buildings and development in less dense areas.

From a local perspective, Lisbon remains a popular area for real estate investment. The city's historical areas, such as Alfama and Chiado, are particularly sought after, as are modern developments in Parque das Nações.

However, this popularity has led to higher prices, making it more challenging for locals to afford properties in these areas.

For foreign investors, Portugal offers several incentives like the Non-Habitual Resident (NHR) tax regime, which offers tax benefits for new residents.

However, there are drawbacks too, such as bureaucracy and occasionally unclear property laws. It's also worth noting that real estate prices in Lisbon are generally higher than in other Portuguese cities but are still competitive when compared to other major European capitals.

Comparatively, real estate prices in Lisbon are lower than in major neighboring cities like Madrid or Paris, offering value for money for investors. As Lisbon gains popularity, this gap is narrowing.

The legal framework for real estate in Portugal is fairly stable and transparent.

However, foreign investors should be aware of the bureaucracy involved in property transactions. Hiring a local legal expert is often advisable to navigate the process smoothly.

Outlook and forecast

Lisbon's real estate market has unique factors that distinguish it from other markets.

One of the key aspects is its blend of historical and modern properties. The city's rich cultural heritage, evident in its architecture and urban layout, attracts a specific segment of investors and buyers who are interested in properties with character and history.

Additionally, Lisbon's status as a tourist hotspot has led to a thriving market for short-term rentals, which can be more profitable than traditional leasing.

Forecasting Lisbon's economy and stability, and consequently its real estate market, requires considering several factors. Portugal's economy has been on a recovery path, and Lisbon, as the capital, often reflects this growth more visibly than other regions.

The city has attracted significant foreign investment, especially in technology and tourism, contributing to its economic vitality.

This suggests a positive outlook, but it's tempered by the need to manage the challenges of rapid growth, such as the cost of living and housing affordability for locals.

In terms of growth rate, Lisbon has often experienced faster growth compared to other regions in Portugal, partly due to its status as the capital and its appeal to international investors and tourists.

However, this growth is not without its challenges. The concentration of investment and development in Lisbon can lead to disparities with other regions and can strain local infrastructure and housing markets.

Regarding government policies, there's always the potential for changes that could impact the real estate market. These could include modifications to property taxes, rental laws, or the Golden Visa program, which have been points of contention and adjustment in recent years.

For example, any tightening of regulations around short-term rentals could impact those investing in property primarily for tourist accommodation.

Similarly, adjustments to the Golden Visa program, which have been periodically discussed, could influence the level of foreign investment in the market.

Several factors suggest potential improvements in Lisbon's real estate market. The ongoing commitment to infrastructure development, like improvements in public transportation and the expansion of the airport, enhances the city's appeal.

Additionally, initiatives to revitalize and redevelop older districts can open new opportunities for investment and development. These improvements can make Lisbon more attractive to both residents and investors, potentially driving further growth in the real estate market.

However, potential risks should also be considered. The reliance on foreign investment and tourism makes the market somewhat vulnerable to global economic shifts. Changes in global travel patterns or economic downturns in key investor countries could impact demand.

There's also the risk of a property bubble, as rapid price increases may not be sustainable in the long term.

Should these risks materialize, the real estate market could see a slowdown in investment, a stabilization or decrease in property prices, and potentially a shift in the type of properties in demand.

Investors should be mindful of these risks and consider the long-term sustainability of their investment strategies in Lisbon's dynamic market.

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What about housing prices in Lisbon?

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Current state

In Lisbon, the real estate market has experienced a notable trend in price movements over the past few years.

Since the early 2010s, following Portugal's recovery from the global financial crisis of 2008, Lisbon's real estate prices have been on an upward trajectory. This rise in prices was fueled by several factors, including economic recovery, increased foreign investment, and the city's growing popularity as a tourist destination.

When examining how real estate prices have reacted to past economic crises or booms, it's clear that these prices are sensitive to broader economic conditions. During the 2008 crisis, Portugal, like many countries, saw a dip in property values.

However, post-crisis, with the stabilization of the economy and introduction of investor-friendly policies like the Golden Visa program, there was a significant boost in property prices. This boom was particularly evident in Lisbon, which became a focal point for foreign investment in real estate.

Comparing current real estate prices with those a decade ago, there's been a substantial increase. A decade ago, the market was still feeling the effects of the global financial crisis, with lower property values and slower investment.

Today, the scenario is quite different, with prices significantly higher. This rise is attributed to the increased demand, both from domestic buyers and international investors, and the limited supply of properties, especially in popular areas of the city.

Currently, the prices are generally rising, although there are signs of stabilization in some segments of the market. The types of properties experiencing the highest growth in real estate prices are typically those in prime locations, such as the historic city center, and waterfront properties.

Properties that offer unique features, like traditional Portuguese architecture or modern luxury amenities, are also seeing significant price growth.

This is largely due to the high demand from foreign investors seeking properties with distinctive characteristics and strong potential for rental income, particularly through short-term tourist rentals.

The population dynamics in Lisbon have been changing recently as well. There's been an influx of expatriates and foreign residents, attracted by the city's lifestyle, climate, and the aforementioned Golden Visa program. This influx has contributed to the demand for housing, impacting real estate prices.

Simultaneously, there are concerns about the affordability of housing for local residents, with some being priced out of the more popular areas.

The trends in Lisbon's real estate market are the result of a combination of factors; economic recovery and stability, investment-friendly policies, the city's appeal to tourists and expatriates, and the limited availability of properties in high-demand areas.

While this has led to a boom in property prices, it also raises questions about sustainability and affordability, particularly for local residents.

As an investor or someone considering moving to Lisbon, it's important to understand these dynamics and consider both the opportunities and challenges they present in the real estate market.

Outlook and forecast

In Lisbon, several economic and demographic factors are currently influencing real estate prices.

Firstly, the influx of foreign investment plays a significant role. Programs like the Golden Visa have attracted international investors, particularly in luxury and high-end real estate. This demand from foreign buyers drives up prices, especially in sought-after areas like the historic city center and waterfront locations.

Another factor is tourism growth. Lisbon's popularity as a tourist destination has spiked, leading to increased demand for short-term rental properties.

Property owners can often earn higher returns from short-term tourist rentals than long-term local rentals, making these properties particularly attractive and driving up prices.

Additionally, demographic shifts are impacting the real estate market. There's been a trend of young professionals and expatriates moving to Lisbon, drawn by its lifestyle, climate, and growing tech industry. This influx increases demand for housing in central and trendy neighborhoods, pushing up prices.

Looking into the near future, several factors could lead to an increase in housing prices in Lisbon. Continued foreign investment, driven by programs like the Golden Visa and Non-Habitual Resident status, will likely keep demand high for luxury and unique properties.

Ongoing urban renewal projects and infrastructure improvements, such as the expansion of the metro system and redevelopment of older districts, could also enhance the appeal of certain areas, leading to price increases.

However, these trends might not uniformly affect all cities and regions in Portugal. Lisbon's unique appeal to international investors and its status as the capital make it a specific case.

Other regions may experience different dynamics based on local factors like employment opportunities, infrastructure development, and regional policies.

On the contrary, there are factors that could lead to a decrease in housing prices in Lisbon. Economic downturns, either globally or locally, could reduce foreign investment and demand for housing.

Changes in government policies, such as alterations to the Golden Visa program or increased taxes on foreign property owners, could also diminish the attractiveness of Lisbon for international buyers.

Another potential factor is the saturation of the market, especially in the short-term rental sector. If the market becomes oversaturated with properties aimed at tourists, this could lead to a decrease in rental yields, making these investments less attractive.

Any decrease in Lisbon's housing prices due to these factors may not be reflected across all Portuguese cities and regions. Each area has its unique economic and demographic dynamics.

For instance, regions less reliant on international tourism or foreign investment might not experience the same level of impact from global economic shifts or policy changes.

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How's the demand for the real estate market in Lisbon?

Current state

The current demand for residential real estate in Lisbon remains robust, driven by various factors including foreign investment, the city's growing popularity, and economic recovery.

Generally, there's a high demand, especially in certain areas of the city, with more buyers than sellers. This imbalance has contributed to the rising property prices in recent years.

In terms of the supply of new housing, it's struggling to keep pace with the demand. While there are development projects underway, the rate of new construction is often insufficient to meet the high demand, particularly for certain types of properties.

Lisbon's historical and urban planning constraints also mean that there are limits to how quickly new housing can be added, especially in the city center and other popular areas.

Buyers in Lisbon are looking for a variety of properties, but there's a noticeable trend towards certain types. Apartments in central locations, particularly those with historical value or modern amenities, are highly sought after. Properties that offer unique features, like traditional Portuguese architecture or views of the city or river, are also in demand.

Additionally, with the rise in remote work and the influx of international buyers, there's a growing interest in larger properties with space for home offices and outdoor areas.

Current interest rates for mortgages are a crucial factor in the real estate market. Portugal, like other European countries, has experienced historically low interest rates in recent years, making mortgages more affordable and increasing buying power.

This has been a significant driver in the demand for residential real estate, as lower interest rates make it more feasible for individuals to purchase homes.

Recent changes in government policies and regulations have also impacted the local real estate market. These changes include adjustments to the Golden Visa program, which may influence foreign investment patterns.

Additionally, there have been discussions around tax changes that could affect property owners, though the specifics and impacts of such changes would depend on their final form.

There's also a growing focus on affordable housing initiatives and potential subsidies for homebuyers, particularly aimed at helping locals and first-time buyers.

Zoning laws and urban development plans are continually evolving, with an emphasis on balancing the preservation of Lisbon's historical character with the need for new housing and infrastructure.

It's important to note that these factors and policies can vary over time and may have differing impacts on different segments of the market.

For example, changes that primarily affect high-end or luxury properties might not have the same impact on more affordable housing segments.

Outlook and forecast

In Lisbon, demographic shifts such as aging populations and urbanization are notably influencing the demand in the real estate market.

An aging population typically increases the demand for properties that are smaller, more accessible, and easier to maintain, like single-story homes or apartments in central locations with good access to healthcare and other amenities.

This trend also opens up opportunities in the market for retirement homes or communities specifically designed for older residents.

Urbanization, on the other hand, is driving demand for housing in city centers and well-connected areas. Young professionals and families are increasingly moving to urban areas for better job opportunities and amenities.

This shift influences the demand for apartments and townhouses in these areas, especially properties that cater to the needs of a modern urban lifestyle, such as those with smart home features, communal spaces, or proximity to public transport and amenities.

Regarding household formation trends, there's a growing preference for smaller household units in Lisbon. This shift is due to several factors, including economic considerations and lifestyle choices. Young people and professionals are more inclined towards apartments, particularly in vibrant neighborhoods or near workplaces.

This demand influences the type of properties being sought - with a focus on one or two-bedroom apartments that are affordable yet modern and well-located.

The trends in real estate as an investment in Lisbon in Lisbon have been evolving. With the city's increasing popularity among tourists and expatriates, there's been a surge in demand for properties that can be used for short-term rentals or as holiday homes.

This trend is particularly strong in areas with high tourist appeal, such as the historic city center or near landmarks.

As a result, apartments in these areas, especially those with unique features or luxury amenities, are highly sought after by investors.

Cultural trends also play a role in shaping the housing market. For example, there's a growing awareness and preference for sustainable living, which has increased the demand for eco-friendly homes or properties with green features.

Additionally, the cultural value placed on historic preservation in Lisbon fuels interest in older properties that offer a sense of history and character, especially among foreign buyers who are drawn to the city's unique cultural heritage.

In terms of investment versus living purposes, there's a notable trend of people buying properties more as investments. This trend is partly driven by the lucrative returns from short-term rentals and the city's appeal as a tourist destination.

Foreign investment plays a significant role in this regard, with many non-local investors purchasing properties for rental purposes or as second homes.

Foreign investment is encouraged through programs like the Golden Visa, which grants residency in exchange for real estate investment. This program has significantly boosted demand for certain types of properties, particularly high-end and luxury real estate.

However, it's also led to concerns about housing affordability for locals and has prompted discussions about potential restrictions or changes to the program.

Finally, niche markets in Lisbon's real estate are experiencing unique trends. The luxury property market is robust, catering to high-net-worth individuals looking for exclusive properties with unique features.

There's also a growing market for eco-friendly and sustainable homes, driven by environmental awareness and a desire for energy-efficient living spaces. These niche markets cater to specific buyer preferences and are influenced by broader societal trends and values.

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How's the rental market in Lisbon?

Current state

In Lisbon, the demand for rental properties is strong, influenced by various factors including tourism, the city's growing popularity among expatriates, and local housing needs.

The types of properties in higher demand are largely determined by the location and the target tenant group.

In urban areas, particularly in central Lisbon and popular neighborhoods, apartments are in high demand. These areas attract a diverse demographic, including young professionals, expatriates, and students.

Tenants in these areas often prioritize location, preferring properties that are close to work, educational institutions, and amenities like restaurants, shops, and public transport.

Smaller apartments, typically one or two bedrooms, are especially popular due to their affordability and practicality for single occupants or small families.

Features most sought after by tenants in these urban rental properties include modern amenities like high-speed internet, furnished interiors, and energy-efficient appliances. In Lisbon's historic areas, apartments with traditional architectural elements are also appealing, offering a unique living experience.

In suburban and rural areas around Lisbon, the demand shifts slightly. Here, tenants often look for larger properties, such as single-family homes, which offer more space and are more suitable for families.

These areas attract tenants who prefer a quieter lifestyle, away from the hustle and bustle of the city center. Features like outdoor space, parking, and proximity to good schools become more important.

While the rental demand in these areas might be lower compared to the city center, there's a steady market driven by families and individuals seeking a more relaxed lifestyle.

Tenant preferences vary significantly based on demographic characteristics. For example, students and young professionals often prioritize affordability and location, opting for shared accommodations or smaller apartments close to universities or urban workplaces.

Retirees, on the other hand, may seek quieter, more spacious properties, possibly in suburban or rural areas, with easy access to health services and community activities.

Income levels and economic factors play a crucial role in determining the type of properties tenants can afford. Higher-income tenants are more likely to rent larger, well-located properties with premium amenities, while those with lower incomes might opt for smaller apartments or shared housing options, often in less central areas.

Certain regions in Lisbon do have a high concentration of specific tenant groups. For instance, areas near universities are popular among students, while neighborhoods known for their nightlife and cultural amenities attract young professionals.

Conversely, areas with a more relaxed pace and lower cost of living might attract retirees or families.

Outlook and forecast

The rental market in Lisbon is influenced by several key factors, each contributing to its dynamics and trends.

One of the primary influences is the city's popularity as a tourist destination. The demand for short-term rentals, especially through platforms like Airbnb, has surged, particularly in central and historic areas.

This trend often leads to higher rental prices in these areas and sometimes reduces the availability of long-term rental properties for locals.

Evolving lifestyles and work patterns are also shaping the rental market. The rise of remote work, accelerated by the COVID-19 pandemic, has changed how people think about living and working spaces.

There's a growing preference for properties that can accommodate home offices, have reliable high-speed internet, and offer comfortable living spaces, as people are spending more time at home.

This shift might lead to increased demand for larger apartments or homes with additional space for a home office, particularly in quieter, residential areas that were previously less in demand.

Demographic changes are evident in Lisbon, with an increasing number of expatriates and young professionals moving to the city. This shift impacts the rental market, as these groups often seek properties in vibrant, well-connected areas. They tend to prioritize modern amenities, proximity to leisure activities, and public transportation access.

Emerging urban areas in Lisbon, such as Parque das Nações and areas around the new technology and business hubs, are becoming new hotspots for rental properties.

These areas offer modern living spaces, are well-connected to the city center, and are close to business districts, appealing particularly to professionals and expatriates.

Technological advancements are significantly impacting the rental market. The ease of finding and booking rental properties online has made the process more efficient for both landlords and tenants.

Property management technologies, including automated payment systems and maintenance request platforms, are enhancing the rental experience.

There's also a growing movement towards sustainability and green living. This trend is reflected in the increasing demand for eco-friendly homes and properties with energy-efficient features. Tenants are becoming more environmentally conscious, seeking rentals with green spaces, recycling facilities, and energy-saving appliances.

The rental market forecast across various regions of Portugal varies. In urban areas like Lisbon and Porto, the demand for rental properties remains high, driven by tourism, expatriates, and students.

In contrast, rural and some suburban areas may experience a steadier or lower demand, influenced by factors such as the availability of jobs, lifestyle preferences, and access to amenities.

The long-term outlook for the rental market in Lisbon considers these factors, suggesting a continued strong demand in urban and emerging business districts, with a shift towards properties that cater to remote work and sustainable living.

The market is likely to remain dynamic, with adjustments to the balance between short-term and long-term rentals, and evolving tenant preferences.

Finally, there are niche markets in Lisbon experiencing unique trends. Luxury properties, particularly in prime locations, continue to attract high-income tenants and expatriates. The market for eco-friendly homes is also growing, catering to environmentally conscious tenants who prioritize sustainability in their lifestyle choices.

Make sure you understand the real estate market in Lisbon

Don't rush into buying the wrong property in Portugal. Sit, relax and read our guide to avoid costly mistakes and make the best investment possible.

real estate market Lisbon

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.