Portugal may have less demand and continue with houses that are too expensive

Portugal may have less demand and continue with houses that are too expensive

For years we have become accustomed to a seemingly simple explanation: houses are expensive because there is too much demand. More population, more immigration, more international buyers, low interest rates, job growth and rising incomes have created enormous pressure on the Portuguese housing market. But there is now a question that deserves to be asked: what if demand slows down and houses remain too expensive?
It is precisely this possibility that the most recent study by Morningstar DBRS puts on the table and, in my opinion, this is one of the most important conclusions to understand the future of housing in Portugal.
The numbers are impressive. Since 2019, house prices have practically doubled in Portugal and, in 2025 alone, they increased by 19%. During the same period, the country received more than 650 thousand net migrants, employment grew and real incomes improved. All this helped fuel demand much higher than the capacity of supply to respond.
Now, however, some of those drivers may start to lose steam. DBRS anticipates a possible slowdown in migration flows, a growing deterioration in housing affordability, and tighter financing conditions. Interest rates have risen again, and credit has become more expensive. In theory, less demand should mean less pressure on prices.
But the real estate market rarely works so simply.
Since 2014, Portugal has accumulated a deficit of more than 300 thousand homes, comparing the formation of new households with the number of completed houses. And the causes of this imbalance are deeply structural: lack of workers in construction, increased costs of materials and labor, scarcity of ready-to-build land, bureaucracy and slowness in planning and licensing processes.
It is precisely here that we find the great Portuguese contradiction. We may have fewer buyers and, even so, continue without enough houses. We can have more expensive credit and still maintain unaffordable prices for many families. We can have less immigration and continue to have enormous difficulty in housing workers, students and young people who want to start a family.
Because a reduction in demand does not create a single new home.
I have repeatedly argued that the housing problem in Portugal is not solved only by intervening on those who buy. For too long, we have discussed foreigners, funds, golden visas, local accommodation, taxes and credit as if there was a single person responsible for the rise in prices. All these factors can have an impact on certain markets, regions and segments. But none alone explains an accumulated deficit of more than 300 thousand houses.
Perhaps it is also necessary to recognize that affordability will not automatically return just because the market slows down. A family may stop buying because they cannot get financing, but that does not mean that they no longer need a home. They will probably move to renting, increasing the pressure on another segment that is already deeply limited. A young person may postpone leaving home with his parents. A worker may refuse a job in another region because he cannot find housing. Demand may disappear from the statistics without the real need disappearing from society.
The study also contains a signal that we should not ignore. According to DBRS's analysis, almost two-fifths of the recent rise in prices in Portugal is not explained by the economic fundamentals considered in the model. The agency considers it premature to talk about a real estate bubble and stresses that households are much less indebted today than before the last major crisis. The ratio between household debt and disposable income fell from around 100% between 2008 and 2012 to approximately 50% in 2025.
Therefore, we do not need alarmism. But we should also not confuse the absence of a financial bubble with the existence of a healthy market.
And here perhaps we, real estate professionals, should also do some self-criticism. For too long we have looked at rising prices as automatic proof of market strength. I myself recognize that it is easy to celebrate records in transactions, appreciation and demand. But a market where more and more people are no longer able to buy or rent a house cannot be evaluated only by the price per square meter.
True success should also be measured by the ability to create supply, ensure mobility, attract workers, enable young people to form new households and ensure that businesses can find housing for the people they need.
Portugal may indeed see a slowdown in demand in the coming years. But it would be a mistake to expect the market to solve a problem built over more than a decade on its own.
We need more construction, but also better planning. We need effectively available land, faster processes, municipalities with technical capacity, greater regional coordination and a vision that links housing, employment, transport and infrastructure.
Because the Portuguese problem is no longer simply that we have too much demand.
It is that we have created such a rigid market on the supply side that even a slowdown may not be enough to return accessibility.
Portugal may have fewer buyers, less immigration and more expensive credit. But as long as it continues to have few houses, blocked land, slow licensing and insufficient construction, affordability will hardly return on its own.
The market may cool down.
The problem is that the housing crisis may remain hot.