Rental Costs Increase Financial Burden on Portuguese Households, Reports Idealista
A recent market report has announced that the financial effort required to rent a home in Portugal has increased, despite a slowdown in the rate of rent hikes. According to data published by the real estate portal Idealista, the national average rental effort rate reached 83% in the second quarter of 2025. This represents a one percentage point increase from the 82% recorded in the same quarter of 2024. The report indicates that while the annual rent increase was 3.5%, this was still sufficient to intensify the financial pressure on tenants. In contrast, the effort rate for purchasing a home remained stable at 71% over the same period. This stability is attributed to a balance between rising house prices, which saw an 8% year-over-year increase, and a concurrent decrease in interest rates for housing loans, as reported by financial institutions.
The detailed breakdown of price movements by property type and region shows significant variations across the country's 20 largest cities. The city of Faro, the regional capital of the Algarve, recorded the most substantial increase in its rental effort rate, which surged from 70% in the second quarter of 2024 to 90% in the second quarter of 2025, a rise of 20 percentage points. Other cities experiencing notable increases in rental burden include Ponta Delgada (+15 p.p.), Guarda (+4 p.p.), and Funchal (+3 p.p.). However, several key urban centers saw a decrease in the rental effort rate, including Lisbon (-3 p.p.), Porto (-1 p.p.), and Setúbal (-3 p.p.), suggesting that income growth may be providing some relief in these specific markets. Despite these localized decreases, real estate agency reports and market observations confirm that all major cities still have effort rates far exceeding the 33% benchmark recommended by financial advisors.
In the home purchase market, buyer and seller behavior has been influenced by these shifting affordability metrics. Setúbal saw the largest increase in its home purchase effort rate, which climbed by 6 percentage points to 55%. Lisbon's rate also rose by 2 percentage points to an exceptionally high 108%, indicating that average mortgage payments now exceed the average local salary. Conversely, the mortgage market response and improved lending conditions contributed to a decrease in the purchase effort rate in 12 cities. The most significant drops were seen in Funchal and Vila Real, both decreasing by 14 percentage points. The report from Idealista also highlights that six cities, primarily in the country's interior such as Castelo Branco (17%) and Guarda (17%), currently offer the possibility of purchasing a home with a financing commitment below the recommended 33% threshold. This data provides a granular view of the property market's trajectory, reflecting the complex interplay between rental demand, sales prices, and wage growth across Portugal.
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