Portugal Property Market Forecast: 170,000 Sales Expected in 2025 as Lisbon Prices Show First Signs of Cooling

Portugal's residential property market is projected to reach approximately 170,000 transactions in 2025, representing a 9% increase over the 156,000 sales completed in 2024, according to Ricardo Sousa, CEO of Century 21 Portugal, the country's largest real estate network by transaction volume. However, this growth masks a significant deceleration in market momentum, with transaction growth slowing from 14.5% in 2024 to single digits this year, signaling a fundamental shift in Portugal's residential property dynamics that foreign investors must understand.

More significantly for international buyers, Lisbon and Cascais—the capital city and its affluent coastal neighbor 25 kilometers west along the Atlantic coast—are already experiencing declining average transaction values, marking the first concrete evidence of price correction in Portugal's most sought-after markets. This development carries important implications for foreign investors who have driven significant demand in these premium locations over the past five years, particularly those evaluating entry points into the Portuguese market.

The slowdown reflects a critical affordability threshold where property prices have outpaced income growth to the point that even sellers find themselves priced out of replacement purchases. With official data showing 19% year-over-year price increases through Q2 2025, the market faces a structural mismatch between property values and buyer purchasing power that government incentives have proven insufficient to resolve.

The Portuguese residential market's current trajectory reflects two distinct buyer segments driving remaining transaction activity. The first comprises existing homeowners trading up or relocating, leveraging equity from properties purchased at lower price points to navigate current market conditions. The second consists of first-time buyers under 35 years old accessing government incentives introduced to facilitate market entry, including state guarantees for mortgage financing and tax reductions on transaction costs.

These incentives, while supporting transaction volumes in 2024 and early 2025, have not addressed the fundamental affordability challenge facing the broader market. As Sousa emphasizes, the core issue remains a straightforward calculation of income versus purchase price—what Portuguese market participants call the "taxa de esforço" or effort rate, measuring the percentage of household income dedicated to housing costs. For foreign investors accustomed to different income-to-price ratios in their home markets, understanding this local dynamic is essential when evaluating Portugal's property market fundamentals.

Market Implications for Foreign Investors

The deceleration in transaction growth and emerging price softness in premium markets carries several important implications for international buyers. Most significantly, the affordability ceiling that has constrained domestic buyers creates a potential opportunity window for foreign purchasers with access to international capital or higher income levels. Properties that have become unaffordable for local buyers trading up may represent relative value for international investors, particularly in Lisbon's central districts and Cascais's coastal neighborhoods where foreign buyer activity has historically concentrated.

However, investors should recognize that declining transaction values in these premium locations reflect genuine demand constraints rather than temporary market fluctuations. The pool of buyers capable of completing purchases at current price levels has contracted significantly, which has direct implications for liquidity and exit strategy considerations. Foreign investors planning eventual resale should factor in potentially longer marketing periods and increased price negotiation compared to the rapid transaction environment of 2022-2024.

The forecast for price stabilization beginning in Q2 2026 suggests a transitional period where early movers may secure properties before any potential recovery, while late entrants risk purchasing at local peaks before correction. This timing consideration is particularly relevant for investors evaluating off-plan developments with completion dates in 2026-2027, as delivery-date market conditions may differ substantially from purchase-date assumptions.

For investors focused on rental yields rather than capital appreciation, the current environment presents a more straightforward value proposition. With purchase price growth moderating while rental demand remains robust—particularly in Lisbon's international employment hubs—gross rental yields may improve from the compressed levels of recent years. Foreign investors should consult with English-speaking accountants experienced in Portuguese property taxation to model after-tax returns under current market conditions, as Portugal's tax treatment of rental income significantly impacts net investment performance.

Century 21 Portugal's Market Position

Century 21 Portugal operates as the country's largest real estate network by transaction volume, providing market intelligence based on direct operational data rather than statistical modeling. The network mediated over 15,000 property sales in the first nine months of 2025, representing a 15% year-over-year increase, with total transaction value exceeding €3.6 billion—a 28% increase reflecting both volume growth and continued price appreciation during this period.

The company's average transaction price of €246,000 across all Portuguese markets provides important context for foreign investors, as this figure sits well below the price points typically encountered in Lisbon's prime neighborhoods or Cascais's coastal areas, where properties commonly exceed €400,000-€600,000. This disparity underscores the geographic price variation within Portugal's market, with the national average heavily influenced by more affordable secondary cities and peripheral locations where price growth has actually accelerated as buyers seek alternatives to expensive primary markets.

Geographic Market Divergence and Investment Implications

The Portuguese property market increasingly demonstrates divergent performance across geographic segments, with important implications for investment strategy. While Lisbon and Cascais show early signs of price softening, secondary cities and peripheral areas continue experiencing robust price growth from lower baseline values, sustained in part by buyers priced out of premium locations seeking more affordable alternatives.

Several factors explain this geographic divergence and merit investor consideration:

• Income-Price Dynamics: Premium markets have reached absolute price levels that exceed purchasing power for most domestic buyers, while secondary locations remain within reach with government purchase assistance, creating sustained demand in these alternatives
• Supply Constraints: Properties below €300,000 have become increasingly scarce even in peripheral areas, supporting continued price growth in segments that remain accessible to first-time buyers and investors seeking lower entry points
• Government Incentive Impact: State guarantees and tax reductions for first-time buyers disproportionately benefit transactions in secondary markets where purchase prices fall within program limits, artificially sustaining demand and prices in these segments
• Foreign Buyer Concentration: International purchasers focus primarily on Lisbon, Cascais, and Algarve coastal areas, meaning these markets face demand reduction when foreign buyer activity moderates, while secondary cities depend primarily on domestic demand patterns

For foreign investors, this divergence creates distinct risk-return profiles across market segments. Premium Lisbon locations offer greater international appeal and rental demand from expatriate professionals but face near-term price pressure and liquidity constraints. Secondary markets offer lower entry costs and continued price momentum but present greater exit challenges for international sellers and limited rental demand from foreign tenants. Investors should align geographic selection with investment horizon and target buyer profile for eventual exit, consulting with investment property specialists who understand these market-specific dynamics.

The scarcity of properties below €300,000 even in peripheral areas represents a significant market development, as this price threshold historically represented the entry point for first-time domestic buyers. This upward price migration across all market segments suggests that affordability challenges extend well beyond premium locations, with implications for long-term market accessibility and potential policy responses that could affect investor returns.

Structural Housing Challenges and Long-Term Market Outlook

Century 21's leadership characterizes Portugal's housing affordability challenge as structural rather than cyclical, requiring comprehensive policy intervention and significant time to resolve. This assessment carries important implications for foreign investors evaluating Portugal's long-term market trajectory, as it suggests that current supply-demand imbalances and affordability constraints will persist absent major policy shifts or economic changes.

The structural nature of Portugal's housing challenge stems from several interconnected factors. Limited housing construction relative to household formation has created cumulative supply deficits, particularly in high-demand urban areas. Restrictive urban planning frameworks in many municipalities constrain development capacity even where demand exists. Income growth has lagged property price appreciation by substantial margins, creating affordability gaps that incremental policy adjustments cannot bridge. These factors combine to create a market environment where short-term price corrections do not resolve underlying supply-demand imbalances.

For investors, this structural dynamic suggests that any near-term price stabilization or modest correction in premium markets should not be interpreted as fundamental market weakness. Rather, it represents a temporary equilibrium where prices have reached the limits of current buyer purchasing power, with potential for resumed appreciation if incomes rise, financing conditions improve, or supply constraints ease through policy intervention. Understanding Portugal's investment risk factors within this structural context is essential for realistic return expectations and appropriate investment horizon planning.

The Parque Cidades do Tejo initiative represents the type of comprehensive planning approach that industry leaders identify as necessary for long-term market health. This supra-municipal entity coordinates urban planning across the greater Lisbon metropolitan area, defining development zones, construction capacity, infrastructure requirements, and public transportation networks in an integrated framework. Such coordinated planning could eventually increase housing supply in well-connected locations, though implementation timelines extend over years rather than months, meaning near-term market conditions will continue reflecting current supply constraints.

Investment Considerations for Foreign Buyers

The current market environment requires foreign investors to carefully evaluate entry timing, location selection, and investment strategy against a backdrop of moderating growth and emerging price softness in premium segments. Investors should recognize that the 2022-2024 period of rapid appreciation and quick transactions represents an exceptional market phase unlikely to repeat in the near term, requiring adjusted expectations for both capital appreciation and liquidity.

For investors prioritizing capital preservation and steady income, the current environment may offer improved risk-adjusted returns compared to peak market conditions. Properties purchased at stabilized or slightly reduced prices with realistic rental yield assumptions provide more conservative return profiles than purchases made during rapid appreciation phases where yields compressed significantly. Foreign buyers should conduct thorough due diligence on neighborhood rental demand, tenant profiles, and realistic vacancy assumptions, working with English-speaking real estate lawyers to structure purchases appropriately and understand all transaction costs including Portugal's IMT property transfer tax and stamp duty.

Investors maintaining conviction in Portugal's long-term fundamentals—including political stability, EU membership, growing international business presence, and quality of life factors driving continued foreign interest—may view current market conditions as a more rational entry point than the overheated environment of recent years. However, such investors should ensure sufficient capital reserves and flexible timelines to weather potential near-term price stagnation or modest correction, particularly in premium Lisbon and Cascais locations where price adjustment appears most likely.

Looking Ahead

Portugal's residential property market enters a transitional phase where transaction volumes moderate, price growth decelerates, and premium markets show first signs of correction after years of sustained appreciation. This transition reflects fundamental affordability constraints rather than economic weakness, suggesting that current market dynamics will persist until structural supply-demand imbalances improve through increased construction, income growth, or policy intervention addressing housing accessibility.

For foreign investors, this environment demands careful market analysis, realistic return expectations, and strategic patience. The opportunity set remains compelling for investors with appropriate capital, long-term horizons, and realistic appreciation assumptions, particularly as domestic buyer constraints create potential value for international purchasers less affected by local income limitations. For expert guidance on navigating Portugal's evolving property market and identifying opportunities aligned with your investment objectives, contact realestate-lisbon.com.