Tourists exert enormous pressure on the apartment market.
Housing prices in the EU real estate market have risen significantly over the past five years, with Portugal emerging as a leader in housing costs. These conclusions are contained in a report published on Tuesday by the European Commission titled "Residential Real Estate in the European Union: Market Development, Key Factors, and Policy."
The authors cite several reasons for the price surge, including higher interest rates than before, increased demand for housing from wealthy families and investors, migration, the growth of short-term rentals, and a shortage of new spaces and labor in the construction sector.
Are Tourists to Blame?
From 2014 to 2024, housing prices in the EU increased on average by 50 percent, "but in Hungary, Lithuania, the Czech Republic, Portugal, Estonia, Bulgaria, and Poland, the nominal increase in housing prices exceeded 200 percent," the report states.
According to researchers, housing prices in Portugal are currently "overvalued by about 35 percent," and this trend continues. The authors of the report indicate that one of the main reasons for this dynamic has been the tourism boom, which has led to increased demand for short-term rentals. Against this backdrop, long-term rentals have also risen, making it harder to find options for renting for long months and years.
"There is increasing evidence that the growth of tourism in general and the emergence of short-term rental platforms in particular have contributed to rising rents and housing prices in certain prestigious areas, such as historical city centers," the study concludes, which covers EU countries as a whole.
But even here, Portugal stands out. According to a study conducted by ISCTE - Instituto Universitário de Lisboa, the share of public housing in the country is one of the lowest in Europe - about 2% of the total housing stock.
In many urban areas, part of the housing stock is owned by companies, and a prolonged period of low interest rates has fueled demand from institutional investors for purchasing housing.
Statistics on the issuance of building permits are also problematic, the authors write: in countries like Portugal, Croatia, Spain, and Greece, this indicator sharply declined after the global financial crisis and is now "close to a historical minimum."
The complex bureaucratic procedure for obtaining building permits also plays a role in the housing shortage. "In most EU countries, there are fixed deadlines for issuing permits - from 3 weeks in Lithuania to 31 weeks in Portugal," the authors of the EU report write.
Shortage and... Empty Homes Nearby
Amid the shortage of affordable housing, the authors of the study draw attention to the glaring fact - the enormous amount of vacant properties in European countries. "The problem appears serious at the EU level - about one in six properties in Europe is vacant," the report states.
And once again, Portugal leads the way, topping the list of countries with vacant homes alongside Bulgaria, Romania, Malta, Cyprus, and Hungary.
Politicians Must Get Involved
The issue of the housing crisis is constantly raised in Portuguese politics and society, with demonstrations against rising rents and the lack of affordable housing being common in the country.
Among the measures presented by the government is a new tax incentive for the construction sector, specifically a reduction of VAT to 6% for projects costing no more than 648,000 euros. A similar VAT rate will also apply to the rental of housing costing up to 2,300 euros.
Most of the measures proposed by the cabinet are tax-related and therefore depend on parliamentary approval, but changes concerning rentals are also planned.
In June, the European Commission warned that Portuguese governments are ineffectively responding to the housing crisis, recommending the adoption of specific measures such as rent control.
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