House prices, credit, and housing: the Bank of Portugal's warning for the real estate market

In an interview with Conversa Capital, from Jornal de Negócios and Antena 1, Álvaro Santos Pereira, governor of the Bank of Portugal, issued several important warnings about housing, credit, family debt, and financial stability.

The main message is clear: Portugal is not facing a financial crisis, nor are there evident signs of a classic speculative bubble. But there are risks that should not be ignored. According to Álvaro Santos Pereira, governor of the Bank of Portugal:

“We are creating conditions where housing affordability is becoming a problem for many of our families and, mainly, for young people.”

This sentence sums up well the moment we are living. The market remains dynamic, demand remains high, but families' ability to buy or rent a house is increasingly pressured. 

Portugal was one of the countries where house prices rose the most

According to Álvaro Santos Pereira, between 2015 and 2025, housing prices in Portugal were the ones that rose the most in the entire Eurozone. In the European Union, only Hungary recorded higher increases, for specific reasons of its own market.

The most recent data is particularly expressive: in the last year, prices increased by 17.6%.

At the same time, housing credit is growing by nearly 10% per year and consumer credit by almost 7%. For the Governor of the Bank of Portugal, these growth rates require attention, especially when they coexist with already very high prices.

“Maintaining housing credit growth rates around 10% with such sharp price increases can cause problems we want to avoid.”

This is not a warning against buying a house. It is, above all, a warning for families, banks, and policymakers not to repeat past mistakes.

Housing is today a social and financial problem

The governor was clear in linking the housing issue to two central themes: social cohesion and financial stability.

When a family cannot find a decent house to buy or rent, the problem is not just individual. It affects family stability, professional mobility, youth retention, birth rates, productivity, and even the country's ability to retain talent.

Lisbon, Porto, and the Algarve were pointed out as areas where this difficulty is especially felt.

“In areas like Lisbon, Porto, and the Algarve, it is becoming very difficult for families to have a decent place to live, whether to buy or rent.”

For those who follow the market on the ground, this reality is not surprising. There is demand, there is a desire to buy, there are families with stable incomes, but often the price asked for properties no longer fits the real financial capacity of buyers.

The Bank of Portugal wants to curb excesses in credit

One of the most relevant novelties of the interview was the confirmation that the Bank of Portugal intends to adjust some housing credit rules.

Among the ongoing measures is the reduction of the maximum effort rate from the current 50% to 45%. That is, the credit installment will be able to represent a smaller slice of the family's monthly income. The goal is simple: to prevent buyers from being too pressured by an installment that is difficult to support.

There should also be adjustments in loan maturities. In the case of young people up to 35 years old, it will still be possible to have loans up to 40 years. But the Bank of Portugal wants to ensure that the rules are enforced more rigorously.

“What we are talking about here are adjustments so that families themselves do not over-indebt.”

This is a sensitive issue because, on the one hand, stricter rules may make it difficult for some families to access credit, but on the other, they serve to prevent situations of excessive debt. These measures make sense in a context where house prices are very high and interest rates have already started to rise, not to mention the expected growth in the inflation rate.

It is good to remember that these measures arise in a context of pressure from European monetary authorities, who have expressed concern about the recent growth in recourse to housing credit in Portugal, largely driven by the incentives that the Government granted to young people.

By the end of the 1st quarter of 2026, 32,300 young people resorted to housing credit with the support of the State's public guarantee. While this growth was advantageous for them, it also brought some negative consequences:

• The supply of houses decreased, since the supply of new construction did not grow enough;
• The price of similar houses increased as a consequence;
• The credit restriction measures applied by the Bank of Portugal (BdP) will further complicate access for young people who, from now on, want to resort to this support mechanism;

Credit will continue to exist, but it may grow less

The Bank of Portugal does not want to close the door on housing credit. It just wants it to grow at a more balanced pace.

Álvaro Santos Pereira explained that the expected impact of the new recommendations will be mainly in slowing the growth rate of credit. That is, credit will continue to increase, but below the current values close to 10% per year.

“The idea is just to slow down the growth rate.”

This point is important for buyers and sellers. The market should not stop, but it may become more selective. Buyers will have to plan financing better, and sellers will have to be more attentive to the real capacity of demand.

A property may continue to have interested parties, but that does not mean that everyone will be able to obtain credit under the necessary conditions to proceed.

Is there a real estate bubble in Portugal?

This is probably one of the most repeated questions in recent years. The Bank of Portugal's answer is cautious: there are, for now, no clear signs of a classic speculative bubble.

The supervisor's analysis shows that house prices have risen a lot, but rents have also risen significantly. Between 2017 and 2024, the median value per square meter of sales increased by about 88%, while the median value of rents grew by about 81%.

This means that the appreciation of properties is not completely disconnected from the reality of the rental market. There are supply and demand fundamentals explaining much of the increase.

The lack of available houses, population growth, pressure in urban areas, investment demand, and the scarcity of new construction continue to weigh heavily.

Still, “not having a bubble” does not mean that everything is fine. It just means that the problem seems to result more from real market imbalances than from purely speculative appreciation.

Expectations also drive prices up

Another very relevant point is the role of expectations. The Bank of Portugal has emphasized that families' perception of the future evolution of prices influences market behavior.

When many buyers believe that houses will continue to rise, they tend to anticipate purchasing decisions. When many owners believe that their property will be worth more in a few months, they may delay the sale or resist negotiating.

In practice, the expectation of an increase can fuel the increase itself. That is why the real estate market does not move only by numbers. It also moves by confidence, fear, urgency, perception of opportunity, and collective memory.

In Portugal, a house continues to be seen as security, heritage, and protection for the future.

The public guarantee for young people: opportunity with consideration

The interview also addressed the public guarantee for young people up to 35 years old in buying their first house. Álvaro Santos Pereira acknowledged the political objective of the measure and showed understanding for the difficulty young people face in accessing housing.

“I am the father of three children who are about to enter the job market and I would like them to stay in the country and be able to acquire a house.”

Still, he left an important idea: before buying, it is necessary to understand if there is enough income to support the commitment.

The public guarantee can help some young people overcome the difficulty of the initial entry, but it does not eliminate the need for a careful financial analysis. Buying a house without one's own entry can be an opportunity, but it also increases the responsibility of the decision.

The question should not only be “can I buy?”, but also “can I maintain this house safely in the coming years?”.

What does this mean for those who want to buy a house?

For those thinking about buying, the moment requires preparation. It is not enough to find a house you like. It is essential to understand the real value of the property, compare it with similar properties, evaluate the area, negotiate well, and ensure that the financing is sustainable.

In a market with high prices, every decision should be made calmly and thoughtfully. Rushing can be costly. But waiting indefinitely may also not be a solution, especially if prices continue to rise in the most sought-after areas.

The balance is in buying well, with information, with financial margin, and with a medium and long-term vision.

What does this mean for those who want to sell a house?

For those intending to sell, the market remains favorable but more demanding. There is demand, yes. But buyers are more attentive, more informed, and more constrained by credit.

This makes price definition even more important. A price that is too high can drive away qualified buyers and prolong the sale. A well-defined price, supported by real market data, can attract more visits, more proposals, and more effective negotiation.

Today, selling well is not just about placing an ad online. It is about preparing the property, positioning it correctly, communicating its value, and reaching the right buyers.

My reading as a real estate consultant

Álvaro Santos Pereira's interview confirms what we see daily in the market: there is demand, there is a shortage of supply, and there is great pressure on prices, especially in the main urban areas of Lisbon and Porto. But there is also more prudence, more demand for credit, and a greater need for professional advice.

The Portuguese real estate market remains strong, but it is entering a phase where strategy matters even more.

To sell, you need to know how to position. To buy, you need to know how to choose. To invest, you need to do the math realistically.