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

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, especially, for young people.”

This statement aptly summarizes the moment we are living in. The market remains dynamic, demand is still high, but the ability of families 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 highest in the entire Eurozone. In the European Union, only Hungary recorded higher increases, due to specific reasons in its own market.

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

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

“Maintaining housing credit growth rates around 10% with such sharp price increases can lead to 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 now a social and financial issue

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 find 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 news from the interview was the confirmation that the Bank of Portugal intends to adjust some rules on housing credit.

Among the measures underway is reducing the maximum effort rate from the current 50% to 45%. In other words, the credit installment will be able to represent a smaller portion of the family's monthly income. The goal is simple: to prevent buyers from being too pressured by a difficult-to-support installment.

There should also be adjustments in loan maturities. For 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 strictly.

“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, tighter rules may make access to credit more difficult for some families, but on the other hand, they serve to prevent situations of excessive indebtedness. 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 worth remembering 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 motivated 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, as the supply of new construction did not grow sufficiently;
• The price of similar houses increased as a consequence;
• The credit restriction measures applied by the Bank of Portugal (BdP) will further hinder 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 mainly be on slowing the credit growth rate. In other words, 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 still attract interest, but that does not mean everyone can 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 answer from the Bank of Portugal is cautious: there are currently no clear signs of a classic speculative bubble.

The supervisor's analysis shows that house prices have risen significantly, but rents have also increased 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 detached from the reality of the rental market. There are supply and demand fundamentals explaining much of the rise.

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

Still, “no bubble” does not mean everything is fine. It only means that the problem seems to result more from real market imbalances than from purely speculative appreciation.

Expectations also drive up prices

Another very relevant point is the role of expectations. The Bank of Portugal has emphasized that families' perceptions of future price developments influence market behavior.

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

In practice, the expectation of a rise can fuel the rise itself. That is why the real estate market is not only driven by numbers. It is also driven 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 caution

The interview also addressed the public guarantee for young people up to 35 years old in purchasing their first home. 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 buy a house.”

Even so, he left an important idea: before buying, it is necessary to understand if there is sufficient 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 a down payment 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 considering 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 financing is sustainable.

In a market with high prices, every decision should be made calmly and thoughtfully. Haste 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 lies in buying well, with information, financial margin, and a medium to 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 setting 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 perspective 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.