Real Estate Market in Portugal – January 2026 Snapshot

There are several new developments this year, primarily in the fiscal and regulatory landscape. The Government has launched an extensive package of measures aimed at rebalancing the market, with further changes expected in the coming months.

In this January 2026 Real Estate Snapshot, I will provide a more comprehensive summary as we start the year, covering the latest figures, trends, legislative updates, and what to expect in the short term. This is a photograph of the real estate panorama to guide and assist you, whether you are looking to buy, rent, or invest.

The Price Thermometer: Historical Highs

Let's get straight to the numbers. The average housing price in Portugal hit a new record of €3,019/sqm at the start of this year.

While we hear a lot about the massive valuation in the interior (Santarém and Beja are growing above 20%), the "premium" reality is played in a different league.

Summary of Dynamics by Zone (January 2026)

Lisbon / Oeiras / Cascais / Sintra - This region remains the queen of prices, now very close to €6,000/sqm. It has consolidated itself as a true lifestyle refuge: safety, green spaces, proximity to the sea, and demand that does not slow down. It remains highly attractive for foreign investment, especially linked to golf, resorts, and high-yield rentals, particularly in the seasonal segment. The historic center of these locations remains shielded by international capital, while domestic demand is dispersing to other parishes. Despite fiscal and regulatory changes influencing long-term rentals, premium markets remain very resilient, with consistent valuation. Sintra asserts itself as the smart alternative, benefiting from the "overflow" of those who can no longer afford to buy in Lisbon, Oeiras, or Cascais, offering more space at a more competitive price per square meter. For those living or investing in this area—which is my sphere of influence—the signals are clear: no major price drops are in sight, but rather a demand that continues to absorb everything of quality.

Porto, Matosinhos, and Vila Nova de Gaia - These areas continue to experience a phase of urban expansion with strong residential demand and high attractiveness for rentals. They clearly benefit from improved infrastructure and services, with Matosinhos and Gaia standing out. Matosinhos, with its beach, fast connections to Porto city center, and municipal investment in housing (€85M until 2026), maintains prices that are still more accessible than central Porto, although they are rising rapidly—a very interesting option for families and rentals. Vila Nova de Gaia stands out for new construction and the impact of the Metro's Ruby Line, which is boosting valuation. These areas, with views of the Douro/Sea, high quality of life, and more inviting prices than Porto, continue to offer clear growth margins for 2026.

Algarve (incl. Golden Triangle) - A premium market sustained by international lifestyle demand and seasonal investment. Although the regional average has a more moderate value in national terms, the luxury segments and coastal areas leading in demand continue to stand out with their own dynamics. Beyond the Triangle, the west (Lagos, Sagres) is gaining strength with pro-investment reforms and demand for quieter areas. Less touristy areas like Tavira or the interior also offer a good price/quality ratio.

Funchal (Madeira) - A red-hot market! Prices are already at €3,864/sqm (one of the most expensive in the country), with strong increases in 2025 and constant international demand. Calheta and Santa Cruz are also on the rise. It is attractive for those wanting the climate, but it is no longer "cheap"—more geared toward premium investment or residency. Residential and second-home demand (especially from foreigners) and relatively limited supply sustain premium prices and keep the island market on a robust valuation trajectory.

Braga - Emerging as an urban center with strong demand and a good price/quality of life ratio. Braga has been identified as a city with growth potential in the coming years, combining demand for permanent housing, proximity to universities, and quality of life, making it attractive to investors and residents alike. On the other hand, international industrial investment is one of the drivers responsible for this growth.

Aveiro - Also highlighted as an area with relatively more affordable values and strong valuation potential. Aveiro combines a diversified economic matrix, quality of life, and good road and rail connections to major hubs like Porto and Lisbon, growing in relevance for those seeking a balance between price, rental, and quality of life.

Rentals (General) - More moderate growth in rents, with signs of stabilization in 2026, but still far from market equilibrium due to insufficient supply relative to demand, especially in metropolitan areas and higher-density urban centers.

Emerging Zones: Where the Future of Real Estate is Happening

While the major centers become expensive, these areas are exploding:

• Braga and Minho: Strong increases, still affordable prices (~€2,100/sqm), university and tech attracting young people.
• Aveiro: Leading growth in the North, with coast and strong industry.
• Coimbra: Constant demand from students, city center rehabilitation.
• Interior (Évora, Viseu, Amarante): High quality of life, low prices, remote work driving growth.
• Porto Neighborhoods (Campanhã, Bonfim): Urban regeneration, new metro, large valuation margin.
• Comporta: Emerging luxury.
• Loures/Benavente: Proximity to Lisbon and lower prices.
• Others: Setúbal, Santarém, and some less touristy areas of the Algarve.

Even with high prices, the market maintains active demand, both domestic and international. Foreign investors continue to view Portugal as a safe capital destination, thanks to factors like macroeconomic stabilization, controlled inflation, and more predictable interest rates.

Particularly in Lisbon and Porto, demand for quality assets with guaranteed income (e.g., rental properties or premium properties) remains strong, with investors prioritizing prime locations and high-quality assets.

But the narrative of 2026 is polycentric! It is no longer enough to look at Avenida da Liberdade or Foz do Douro. The valuation dynamic has spread like an oil slick, transforming former commuter towns or forgotten district capitals into new hubs of investment and residence.

Housing Prices: Strong Increases in 2025, Moderation in 2026

In 2025, prices hit new records, with average increases above 17% in some periods (INE and Idealista data). The average value per sqm already exceeds €3,000 in many urban areas. For 2026, forecasts point to a more moderate valuation, between 6% and 8%, thanks to a gradual increase in supply—especially in the new construction segment—lower interest rates, and reduced demand from young people (up to age 35) who resorted en masse to government acquisition support in 2025.

I recall that more than 53% of the funds allocated to this support have already been used. Meanwhile, the sale of these 22,933 homes contributed to a significant price increase in this real estate segment (€150k ~ €330k), which will likely slow down the use of this mechanism in the short term. Indeed, the increase in the debt-to-income ratio, resulting from rising prices, makes access to mortgages more difficult.

Lisbon, Oeiras, Cascais, Sintra, Porto, and Funchal remain at the top of the highest prices. However, there is a clear migration to more affordable areas—many people are moving away from the more expensive historic centers.

In short: prices will continue to rise, but without the insane pace of recent years.

Rentals: Pressure Continues, but with a Slowdown

The rental market remains inflated, but the rate of price increases has been slowing since late 2025 and into 2026. In the metropolitan areas of Lisbon and Porto, rents remain high, but peripheral areas and smaller towns are capturing more demand.

January brought 3 major news items for this sector:

1. For Tenants: The IRS rent deduction rose to €900 this year (and will go to €1,000 in 2027). It doesn't solve everything, but it helps.
2. Rent Increases: The official update for 2026 is 2.24% (coefficient 1.0224). But beware: if the landlord has not updated the rent in the last 3 years, the law now allows them to add the old coefficients. The result? Some tenants could face an accumulated increase of over 11% this month!
3. "Moderate Rent" (The Big News): The Government launched a fiscal "carrot" with immediate impact. If a landlord charges a rent up to €2,300 (the new "Moderate Rent" cap) and signs a contract for at least 3 years, their IRS rate drops from 25% to just 10%. This measure is already causing higher rents to drop below this threshold.
   
   Impact Simulation for the Landlord: Imagine a landlord with an apartment in Oeiras rented for €1,500 monthly (€18,000/year).
   • General Regime (25%): They would pay €4,500 in IRS. Net income would be €13,500.
   • Moderate Rent Regime (10%): They pay only €1,800 in IRS. Net income rises to €16,200.
   • Annual Gain: €2,700 of additional annual liquidity, purely through this fiscal measure.

Fiscal and Regulatory Updates

This is the hot topic of the moment! The Government approved an ambitious fiscal package in the 2026 State Budget to encourage supply and relieve tenants:

• For Tenants: The rent deduction in IRS rises to €900 in 2026 (going to €1,000 in 2027). A welcome relief in the 2027 tax return.
• For Landlords: The IRS rate on rents can drop to 10% for longer contracts or moderate rents. If the rent is 20% below the local median, there is a total IRS exemption—a measure to encourage affordable housing.
• For Real Estate Professionals: A draft regulation and professionalization of the real estate consultancy sector is under development and is expected to mark 2026 by introducing broader rules for transparency, qualification, and ethics. Until now, real estate brokerage in Portugal has been structured around the AMI License issued by IMPIC, mandatory for agencies. The new draft law aims to expand this framework, also regulating real estate consultants who currently operate outside the traditional brokerage regime, aiming to raise standards and better protect clients.
• Other Measures: A set of fiscal and regulatory stimuli are advancing in 2026, including a reduced VAT rate of 6% for new home construction up to €648,000, tax benefits for landlords and tenants, changes to IMT and IMI affecting certain properties, and incentives for construction and rehabilitation to expand supply.
• On the Radar: The OECD recommends tax increases on vacant or underutilized houses. There are also new urban planning rules (end of traditional construction permits, shorter deadlines, and heavier fines) to accelerate projects. The debate over short-term rentals (Airbnb style) and undivided inheritances continues.

Structural Challenges: The Supply Shortage Continues

According to Avelino Oliveira, President of the Order of Architects, the housing deficit is estimated at 150,000-200,000 homes. Despite programs to accelerate licensing and construction and financial support from the PRR to municipalities, the effects will be gradual and insufficient.

The combination of labor shortages, rising wage costs, and slow licensing processes maintains structural pressure on prices, even in areas considered secondary.

Demand and Investment: More Selective and Sustainable

Real estate investment grew by about 10% in 2025, with foreign capital returning. For 2026, an 8–10% increase is expected, with a focus on quality: energy efficiency, premium location, and stable income. Sustainability and certifications are now mandatory in purchase and investment decisions.

Housing Package Approved in General (January 2026)

Last Friday, Parliament approved the Government's legislative package to address the housing crisis in Portugal in general terms. The package passed with votes from PSD, CDS-PP, and Iniciativa Liberal, while Chega abstained and left-wing parties mostly voted against.

This package includes two main proposals that have received legislative authorization to proceed to the committee stage, where they may undergo changes before final approval:

Tax Changes and Housing Incentives: Following previously announced measures, the Government is authorized to change key taxes (VAT, IRS, IMT, and tax benefits) to encourage rentals, moderate-priced construction, and residential supply. This includes reducing VAT on construction to 6% for homes for sale (up to a limit) and rentals with moderate caps, as well as measures to reduce the tax burden on landlords.

Review of Licensing and Urbanization Procedures: The second approved proposal aims to simplify and reform the legal regime for licensing urban operations, urbanization, and building, alongside measures to facilitate urban rehabilitation and streamline administrative processes.

As part of the parliamentary process, these proposals are not yet final: they now move to a detailed debate where the texts can be amended and refined before a final vote and eventual promulgation.

Quick Snapshot – Short-Term Forecasts 2026

To Conclude

High housing prices persist in 2026, but we are not facing an imminent bubble burst, as often prophesied by pessimistic analysts or buyers waiting for a sudden repeat of past events. Instead, the market no longer reflects the uncontrolled euphoria of the last decade, but rather a dynamic characterized by strong demand and limited (though growing) supply, tending toward gradual price stabilization with some occasional downward corrections for specific regions or property types.

The year 2026 began with a resilient market in a clear transition phase: high prices accompanied by government measures seeking to relieve pressure and stimulate supply.

The legislative measures regarding licensing, professionalization of the construction and brokerage sectors, and the fiscal package are the big news of the year and could significantly change the math for tenants, landlords, and developers.

The growth of rentals in the real estate market is a reality that will assert itself in the coming years. Difficulty in buying is pushing more people toward renting. Combined with "moderate rent" incentives and the expected entry of foreign investment focused on Build-to-Rent, this housing model will become increasingly relevant in Portugal.

If you are thinking of making a move—buying, renting, or investing—it is worth following these changes and looking at location, prices, and emerging zones. Contact me!

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