Portugal House Prices Hit New Record Highs as Bank Valuations Surge

• 5 January, 26

Portugal’s real estate market continues to heat up. According to the latest data released by Statistics Portugal (INE), Portuguese house prices reached a new all-time high in the third quarter of 2025, with the house price index rising 17.7% year-on-year. This marks the third consecutive quarter of record-breaking growth, confirming that property prices remain on a strong upward trajectory.

Second-Hand Homes Drive Stronger Price Growth

Compared to the previous quarter, the annual growth rate increased by 0.5 percentage points. Price increases were particularly pronounced in the second-hand housing market, where prices surged 19.1% year-on-year, significantly outpacing new-build homes, which rose 14.1%. This highlights especially strong demand for existing properties.

INE also noted that the average annual growth rate of the house price index reached 15.7%, up 1.9 percentage points from the previous quarter, once again setting a historic high.

Transaction Volumes Slow, but Total Value Rises Sharply

Between July and September 2025, a total of 42,481 residential properties were sold in Portugal, with transactions amounting to €10.5 billion. While the number of transactions increased only 3.8% year-on-year, the total value jumped 16%, indicating that price growth—rather than volume—is the main driver of market expansion.  Second-hand homes accounted for the bulk of activity, generating €7.8 billion in sales, a sharp 21.1% increase, while new home transactions totaled €2.7 billion, rising a more modest 3.3%.

Domestic Buyers Dominate as Foreign Demand Declines

Portuguese residents remain the backbone of the housing market. In the third quarter, buyers with tax residence in Portugal purchased 40,262 homes, representing a 5.2% annual increase and accounting for the vast majority of transactions.

In contrast, foreign buyers continued to retreat. Purchases by buyers with tax residence outside Portugal fell 16.4% year-on-year, totaling 2,219 properties. The decline was broad-based, affecting both EU and non-EU buyers, whose transactions dropped by 16.5% and 16.3% respectively, highlighting a sustained cooling in international demand for Portuguese real estate.

Portugal Rated the Most Overvalued Housing Market in the EU

The European Commission recently classified Portugal as the most overvalued housing market in the European Union, with prices estimated to be 25% above fair value—a higher level than in Sweden, Austria, and Latvia.

At the same time, the EU announced a European Affordable Housing Plan, aiming to invest €150 billion per year over the next decade to deliver 650,000 new homes annually, easing supply shortages and affordability pressures across member states.

Bank Property Valuations Also Reach Record Levels

Not only market prices but also bank property valuations are climbing rapidly. In November 2025, average bank valuations rose 18.4% year-on-year to €2,060 per square meter, the highest level ever recorded.

At this valuation, a 100-square-meter home would be assessed at approximately €206,000 on average nationwide, though significant differences remain across regions and property types.

Regional Prices Rise Across the Board, Lisbon and Setúbal Lead

All regions recorded annual growth in bank valuations:

• Setúbal Peninsula: +26.9% (€2,493/sqm)
• Greater Lisbon: +20.8%
• West and Tagus Valley: +23.6%
• Northern Portugal: +17.7%
• Algarve and Madeira: +17.2% and +17.3%, respectively

By property type, apartments recorded the strongest price growth, with average values rising 22.9% year-on-year to €2,389 per square meter. Detached houses also saw solid gains, increasing 13.6% to an average price of €1,500 per square meter, though at a notably slower pace than apartments.

Overall, house prices, transaction values, and bank valuations in Portugal are all at historic highs. While foreign investor demand has cooled, strong domestic demand combined with limited housing supply suggests that upward price pressure is likely to persist in the short term.

Cre: The Portugal News