Portugal’s residential property market gained momentum this summer, with housing demand, construction activity and new licensed supply all showing positive signs. However, continued pressure on sale prices, rents and construction costs remains a key obstacle to improving housing affordability, according to the latest Real Estate Intelligence analysis by APPII, in partnership with Confidencial Imobiliário.
Housing sales increased by 7% quarter-on-quarter in the second quarter of the year, reaching 39,210 transactions, while prices rose by 3.5% over the same period, according to Confidencial Imobiliário. The figures point to a recovery in demand at a time when the market continues to face a shortage of housing suited to current needs.
Supply-side indicators have also improved. In 2025, 48,844 new homes were licensed in Portugal, 14.6% more than in 2024 and the highest figure recorded since 2011. A total of 26,227 buildings were also licensed during the year, up 1.4% year-on-year, according to Portuguese National Institute of Statistics (INE).
The construction sector is likewise showing greater activity. Production in construction rose by 3.4% year-on-year in May, accelerating by 0.4 percentage points compared with April. Building construction alone increased by 2.9% over the same period.
Nevertheless, rising construction costs continue to challenge the delivery of new housing. The cost of constructing new homes increased by 6.9% year-on-year in May, marking the strongest annual increase in three years. Labour costs rose by 7.5%, while materials increased by 6.4%, according to INE.
Price pressures are also persisting in the residential market. Between January and May, average house sale prices in mainland Portugal reached €3,123 per sqm, according to Confidencial Imobiliário. Bank valuations have followed the same trend, with the median valuation rising 16.6% year-on-year to €2,228 per sqm.
At the same time, state-backed financing is becoming increasingly important for younger buyers. In the second quarter, 776 mortgage agreements used the Portuguese State’s public guarantee scheme, representing a total of €1.731 billion. Among mortgage loans contracted by buyers aged up to 35, those benefiting from the guarantee accounted for 51.3% of contracts and 53.5% of the total amount borrowed, according to the Bank of Portugal.
APPII described the current market as a “scenario of recovery in activity and demand, accompanied by positive signs in the reinforcement of new supply”. However, it stressed that continued increases in sale prices, rents, bank valuations and, particularly, construction costs underline the need for further supply to meet demand and improve access to housing.
The association also highlighted the importance of ensuring that licensed projects translate into housing actually reaching the market, while maintaining the economic viability of developments and the sector’s capacity to respond to the country’s housing needs.
The Real Estate Intelligence series will bring together the main indicators for Portugal’s property development and investment market on a monthly basis.
