Why invest in Portugal: Numbers and opportunities
Invest in Portugal, from world-class seafood and sunny Atlantic beaches to vibrant culture, cosmopolitan cities and vineyards aplenty, this country is an attractive prospect for tourists and real estate investors alike.
With an average of 300 days of sunshine each year, Portugal is an immensely popular place to live and visit. This, combined with a favourable tax regime and relatively low property prices compared to other European nations, makes it easy to see why investing in Portugal is so hot right now.
You can use our estimate tool to find out how much a specific property could be earning in Portugal, or continue reading this article to find out more about this amazing rental market.
Life in Portugal
A great place to live and visit
Portugal consistently ranks among the most desirable countries in Europe for both tourism and quality of life. It has received multiple international awards in recent years, including Best European Destination at the World Travel Awards, while Lisbon and Porto are regularly named among the best city break destinations in Europe.
The country also scores highly in global quality of life rankings thanks to its safety, healthcare system, climate and cost of living. For investors, this translates into sustained demand for both short term and long term rentals.
Sunshine, safety and stability
Portugal enjoys around 300 days of sunshine per year, making it especially appealing to visitors from Northern Europe and international remote workers. Beyond the weather, the country offers political stability, low crime rates and a strong sense of security.
Ranked among the safest countries in the world, Portugal appeals to families, retirees, digital nomads and professionals, all of whom contribute to a diversified rental market.
Portugal is also particularly well known for its cuisine, with freshly caught fish forming a significant part of the national diet. Bacalhau, or Portuguese codfish, is a favourite amongst locals and visitors, while decadent Pastel de Nata egg tarts are perfect for indulging your sweet tooth.
Investing in Portugal
As of late 2025, the Portuguese residential property market is defined by exceptional price growth and a resilient economy, even as the pace of rental inflation begins to moderate. Despite elevated base values, the market continues to be driven by a persistent imbalance between limited supply and robust demand, alongside improving financial conditions.
Portugal in numbers
How are the house prices in Portugal?
Residential property prices in Portugal continue to post extraordinary gains, with the median bank appraisal value rising to EUR 2,025 per square metre in October 2025, a 17.66% year-on-year increase. This growth has been particularly aggressive in the apartment sector, which saw values surge by 22.14% to EUR 2,345 per square metre, while villas recorded a more modest increase of 11.77%. This trend is sustained by a structural housing shortage, as the 13,244 new dwellings completed in the first half of 2025 failed to keep pace with the 20% surge in transaction volumes.
The market remains heavily concentrated in high-value urban and tourism-driven hubs.
• Lisbon: Remains the most expensive municipality, with median asking prices reaching EUR 5,914 per square metre in November 2025.
• Porto: Prices advanced by 5.9% year-on-year to reach EUR 3,908 per square metre.
• Algarve and Greater Lisbon: These regions continue to host the highest appraisal values, reflecting strong demand in prime residential markets.
• Secondary Markets: Coastal towns and secondary cities are increasingly popular with investors seeking lower acquisition costs and strong seasonal demand.
Shifts in Demand and Investment
The profile of buyers that want to invest in Portugal has shifted significantly following recent regulatory changes.
• Domestic Buyers: Now dominate the market, accounting for 95% of homes sold to individuals with tax domicile in Portugal during the first half of 2025.
• Foreign Demand: Investment from abroad declined by 7.2% year-on-year, a shift attributed to the end of real estate eligibility for the Golden Visa and the termination of the original Non-Habitual Resident (NHR) tax regime in January 2024.
• Short-Term Rentals: Investors must register for an Alojamento Local (AL) licence; while the process is generally straightforward, some high-density municipalities have introduced restrictions on new licences.
Rental Market and Yields
While still rising, rental inflation has begun to slow, dropping to 5.0% in October 2025 from 7.2% a year prior. For 2026, the official rent increase cap for existing contracts is set at 2.24%.
• National Median Rent: Reached EUR 8.220 per square metre in Q1 2025, with Lisbon seeing the highest rates at EUR 16.000 per square metre.
• Gross Rental Yields: Average yields nationwide are around 5%, though they vary by location. Lisbon offers yields of approximately 3.82%, while Setúbal has shown higher potential at 5.09%.
Portugal’s wider economy has remained resilient to external shocks. Real GDP growth is forecast at 1.9% for 2025, supported by domestic demand and EU-backed investment, while inflation has fallen to approximately 2.2%. The labour market is strong, with unemployment at a historically low level of 5.9% as of October 2025.
The financing environment has also improved; average interest rates on new housing loans dropped to 2.84% by September 2025. This improved affordability spurred a 39.7% growth in pure new housing loans during the first nine months of 2025. Reflecting this stability, both S&P and Fitch upgraded Portugal to an ‘A’ rating in 2025, citing debt reduction and resilient fiscal positions.
The Portuguese property market can be compared to a high-performance engine running on a restricted fuel line; while the economy and buyer demand provide powerful momentum, the persistent shortage of new housing acts as a bottleneck, keeping price pressures high even as the “speed” of rental growth begins to level out.
What are the requirements for renting out my property in Portugal?
Renting out your property on a short-term basis requires a ‘Alojamento Local’ (short-term rental) license, but registering for this is relatively easy via the Tax and Customs Authority website. It’s important to be aware of limitations on the granting of new licenses in some areas due to laws that are moving through the Portuguese Parliament at time of writing.
Further up the coast, Porto offers a cheaper deal, with an average of €3,276 per square metre. It’s a popular place to visit and live, with many digital nomads setting up home there. With countless world-class attractions such as Ribeira Square and the striking Clerigos Tower, it’s easy to see why. Investing in property in Porto is likely to return a rental yield between 3.5% and 6.5%.
How to Invest in Portugal
An increasingly popular and simple way of investing in Portuguese property is through a rental management company. You can find detailed information about this and helpful advice in our handy guide.
Golden Visas
Since 2012, Portugal has offered foreign investors the chance to benefit from temporary residency status and a five-year fast-track to permanent residence via a ‘Golden Visa’. At time of writing however, legislation is moving through Parliament to end the scheme. Existing Golden Visas will be honoured.
Incentives for investors
In addition to the above scheme, there are several incentives for foreigners to invest in Portugal. The non-habitual residence scheme provides investors with exemption on all foreign sources of income for 10 years and a 20% flat rate on incomes within the country.
Entrepreneurs also have the option of applying for a Startup Visa, which provides a residence and work visa, if they intend to develop a business offering innovative goods and services.
Taxes
If you’re a non-resident, you will only be taxed on your Portuguese income, unless you are in Portugal for 183 days a year or more. A flat tax rate of 15% applies to your net rental income in the country.
If your property is worth more than €600.000, you will also be required to pay a wealth tax of 0.7%, or 1% if your property is worth more than €1 million.
If you later sell the property, as a non-Portuguese resident you will pay capital gains tax at a flat rate of 28% on your profits from the sale.
Get the most out of your investment
Working with a professional rental management company is one of the most effective ways to invest in Portugal, particularly for short term and flexible rental strategies.
Professional management helps optimise pricing, maximise occupancy, ensure regulatory compliance and deliver a consistent guest experience, all while reducing day to day involvement for owners.
Ready to invest in Portugal
Portugal continues to offer compelling opportunities for property investors seeking strong fundamentals, international demand and long term growth potential.
If you want to explore investment opportunities or understand how much your property could earn, speak to one of our experts today.
