A stunning European country popular among British tourists has the highest house prices on the continent, a latest report has revealed. A new European Commission report reveals that house prices in Portugal are among the highest in the European Union.
According to a report from the European Commission, “Housing in the European Union: market developments, underlying factors and policies”, published this week, property prices in Portugal are overvalued by 35%. Between 2014 and 2024, house prices in the EU increased by an average of 50%, “but in Hungary, Lithuania, Czechia, Portugal, Estonia, Bulgaria and Poland, nominal house price growth exceeded 200%,” the report said.
In some regions, house prices have significantly drifted from their actual market value, with researchers identifying Portugal as a standout example of this trend. The appreciation of property prices there has exceeded typical real value benchmarks, suggesting a pronounced overvaluation. According to recent analyses, Portugal’s housing market is estimated to be overvalued by as much as 35%, the highest in the European Union, driven by factors such as strong demand, limited supply, and investor interest.
House prices in Portugal have surged in recent years, and several key factors are driving this inflation. According to a report by the European Commission, one of the most prominent contributors is the growth of tourism and the rise of short-term rental platforms like Airbnb. These trends have increased demand for properties in popular areas, particularly in cities like Lisbon and Porto, where homes are often converted into tourist accommodations.
The researchers stated: “The increase in short-term rentals in tourist areas is closely related to the increase in house prices and rents.
“There is growing empirical evidence to suggest that the increase in tourism in general and the rise of home-sharing platforms in particular have contributed to an increase in rents and house prices in some prime locations, such as historic city centres.”
Portugal has experienced the most significant impact of tourism on house prices among EU countries, according to the recent report. The surge in tourism has driven up demand for short-term rentals and investment properties, contributing to inflated housing costs—particularly in popular destinations.
This issue is not unique to Portugal; Spain faces similar challenges, especially in cities like Barcelona, where overtourism strains local housing markets.
Compounding the problem in Portugal is the limited availability of public housing, which accounts for only about 2% of the total housing stock.
A study by the University Institute of Lisbon (ISCTE) reveals that, with limited public housing available, many people in Portugal struggle to find affordable homes as prices continue to rise.
