Portugal real estate market outlook 2025: A guide for international buyers

Portugal property market overview

"Portugal's property market continues to defy expectations, showing remarkable resilience and growth despite global economic headwinds," says Louise Dell, co-founder of Kyero. "As we move into 2025, we're seeing a market that's not just recovering, but transforming - driven by changing buyer demographics, strong tourism figures, and Portugal's enduring appeal as a lifestyle destination."

"The market's recovery is no longer merely projected - it's a tangible reality," observes Luís Cavadas, Business Development Manager at Kyero Portugal. "We're witnessing a fundamental shift in the market dynamic, with domestic buyers stepping up their presence while international interest remains robust. This broader base of demand creates a more sustainable market environment for 2025."

The data supports these observations. According to Confidencial Imobiliário, the real estate market showed strong recovery signs in late 2024, with 38,050 homes sold in the third quarter - a 6.7% increase compared to the previous quarter and a 16% rise year-over-year. This marked the second consecutive quarter of growth, suggesting a sustainable recovery trajectory. While numbers tell one story, the reality on Portugal's streets tells another -  estate agents have replaced baristas as the most common sight in urban centres.

Price dynamics remain strong, with a 2.5% increase in house sales prices compared to the previous quarter - the highest quarterly rate recorded in 2024. The average transaction values reached €2,572/m², with new houses commanding €3,967/m² and used properties averaging €2,344/m². This price differential between new and used properties highlights the premium market's strength and the potential for value-add opportunities in the renovation sector.

2024 saw Portugal continue its winning streak in global rankings and international recognition. The country secured its position as the 7th safest country globally, topped the OECD's Family Relocation Score, and was featured heavily in the 2024 World Travel Awards, picking up gongs for, amongst other things, world’s leading adventure tourism destination (Azores), world’s leading beach destination (Algarve), world’s leading city break destination (Lisbon), and world’s leading emerging tourism destination (Braga).

Meanwhile, Portuguese housing stock is shrinking faster than a wool sweater in hot water, with one-bedroom apartments becoming the new currency of urban living - much to the bemusement of traditional Portuguese families. This shift in housing preferences aligns with changing demographics and the rise of remote work, which has altered traditional living patterns and property requirements.

Portugal's 2025 economic outlook

Portugal's economic fundamentals appear solid heading into 2025, with several key indicators pointing to sustained growth. Tourism, a crucial driver of property demand, is expected to grow by 9% in 2025, building on the projected €27 billion in revenue for 2024, according to the Secretary of State for Tourism. This growth in tourism continues to underpin property values, particularly in popular coastal regions and major cities.

The construction sector shows positive momentum, with cement consumption rising 2.6% by the end of September 2024, reaching 3.033 million tonnes. This increase in construction activity suggests growing confidence among developers and investors. Moreover, mortgage lending saw a substantial 34.7% increase by September 2024, reaching €12.311 billion (excluding renegotiations), indicating strong market liquidity and buyer confidence.

The banking sector's health is particularly noteworthy, with improved lending conditions and stronger risk assessment practices contributing to market stability. The rise in mortgage lending has been accompanied by robust underwriting standards, helping to prevent the formation of any potential property bubbles while ensuring sustainable market growth.

Infrastructure development continues to play a crucial role in market dynamics. The ongoing improvement of transport links, particularly in the country's interior regions, is opening up new areas for development and investment. This infrastructure expansion is crucial for addressing the "great coastalisation" of tourism and property investment, as noted by regional tourism authorities.

Portugal property market investment opportunities in 2025

The Portuguese property market presents a diverse range of investment opportunities across different regions and property types. According to Kyero data, average asking prices have shown significant appreciation across all regions, with some areas emerging as particularly attractive investment destinations.

In the Algarve, average median prices have reached €485,000, up from €435,000 in 2023, reflecting the region's enduring appeal to international buyers and its strong rental potential. The region continues to benefit from its excellent climate, world-class golf courses, and established tourism infrastructure. Coastal areas like Albufeira and Lagos remain particularly popular, though inland areas are increasingly drawing investor attention due to better value propositions.

The Lisbon Region has seen prices rise to €480,000 from €405,000, driven by strong domestic and international demand. The capital's property market is particularly dynamic, with significant urban regeneration projects and new development initiatives creating opportunities across different market segments. Areas like Misericórdia, Estrela, and São Vicente have seen substantial investment volumes, while emerging neighbourhoods such as Beato and Ajuda have doubled their invested capital.

Madeira's market has shown robust growth, with prices reaching €455,000, up from €395,000. The island's appeal as a year-round destination and its growing digital nomad community have contributed to market strength. The city of Funchal, in particular, has seen sustained interest from international buyers.

North Portugal, including Porto and its surrounding areas, has also seen prices rise, to €310,000 from €279,000. The region's lower prices compared to Lisbon and the Algarve, combined with strong economic fundamentals and improving infrastructure, makes it an attractive proposition for investors seeking growth potential.

Central Portugal offers some of the most accessible entry points from a budget point of view, with average prices at €220,000, up from €210,000. This region has seen growing interest from international buyers seeking authentic Portuguese experiences and better value for money. Areas like Tomar and Castelo Branco have shown particularly strong growth in buyer interest.
 

Where to buy property in Portugal in 2025

Analysis of Kyero's 2024 data reveals several emerging hotspots worthy of attention in 2025, with a notable shift in buyer interest toward inland locations. This trend represents a significant evolution in the Portuguese property market, moving beyond the traditional coastal favourites to embrace the country's diverse regional offerings.

Ferreira do Zezere has emerged as a surprising success story, recording a 27.61% surge in buyer interest. This picturesque town in Central Portugal, known for its stunning natural surroundings and proximity to the Castelo de Bode lake, offers an attractive combination of affordable property prices and an authentic Portuguese lifestyle. The area's growing popularity reflects a broader trend of buyers seeking value and authenticity away from more established markets.

Castelo Branco, the inland darling that's suddenly found itself the belle of the property ball, has seen enquiries surge by 22.29% - proving that even Portugal's wallflowers eventually get their dance card filled. The city's strategic location, improving infrastructure, and commitment to urban development have attracted both domestic and international buyers. Local authorities have been proactive in supporting new development, with significant investment in public spaces and cultural facilities enhancing the city's appeal.

Castro Marim, showing an 18.18% increase in buyer interest, benefits from its position near the Spanish border and proximity to the Algarve's beaches while offering more competitive pricing than other coastal locations. The town's historic character and many nature reserves, provide unique selling points for buyers seeking a blend of heritage and natural beauty.

The usual suspects - Albufeira, Lisbon, and Porto - continue their reign as market favourites, though some might say their charm now comes with a rather steep price tag. Albufeira maintains its position as the most searched location, particularly among international buyers, with its established infrastructure and strong rental potential. Lisbon, despite high prices, continues to attract significant interest, especially in emerging neighbourhoods where value can still be found.

Porto's market shows particular promise, combining strong economic fundamentals with cultural appeal and ongoing urban regeneration. The city's growth story extends beyond its historic centre, with surrounding areas benefiting from improved connectivity and spillover demand.

Most searched for locations in Portugal on Kyero:

Who is buying property in Portugal?

The buyer landscape for Portuguese property reveals a fascinating mix of nationalities and demographics, reflecting the country's broad international appeal. British buyers continue to lead the international contingent, representing 16.88% of foreign purchases, according to Kyero's latest 2024 data, despite Brexit-related complications. Their ongoing presence speaks to Portugal's enduring appeal to the British market, particularly among retirees and remote workers seeking better weather and quality of life.

Portuguese domestic buyers have shown remarkable strength. This increased domestic participation is particularly noteworthy in urban areas, where local buyers have grown their market share significantly. In Lisbon's historic rehabilitation area (ARU), Portuguese buyers now represent 72% of operations and 69% of volume, with an average investment ticket of €490,400.

American buyers have emerged as a significant force, representing 12.22% of international purchases. This growing U.S. presence reflects Portugal's increasing visibility in the American market, aided by favourable exchange rates and Portugal's reputation for safety and quality of life. American buyers tend to concentrate in urban areas and premium coastal locations, often combining property purchase with Golden Visa or D7 visa applications.

French investors maintain a strong presence, accounting for 10.11% of foreign buyers and showing particular interest in urban regeneration projects. German buyers, at 8.62%, typically focus on high-end properties and sustainable developments, reflecting their preference for quality and environmental consciousness.

The age demographics tell a tale as predictable as a summer sunset in the Algarve - though with rather more financial implications. The 55-64 age bracket dominates at 28.51%, followed by the 45-54 group at 25.94%, suggesting a strong market for retirement and pre-retirement buyers. However, the significant presence of younger buyers (19.15% in the 25-34 age group) indicates a broadening market appeal beyond traditional retiree buyers.

Market dynamics & trends

The Portuguese property market is experiencing several significant shifts that are likely to shape its development throughout 2025. The strengthening domestic market represents perhaps the most notable change, with Portuguese nationals showing unprecedented levels of activity. This surge in domestic buying has been particularly evident in urban areas, where local purchasers have increased their presence significantly, often competing successfully with international buyers.

The international buyer mix continues to evolve in interesting ways. Dutch buyers have shown remarkable growth, increasing their market presence by 27.8%, while Irish investors have grown their participation by 20.9%. This diversification helps insulate the market from overreliance on any single nationality.

Urban regeneration has emerged as a key market driver, with cities across Portugal embarking on ambitious renewal programs. Braga exemplifies this trend, showing strong commitment to new housing development through streamlined licensing processes and support for urban renewal projects. This focus on urban regeneration is creating opportunities for both developers and investors while helping to address housing supply constraints.

Sustainability has graduated from optional extra to market necessity, rather like air conditioning in the Alentejo - though mercifully with better implications for the planet.  This shift reflects both regulatory requirements and changing buyer preferences, particularly among younger purchasers and international investors. Properties with strong environmental credentials often command premium prices and attract stronger rental demand.

Fast internet has joined good wine and ocean views in the holy trinity of Portuguese property must-haves, as digital nomads continue their apparently unstoppable migration to these sunny shores. The country's ranking as the 3rd best destination in the world for digital nomads underscores its appeal to this growing demographic, with implications for both the sales and rental markets.

Predictions for the Portuguese property market in 2025

The Portuguese property market appears poised for continued growth in 2025, though the pattern of expansion may differ from previous years. Price appreciation is expected to continue, albeit potentially at a more moderate pace than 2024's 10% growth. This moderation should not be interpreted as market weakness but rather as a sign of maturation, with different regions likely to show varying growth rates reflecting their specific market dynamics.

Regional diversification looks set to accelerate, with secondary cities and inland areas gaining increased attention from both domestic and international buyers. This trend reflects both pricing pressures in primary markets and improving infrastructure in regional locations. Areas with good transport links and digital connectivity are likely to see particularly strong interest.

The age-old story of supply failing to keep pace with demand continues its run in Portuguese property - rather like a television series that everyone knows the ending to, yet can't stop watching. While new construction is increasing, with permitting data showing positive trends, development activity remains insufficient to meet current demand levels. This supply-demand imbalance is likely to continue pushing property prices up, particularly in popular urban areas and coastal locations.

Portuguese buyers, having watched from the sidelines as their property market became an international playground, are now making their presence felt with all the subtlety of a Fado singer at full volume. This trend reflects both improved economic conditions and better access to mortgage financing, with banks showing continued appetite for property lending despite rising interest rates.

Tourism, Portugal's faithful companion in economic matters, shows no signs of abandoning its post - much to the delight of property owners and the mild consternation of locals seeking parking spaces in the Algarve, with the projected 9% increase in tourism activity likely to support continued demand for holiday homes and rental properties. This growth has implications beyond direct holiday home purchases, affecting local property markets through increased demand for short-term rentals and supporting services.

Conclusion

"As we look ahead to 2025, Portugal's property market shows all the hallmarks of a mature, evolving market," reflects Louise Dell. "While prices continue to rise, we're seeing a more nuanced market with opportunities across different regions and property types. The key to success will be understanding local market dynamics and taking a long-term view."

The Portuguese property market enters 2025 from a position of strength, characterised by robust price growth, strong transaction volumes, and diverse buyer interest. While challenges exist, particularly around supply constraints and affordability in premium locations, the overall outlook remains positive. Portugal's combination of lifestyle appeal, economic stability, and property market fundamentals continues to attract both domestic and international buyers, suggesting a sustainable growth trajectory for the year ahead.

The market's evolution reflects broader changes in Portuguese society and the country's position within Europe and globally. Portugal's high rankings in quality of life indices - including being rated the 7th safest country globally and placing first in the OECD's Family Relocation Score - underscore its fundamental attractiveness as a destination for both living and investment. These strengths, combined with the market's demonstrated resilience and adaptability, suggest that 2025 will be another significant year for Portuguese property, albeit one requiring careful navigation of an increasingly sophisticated market landscape.