Amid inflation, Europe’s housing crisis bites deep. Portugal is not an exception

A growing number of people in Portugal no longer earn enough money to afford a place to live, and now with rents rising in the capital city of Lisbon, many are constantly living in anxiety of getting evicted anytime.

Scores of Portuguese, particularly the middle class, are being priced out of the country’s property market by climbing home prices, increasing rents, and surging mortgage rates, triggered by the growing influx of foreign investors and an increasing number of tourists needing short-term rentals.

Worsening fears about the health of financial institutions and a looming recession have added even more uncertainty.

Between 2020 and 2021, house prices jumped by 157%, and according to the EU’s statistics agency Eurostat, rents shot up by 112% from 2015 to 2021. However, the rising cost of real estate only tells part of the story in Portugal.

Portugal is one of Western Europe’s poorest countries and has long pursued investment on the back of a low-wage economy. In 2022, more than half of Portuguese workers earned below $1,054 a month, Labour Ministry statistics show.

The housing dilemma in the EU has been aggravated by the recent spike in inflation, particularly rising food and energy bills, and the consequences of the Covid-19 pandemic. Across the 27-nation bloc, more than 82 million households face difficulties paying rent and 17% of people reside in overcrowded accommodations.

Numerous families in Portugal have been forced by necessity to live in illegal makeshift dwellings on Lisbon’s outskirts with no electricity or running water.

Tourism has long been of great help to the country’s economy. But the same factor has now magnified problems for a number of people. Most homes in several neighbourhoods are occupied by short-term vacation rentals – largely for foreign tourists – with dozens of Portuguese raising concerns over vanishing rich local traditions.

Portugal’s Socialist government has revealed a package of measures to address the problem, and some of them are set to receive approval from the Cabinet on Thursday. The measures, including capping increases in new rental contracts to 2% above the earlier contract as well as ending the ‘golden visa’ programme, are expected to bring about a market correction.

However, the proposals have stirred controversy and enraged many.