For some time now, the debate on the Portuguese real estate market has been captured by two expressions that seem to resolve everything: “bubble” or “non-bubble”. The problem is that this dichotomy is too poor to explain a structurally more complex phenomenon.
There are solid reasons to reject the thesis of a classic bubble, the kind we knew in 2007/08: the average loan-to-value ratio for housing credit is today below 70% (pre-crash it was over 90%), banking operates with capital requirements and stress tests that did not exist 15 years ago, and annual construction is still around 50% below the pre-2008 level (around 26 thousand houses/year vs more than 50 thousand/year before the crisis). There is no easy credit, there is no overbuilding and there is no massive bank leverage. The market is not repeating the old disease.
But that doesn’t mean it’s healthy. What exists today is a different structural disease. Portugal combines a chronically insufficient supply (slow licensing, high construction cost, short pipeline), with a demand that is no longer domestic but has become global.
The European Commission report, published on October 15th, estimates an overvaluation of close to 35% compared to internal fundamentals and shows a clear deterioration in accessibility. The UBS Bubble Index (September 2025) reminds us that when real prices stabilize globally, peripheral markets are the first to lose traction. And, despite this, INE data shows that Portugal continues to see prices rise by double digits (+17.2% in the last quarter of the same year) and with transactions growing (+15% to 43 thousand units), a sign that the rise is not sustained by easy credit, but by real imbalance: little supply, resilient demand.
If we accept that the question is not “bubble or not bubble” but the quality of the system’s response, what matters is where the country can evolve in the next 3–4 years.
In the base scenario, recently announced public measures (EIB, PPP, 6% VAT in eligible segments) advance, but at an unequal speed between municipalities; licensing improves only marginally and supply grows, but insufficiently. In this regime, nominal prices tend to rise by 2% to 4% per year and rents in new contracts by 3% to 5% per year, with accessibility stabilizing, but not recovering. It is a “containment without resolution” scenario.
In an optimistic scenario, there is rapid execution with binding licensing deadlines, contractual standardization in PPPs, land release and incentives conditioned on real accessibility. In this environment, annual production could grow 40 to 60% by 2028, incomes stabilize and real prices converge to zero or slightly negative not due to collapse, but due to absorption of supply. Correction is “orderly”, non-violent.
In a stressful scenario, execution fails, rules fluctuate, regulatory uncertainty returns and supply does not expand. With external demand persisting, prices could accelerate again in hotspots by 6% to 9% per year and rents could worsen by 7% to 10% per year in the centers, pushing the middle class out of the system and transferring the risk from the financial domain to the social and political domain.
An example of innovation that I have been following and that gives me clear hope, although it affects another variable of the problem (the temporality of the stock), is the model that allows the sale of bare property while maintaining lifetime usufruct. It does not create supply, but it unlocks fixed assets and makes the future entry of that stock into the market predictable. By reducing transmission uncertainty, it reduces the risk of disorderly corrections and creates a horizon for long-term capital, without public expenditure.
The right discussion is not to label the cycle. It is about knowing whether Portugal has a credible plan to make this global demand compatible with the lives of the people who live and work here. Without a response from the execution side, the risk does not disappear: it moves. Not for the banks’ balance sheets, but for the country’s social body.