Portugal's housing woes are changing amid low demand and high inflation

In Portugal, a combination of rising house prices and inflation is causing a new form of homelessness. Traditionally, homelessness was associated with individuals struggling with addiction or mental health issues. The current trend shows a significant shift.

The changing face of homelessness

Luís Filipe Macedo of the Remar association notes that homelessness is now impacting "healthy people who are fighting for their lives."

The increase in property prices and the cost of living is pushing people who are employed, or performing odd jobs, into living on the streets. Some are even forced to reside in tents.

The Cais association, which focuses on reintegration processes, also reports a rise in homelessness and social exclusion. Many people are living in a precarious state, and unemployment for couples can be particularly devastating.

The lack of stable housing directly impacts their ability to secure and maintain employment.

Current statistics and regional variations

As of 2022, there were 10,700 homeless people in Portugal. The regions with the highest proportions of homeless individuals are Alentejo, the Lisbon Metropolitan Area, and the Algarve.

The national strategy for the integration of homeless people (ENIPSSA) 2025-2030 acknowledges the increase in homelessness, despite various measures being suggested and implemented.

Housing market trends

Despite the economic slowdown, house prices in Portugal continue to rise. In the year leading up to April 2024, the median price of dwellings increased by 7.04% to €1,596 per square metre.

From 2017 to 2023, house prices grew at an annual rate of 9.2%. Adjusted for inflation, the increase was a more modest 4.74% year-over-year as of April 2024.

House prices have been rising steadily since 2014. This trend has continued across all regions, with some experiencing more significant increases than others.

• Grande Lisboa: Up 4.9% to €2,333 per sq. m.

• Alentejo: Up 13.4% to €1,120 per sq. m.

• Algarve: Up 1.3% to €2,110 per sq. m.

• Azores Islands: Up 19.7% to €1,269 per sq. m.

• Madeira: Up 16.8% to €1,796 per sq. m.

Housing transactions and construction activity

Despite the rising prices, housing transactions have fallen sharply. In 2023, the total number of housing transactions decreased by 18.7% to 136,499 units.

This followed a modest increase of 1.3% in 2022 and a substantial rise of 20.5% in 2021. Every region in Portugal saw a decline in transactions, with Península de Setúbal experiencing the largest drop at 25.2%.

Conversely, the residential construction sector remains robust. Licensed dwellings increased by 6% in 2023 to 32,053 units, and dwelling completions rose by 6.8% to 21,534 units.

Portugal's economy is suffering

Portugal’s economic growth has slowed considerably. After a 6.8% expansion in 2022, growth fell to 2.3% in 2023 and is expected to slow further to 1.7% in 2024. The Banco de Portugal projects a slight improvement to 1.9% growth in 2025.

Inflationary pressures are easing, with overall inflation at 2.2% in April 2024, down from 5.7% the previous year.

The unemployment rate stood at 6.8% in Q1 2024, showing a slight increase from the previous quarter but a decrease from 7.2% in the same period the prior year.

Impact on socially integrated individuals

The rising cost of living and house prices are particularly impacting socially integrated individuals who are now facing homelessness.

The phenomenon underscores the need for affordable housing and effective social safety nets.

The situation is exacerbated for those who may be employed but cannot secure stable housing due to exorbitant rental and property prices.