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07, mar 22 | Reading: 8 min.

The rental market - Why is it becoming increasingly difficult to rent a house in Portugal?

In the housing market, two options immediately jump out at anyone looking for a house to live in: renting long-term or buying a property. When you decide to live on your own for the first time, this is one of the most difficult decisions you will have to make. To assist you in making your decision, we will discuss these two choices considering the current Portuguese real estate situation. We'll go through things you should think about while renting or buying a home in Portugal.


Photo by Erda Estremera – Unsplash


Do the Portuguese prefer to buy or rent a house?


We can look at the percentages and understand which option the Portuguese prefer when it comes to owning or renting a house. The figure reflects well the will: 77% of Portuguese own at least one property.


What factors influence the decision to buy rather than rent a home? Although it is a long-term commitment, Portuguese people prefer to buy a house if they must take out a mortgage to do it. In general, monthly payments to banks are lower than rents in rented properties, and the ability to increase your assets is something that the Portuguese consider when making their decision. The number of owner-occupied dwellings climbed by 3.4 percentage points in 2020 compared to the previous year, the biggest growth in the European Union.


In 2020, after the pandemic had entered our lives, freedom of movement was restricted by measures to combat Covid-19. Soon the Portuguese were consuming less and had the opportunity to invest in their household savings. In July 2021, a historic level of household savings was recorded, according to the Banco de Portugal.


Also read the article "Is buying a house a Portuguese cultural issue?"


Photo by Aayush Gupta – Unsplash


Prices per square metre: Buying or renting a home


Understand the true values of these two methods of obtaining a home, and begin idealizing your desire based on this knowledge.


  • At the end of 2021, the cost of renting a property in Portugal was € 10.7/sqm. When compared to other regions, the Algarve region had one of the greatest price rises (7.6%). The costliest region to rent a house is still Lisbon, which costs € 12.4/sqm, followed by the Algarve, which costs €9.8/sqm. The Northern Region has a value of € 9.1/sqm, whereas the autonomous region of Madeira has a value of €8.6/sqm.


  • The value of houses for sale in Portugal was € 2,325/sqm at the end of 2021. Prices per square metre have increased over the past year, with Madeira showing the highest increase with a percentage of 13.6%. The most expensive region to buy a house in the same year was Lisbon, with a price of €3,346/sqm. In the Algarve, it was €2,602/sqm.


Photo by Racool_Studio – Freepik


What are the requirements for renting or buying a home?


Renting a house: it will be an arduous task until you find a house. There are few long-term rental homes available, and rent pricing is rising. Renting a house is the first step for many young people toward independence, but many can only rent a room and split the house and expenses with others.


To sign the rental contract, you must present the following documents:


  • A valid identification document (citizen card, passport, or residence permit);
  • A taxpayer number;
  • The same identification documents will be requested from the guarantor if foreseen in the contract.


Buying a house: The lack of properties for sale in Portugal can be the brake for many families to find their dream home. Apart from the high demand and low supply of houses, it is common in Portugal to take out a property loan to own a house. But some conditions must be met, including having a down pay of between 10% and 20% of the property value (this percentage depends on the conditions imposed by the bank). To find out if buying a house is a good choice for your family, several online simulators show the possibility of taking out a home loan and the amount available.


Buying a house with a mortgage is divided into several stages. The first is the signing of the promissory note (CPCV - Contrato Promessa Compra e Venda):


  • Citizen Card;
  • Taxpayer number;
  • Place of birth;
  • Marital status;
  • Residence address.


To apply for a mortgage, you will need the following documents:


  • Last Personal Income Tax statement;
  • Photocopy of last three payslips;
  • Proof of other income;
  • Employer's statement proving contractual commitment or seniority in the business. Document of commencement of business or certificate of incorporation (for self-employed);
  • Location plan of the property
  • Plan of the building or fraction;
  • The last three proofs of credit liabilities are included in the responsibilities map (you can do this online through the Bank of Portugal website).


Photo by Romain Dancre – Unsplash


Mobility: Renting or buying a house


Renting a home: The pandemic experience has altered our perspective on our professions. It was the beginning of a new era for many workers, who saw their regular job routine taking place in the comfort of their own homes. This has led to more freedom and mobility in choosing where to work. With these recent changes in the working sector, it was easy to believe that renting a home would allow this flexibility in determining a new workplace, but is this the case?


Renting a house indeed allows you to move more quickly between cities or countries. When you don't apply for a mortgage, you are not tied to a single house, and you do not have to pay the bank's monthly fees. Currently, the rental market has high demand and very little supply. As previously stated, rentals in most places are prohibitively expensive for the ordinary Portuguese family's budget. Because of the market's shortage, finding a rental home is a time-consuming task. When you move from one rented house to another, you must adhere to the notice periods specified in the rental contract. If the contract is greater than one year or less than six months, the notice period can be 90 days. Three months (90 days) is not always enough time to find a new rental apartment, which can be a challenge.


 Buying a house: Owning a property does not mean being stuck to the place where it is located forever. The real estate market is a great place to invest, and you can always benefit from it. If you work from home and want more freedom, or if you're thinking of looking for work in another city or country, owning a home is not a barrier. You can always rent out your property on a long-term basis by specifying the duration and the amount of rent in the contract. This way, your home is secured if you want to return, and you can still earn an income to cover the expenses of your second home.

Another option where you can also benefit from extra income is local accommodation. This is the term used for temporary rentals in Portugal, i.e., renting for holidays. The advantage over long-term renting is that you can return home when you have no guests.


Read also the article: "How to invest in homes in Portugal".



Photo by Karim Manjra – Unsplash


What should you know about the affordable rent scheme?


The affordable rent scheme is a programme set up by the Portuguese government to help Portuguese families rent housing for the long term by allowing them to pay lower rents than the rest of the rental market.


The programme consists of a voluntary commitment by property owners and tenants. Landlords receive a tax benefit by joining, while tenants receive a lower rent than the rest of the market. Landlords are encouraged by the tax exemption on real estate income to set residential rents up to a limit of 80% of the reference value of median rents published every six months by the INE.


The leases to be included in the Affordable Rent Scheme must have a minimum duration of 5 years. The rents must not exceed the limits set out in Ministerial Decree no. 176/2019, i.e., they must be based on the typology and municipality in which the property is. 


The Affordable Rent Scheme was created to make it easier for families to find affordable homes by offering stability and security. Landlords have not joined up in the numbers expected since the scheme's inception.


What could be causing this programme to fail? The benchmarks do not accurately reflect the rental market. In reality, the median values reported by the INE each semester are substantially lower than the values practised. Maintaining market rents may benefit landlords more in some instances.


Photo by Freepik


The pandemic changed the characteristics of house searches. Because of the constant lockdowns, the Portuguese sought houses with outdoor areas such as balconies, gardens or terraces, as well as more spacious houses. The prospect of saving during these two years has encouraged many who were already dreaming of buying a property with the above features to pursue their dreams, leaving rental properties with high rental prices and contracts with short and volatile periods behind.


If you are one of those people who are keen to find their dream home but does not know where to begin, we recommend that you contact one of our real estate agents. At Casas do Barlavento, you will get all the help you need to select the perfect property, as well as all the necessary papers and guidance through the entire process of buying your first home.


Contact us by filling out the form.