Lisbon and Porto rents cool – but still expensive by international standards

Portugal’s rental housing boom is losing momentum, with rents in Lisbon largely flatlining and Porto experiencing several consecutive quarters of decline as more properties come onto the market, according to data reported by Expresso newspaper.

Figures from the Confidencial Imobiliário (CI) residential rents index show that Porto’s rental market has undergone a sharp reversal after years of explosive growth. Between the third quarter of 2024 and the first quarter of 2026, rents in the city fell by a cumulative 3.6%.

The decline marks a stark contrast with the period between 2022 and 2023, when rents on new residential contracts in Porto were rising by an average of 22% year-on-year. In the first three months of 2026, rents in the city recorded a year-on-year drop of 1.3% — the largest fall in five years.

Despite the correction, rental prices remain close to 2023 levels and are still almost double those recorded a decade ago.

Lisbon has also entered a period of ‘stabilisation’/ stagnation. After average rent growth of 23.2% between mid-2022 and the third quarter of 2023, new rental contracts in the capital rose by just 0.2% in the first quarter of 2026.

According to CI director Ricardo Guimarães, the slowdown is primarily being driven by a surge in supply.

The number of homes available to rent increased by 12.2% year-on-year in Lisbon and 19.8% in Porto during the first quarter of 2026. Compared with the same period in 2024, supply has jumped by 60% in Lisbon and an extraordinary 126% in Porto.

“The shortage of rental properties pushed rents sharply higher, which in turn attracted more landlords into the market,” Guimarães told Expresso. “That increase in supply is now leading to lower rents or, at the very least, a slowdown in rental growth.”

Economists also point to weaker demand. Higher mortgage costs, rising property prices in city centres and stricter immigration controls are reducing pressure on Portugal’s two largest urban markets.

According to the Bank of Portugal, the pace of immigration into the country fell by more than half between 2024 and 2025.

Pedro Brinca, an economist at Nova SBE, cautioned that the figures should be interpreted carefully. Rent increases below inflation still represent a real-term decline, he noted, while changes in the type of properties entering the market can distort headline figures.

The moderation in rents has coincided with housing measures introduced by Prime Minister Luís Montenegro’s government, including a reduction in tax on rental income from 25% to 10% for qualifying landlords charging rents of up to €2,300 per month, as well as expanded support through schemes such as Porta 65 Jovem.

However, Brinca said it remains unclear how much of the slowdown can be directly attributed to government policy.

Porto Mayor Pedro Duarte told Expresso that housing remains one of the city’s top priorities but argues that simply building more homes in Lisbon and Porto is not enough.

“If we do that, we will concentrate even more people in cities like Lisbon and Porto while depopulating large parts of the country,” he said.

Instead, Duarte wants to encourage former residents to return through affordable housing projects, the rehabilitation of vacant buildings and targeted rental support for young people and local residents.

While the recent cooling offers some relief, housing experts warn that rents still remain far beyond the reach of Portuguese salaries. Guimarães argues that deeper reforms to Portugal’s rental legislation will be needed to significantly reduce housing costs and expand the market.

Source: Expresso