Rental property returns start falling throughout Portugal; Lisbon leads decline

Buying residential property in Portugal as a buy-to-let investment became less profitable in the second quarter of 2026, with gross rental yields falling to 6.2%, according to new figures released by property portal Idealista.

The national average yield was down from 6.9% in the second quarter of 2025 and 7.2% a year earlier, representing a decline of 0.7 percentage points year-on-year and one full percentage point compared with the same period in 2024.

Despite the nationwide drop, several smaller cities continue to offer significantly stronger returns than Portugal’s largest property markets.

Castelo Branco and Vila Real recorded the highest gross rental yields, both at 8.1%, followed by Bragança (7.6%), Santarém (6.6%), Coimbra (6.4%), Leiria (6.0%), Évora (5.7%), Ponta Delgada (5.6%), Setúbal (5.4%) and Braga (5.3%).

At the other end of the scale, Lisbon remained the least attractive district capital for buy-to-let investors, with a gross rental yield of just 4.3%.

The Portuguese capital ranked below both Porto and Faro, where average gross yields stood at 4.8%. Funchal recorded 5.2%, while Aveiro and Viseu each posted yields of 5.0%.

The findings reinforce a long-standing trend in Portugal’s housing market: cities with the highest property prices tend to deliver the lowest investment returns – even where rents remain among the country’s highest.

Idealista said the figures show that investors seeking stronger rental income may find better opportunities in medium-sized cities rather than in Portugal’s largest urban centres.

The study also compared returns across other segments of the property market, with commercial real estate continuing to outperform residential housing.

Retail premises generated an average gross yield of 8.0%, while offices returned 7.8%, both comfortably ahead of residential property at 6.2%. Garages delivered the lowest average return, at 5.1%.

According to Idealista, the analysis is based on asking prices for residential sales and rental listings during the second quarter of 2026. Gross rental yields were calculated by comparing purchase prices with annual rental income, providing an indication of the potential return available to property investors before costs and taxes.

Source material: Executive Digest

Natasha Donn

Journalist for the Portugal Resident.