Lisbon's Transformation: From Affordable Capital to Europe's Least Affordable City

Over the past decade, Lisbon has transformed from one of Europe's most affordable capitals to its least affordable. House prices in the city surged by 176% between 2014 and 2024, with central historic districts seeing increases of over 200%. Today, Lisbon leads Europe in housing unaffordability, a stark contrast to Portugal's 22nd place ranking in 2015. With 60% of Portuguese taxpayers earning less than €1,000 monthly, finding a rental below that price in Lisbon often means settling for spaces of 20 sq metres or less.

The roots of this crisis trace back to post-2008 financial crisis policies. Portugal's aggressive liberalization strategy aimed to boost real estate investment and tourism. This included relaxed rental laws, tax incentives for non-resident buyers like the 'golden visa' program, and encouragement for investment funds to enter the property market. Simultaneously, the short-term rental sector exploded, with half of all homes in Lisbon's historic center holding short-term rental licenses, reaching 70% in tourist-heavy areas.

The global context of low interest rates further fueled the crisis. Affluent investors saw Lisbon as a prime location for second homes and rental income, driving up prices. Foreign buyers pay a median price 82% higher than domestic buyers, exacerbating the affordability gap. Despite building rehabilitations, Lisbon's city center lost 25% of its population from 2011 to 2021, with only 56.5% of new or renovated dwellings serving as primary residences.

The current housing crisis highlights a disconnect between wages and property prices, with costs nearing those of global cities while salaries remain among Europe's lowest. Locals are increasingly pushed out or forced to rent rooms instead of entire flats, deepening social inequality. This situation underscores the failure of market-driven solutions to meet basic housing needs, prioritizing investor returns over residential stability.