Portugal's housing crisis stems from low wages rather than a lack of homes

In a recent public forum in Barreiro, Paulo Raimundo, the secretary-general of the Portuguese Communist Party (PCP), addressed a pressing issue: "Portugal does not have a shortage of houses; it has a problem of low wages."

He emphasized that the core of the housing crisis lies not in the availability of homes but in the disparity between stagnant wages and escalating property prices.

Over the past decade, Portugal has witnessed a significant surge in housing prices.

Between 2013 and 2023, house prices grew by 83% in real terms, starkly contrasting the 28% growth observed in neighboring Spain.

This rapid appreciation has been attributed to increased demand from foreign investors and expatriates, drawn by Portugal's favorable climate, tax incentives, and quality of life.

While this influx has stimulated the economy, it has also led to inflated property values, making homeownership increasingly unattainable for many locals. The average Portuguese worker finds keeping pace with these rising costs challenging, especially when wage growth remains sluggish.

Market Contrast - Luxury apartments VS Low Wages

In urban centers like Lisbon and Porto, the situation is particularly pronounced.

Lisbon continues to be the city where it is most expensive to buy a house, with average prices reaching €5,718 per square meter downtown. Porto follows, with prices around €3,705 per square meter.

These escalating prices have forced many residents to seek housing in peripheral areas or to allocate a significant portion of their income to housing expenses, leading to financial strain.

Despite the booming real estate market, wage growth in Portugal has not kept pace.

House prices surpassed wages by 47.1% in the first quarter of 2022, making Portugal the OECD country with the biggest difference between the two values.

This disparity underscores the crux of the issue: while housing availability exists, affordability does not. The average Portuguese salary is insufficient to meet the demands of the current housing market, leading to increased financial hardship for many.

The housing affordability crisis has far-reaching implications. Young professionals, unable to afford homes in urban centers, are either delaying homeownership, relocating abroad in search of better opportunities, or remaining in rental situations longer than desired.

This trend contributes to a "brain drain," with talented individuals leaving Portugal, further challenging the nation's economic future.

Without intervention, housing prices in Portugal are expected to continue rising until at least 2026, driven by structural challenges in the construction sector and sustained demand from foreign investors.

According to different experts, To address this pressing issue, the following measures are recommended:

1. Wage Enhancement: Implement policies aimed at increasing wages, ensuring that workers can afford housing without compromising other essential needs.

2. Affordable Housing Initiatives: Invest in the development of affordable housing projects to cater to low and middle-income families.

3. Regulation of Foreign Investment: Introduce measures to manage foreign investment in the real estate sector, ensuring it does not disproportionately drive up property prices.

4. Tax Incentives for Locals: Offer tax breaks or incentives to local first-time homebuyers to make homeownership more accessible.

By addressing both wage stagnation and housing affordability, Portugal can work towards a more equitable and sustainable future for its residents.

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