Portugal housing prices driven by economic growth and low supply, not interest rates

Two recent studies of Portugal’s residential market, coordinated by Professor Fernando Oliveira Tavares and co‑authors Luís Pacheco, Margarida Carvalho and Elisabeth T. Pereira, analysed quarterly data from 2000‑2025. They conclude that the country’s GDP growth and a chronic shortage of new housing have a larger impact on house‑price dynamics than the Euribor or other interest‑rate measures.

The research shows that prices of homes have almost tripled in the past decade, rising at an average of 11 % per year, while construction activity has fallen about 70 % since the start of the century, creating an estimated deficit of roughly 300 000 dwellings. Building‑costs have risen over 40 % in the last ten years. The authors note that credit‑default rates are the most reliable early warning of a market slowdown, outweighing consumer‑confidence indicators.

Fernando Oliveira Tavares said, “Embora a taxa de juro seja importante, as condições do crescimento económico do país … têm um impacto maior nos preços da habitação.” The second paper added, “O PIB surge, por isso, como o principal motor de curto prazo do mercado.” When macro‑economic variables and credit conditions are accounted for, the statistical relevance of Euribor disappears, underscoring that household income, employment and credit access drive purchasing decisions.