The Portuguese real estate market showed mixed signals in the second quarter of 2025. According to the latest data from INE, licensing activity remained positive but slowed considerably compared to the strong momentum of early 2025. At the same time, the number of completed projects fell, exposing a growing gap between planned developments and actual delivery.
For those focused on real estate investment, this divergence highlights both risks and opportunities. While regional markets such as the North and Centre continue to expand, areas like Lisbon and the Algarve are showing signs of strain. Understanding these dynamics is essential for investors seeking to balance growth potential with risk management.
Licensing: Growth Persists, but Momentum Weakens
In Q2 2025, 6,500 buildings were licensed, a 4.3% increase year-on-year. However, this marks a sharp slowdown compared to the 27.6% surge in Q1.
- New construction licenses grew 4.4% (vs. +31.6% in Q1).
- Rehabilitation licenses rose 6.1%, down from 20.4% growth previously.
- Housing units licensed in new builds climbed 17.9%, slower than the 39.1% expansion in Q1.
Regionally, the North and Centre remain central drivers of the Portuguese real estate market, accounting for nearly 60% of licensed projects. Notable growth came from Setúbal (+17.3%) and Oeste e Vale do Tejo (+10.2%), while the Azores (-26.3%), Algarve (-5.6%), and Alentejo (-2.8%) contracted.
Completions: A Sharper Contraction
While licensing held up, completions revealed a more concerning trend. 3,900 buildings were completed, down 15.0% year-on-year, worsening from the -10.5% decline in Q1.
- New construction completions fell 15.4%.
- Rehabilitation completions declined 12.8%.
- Housing units completed slipped 4.4% (after +16.1% in Q1).
The regional breakdown underscores the uneven state of the Portuguese real estate market. Madeira stood out with completions up 26.2%, while Lisbon (-27.4%), Oeste e Vale do Tejo (-25.8%), and the Algarve (-22.2%) suffered steep declines. In housing units, the Algarve recorded a dramatic -65.4% fall, highlighting heightened risk for investors focused on tourism-heavy markets.
Implications for Real Estate Investors
The divergence between licensing (future supply) and completions (current delivery) carries several implications:
- Tightening near-term supply: In Lisbon, Setúbal, and the Algarve, falling completions may support rental yields but limit liquidity.
- Project delivery risks: Higher construction costs, financing challenges, and administrative bottlenecks are delaying projects, especially in coastal regions.
- Regional rebalancing: The North and Centre are consolidating their position as the growth backbone of the Portuguese real estate market. Mid-size cities like Leiria, Vila Nova de Gaia, and Portimão are gaining weight in new approvals.
Strategic Outlook for the Portuguese Real Estate Market
Looking forward, investors should monitor three dynamics:
- Macroeconomic headwinds – Eurozone slowdown and tighter credit may pressure development pipelines.
- Regional divergence – Inland and northern regions are showing resilience, while Lisbon and the Algarve remain volatile.
- Policy shifts – Housing affordability measures, foreign investment rules, or changes in licensing processes could alter investment strategies in 2026.
Conclusion: Managing Risk in a Cooling Market
The Portuguese real estate market is transitioning from rapid expansion to moderation. For investors, the key is to manage exposure strategically: focus on resilient regions, anticipate project delays, and stress-test portfolios against supply-demand imbalances.
Opportunities remain in the North and Centre, but Lisbon and the Algarve show signs of fragility. The coming quarters will be decisive in determining whether Q2 marks a temporary correction or the beginning of a more structural cooling in Portugal’s property cycle.
For tailored insights and opportunities in real estate investment in Portugal, connect with Roca Estate and explore strategies aligned with the market’s evolving dynamics.
