Renting in Portugal 21 Percent More Expensive than Buying

Access to housing in Portugal has been widely discussed over the past few years, both in social and political circles. House and rental prices have been rising at a faster rate than household income.

However, after a period of high interest rates, mortgage rates have been falling in recent months, reducing monthly mortgage payments on new contracts and making it easier to get on the property ladder.

With this in mind, renting a two-bedroom property ends up being 21 percent more expensive than the monthly mortgage payment to purchase the same property. This is not universal across the entire country, but certain locations and cities are proving to be cheaper to buy property than it is to rent one, based on monthly mortgage payments and rental prices.

Buying versus Renting

Currently, to get a mortgage loan in Portugal, you will need to have a reserve fund to pay as a down payment on the new house, making buying a house in Portugal to require savings of €32,585, on average, according to analysis by Idealista.

To rent a two-bedroom apartment in Portugal, the monthly median price clocks in at €1,026, while the mortgage payment to buy the same property will be €1,001 (as of the second quarter of 2024). This shows renting a property to be 21 higher than the monthly payment that would be required to purchase the exact same property. With this said, to buy a house, €32,585, on average, would be needed to make a down payment on the loan.

In most real estate markets, it would be easier to pay mortgage payments more easily than monthly rent. However, this is not the case at the moment in the Portugeuse real estate market due to the lack of financial liquidity as a result of high rents.

Improving Housing Accessibility

A key solution to improve access to housing in Portugal seems to be in the adoption of measures that allow for an exponential increase in housing supply for both rental properties and properties to purchase to reduce property prices and improve access.

The Portuguese government has already taken measures to help young buyers purchase property in Portugal, with a new law making it easier for young buyers to secure their first home in Portugal with the elimination of certain property taxes and other incentives.

Cities with the Biggest Differences in Income and Mortgage Payments

In Santarém, just an hour’s drive to the north of Lisbon, monthly rent, which stands at €797, is the most expensive when compared with mortgage payments to the bank, with a difference of 86 percent.

Other cities where renting is also more expensive on a monthly basis include Guarda (75 percent more expensive), Castelo Branco (58 percent) in addition to Évora (22 percent), Portalegre (21 percent), Bragança (4 percent), Viana do Castelo (2 percent), and Vila Real (2 percent).

As we mentioned previously, rent is not lower than bank payments across the entire country, with many key locations being cheaper to rent than making a bank payment. This includes Faro (-32 percent cheaper to rent), alongside Aveiro (-21 percent), Ponta Delgada (-13 percent), Lisbon (-12 percent), Viseu (-11 percent), Leiria (-11 percent), Funchal (-10 percent), Braga (-7 percent), and Coimbra (-2 percent). In Porto, the second-largest city in Portugal, the difference is minimal between renting or making a bank payment, standing at -0.4 percent.

Districts and Islands Biggest Difference in Income and Mortgage Payments

When comparing districts and the autonomous islands of Madeira and the Azores, discrepancies between the rental costs and the monthly mortgage payments to the bank become even more pronounced.

Take Guarda, for example, where renting is double the cost of the mortgage payment. Other cities where rent is also more expensive include:

• Portalegre: 78 percent
• Évora: 75 percent
• Beja: 72 percent
• Vila Real: 60 percent
• Castelo Branco: 59 percent
• Santarém: 46 percent
• Bragança: 43 percent
• Viseu: 35 percent
• Coimbra: 23 percent

Districts that were below the national medium are Viana do Castelo (20 percent), Setúbal (15 percent), Lisbon (14 percent), Leiria (11 percent), and the island of São Miguel, the biggest island on the Azores (10 percent), Porto (6 percent), and Braga (5 percent).

In Faro, rent is -21 cheaper than the monthly mortgage payment, alongside Madeira (-10 percent) and Aveiro (-9 percent).

Buying More Affordable in the Long Term

Given the high rental prices in many locations in Portugal, for foreigners looking to relocate to the country, it can be a smart move to buy property instead of renting.

Not only due to the fact that mortgage payments have fallen in recent months and are often more expensive than mortgage payments to banks but also because, when buying property, its value is highly likely to increase in value over time. This is alongside the fact that property in Portugal provides a lucrative venture for investors, with the potential to secure a strong return on your investment for both long and short-term rentals.