Over the past decade, Lisbon has undergone a startling metamorphosis, shifting from one of Europe’s most affordable capitals to its most unaffordable. This dramatic change is evident in the skyrocketing house prices, which surged by 176% across the city between 2014 and 2024 and by over 200% in its historic central districts. Today, Lisbon leads Europe’s housing unaffordability rankings, a stark reflection of its home price-to-income ratio. This trend isn’t confined to the capital; nationally, Portugal has plummeted from 22nd out of 27 EU countries for housing unaffordability in 2015 to first place today. For a country where 60% of taxpayers earn less than €1,000 per month, securing a rental in Lisbon below that price is only feasible if one is willing to occupy 20 square metres or less.
To comprehend Lisbon’s current predicament, one must look back to the years following the 2008 global financial crisis. As part of a “shock plan” to revitalise its economy, Portugal embraced an aggressive liberalisation strategy. The aim was to position Lisbon, and the country as a whole, as a global hub for real estate investment and tourism. The government adopted a familiar neoliberal approach: rental laws were eased, facilitating easier evictions and shorter tenancy agreements; attractive tax incentives, such as the controversial “golden visa” and “non-habitual resident” programmes, were introduced for non-resident buyers; and investment funds were actively encouraged to enter the property market, benefiting from additional tax exemptions.
Simultaneously, both the hotel industry and the short-term rental sector received significant promotion, alongside initiatives designed to attract tourists, digital nomads, international students, and transient young professionals. The impact on Lisbon’s historic centre has been dramatic, with half of all homes now holding a short-term rental licence, a figure that escalates to 70 out of every 100 in the most tourist-saturated areas. Compared to the city’s population, Lisbon’s short-term rental density is six times higher than Barcelona’s and 3.5 times higher than London’s. Furthermore, the number of hotels in the city has tripled since 2010, rising from approximately 100 to 300, with plans for around 50 more already approved by the city council. This phenomenon is not unique to Lisbon, playing out across other European cities, particularly in Southern Europe, where residents are increasingly pushing back through protests.
These changes unfolded within a global environment of low interest rates, prompting affluent individuals to increasingly view housing as a secure place to invest their savings. For these investors, purchasing properties in Lisbon presented a win-win scenario: they could acquire assets for use as second homes in an appealing destination, generate rental income when not in residence, and benefit from both property value appreciation and tax advantages. This trend of housing becoming a store of wealth drives up prices, as investors are willing to pay premium rates for what they perceive as safe assets; the median price for transactions made by foreign buyers in Lisbon is 82% higher than that paid by domestic buyers.
Prior to 2008, gentrification was largely absent from many central Lisbon neighbourhoods, which were primarily inhabited by impoverished, elderly residents living in dilapidated buildings. While investment did lead to building rehabilitation, it failed to translate into residential stability. Despite these improvements, the city centre experienced a 25% population decline between 2011 and 2021. Across the municipality, only 56.5% of dwellings built or renovated during this period serve as primary residences, with the remainder either vacant, used as second homes, or converted into short-term rentals.
This reality directly contradicts the neoliberal narrative of supply and demand, as the escalation of property prices is clearly not driven by an actual demand for homes for new households or places to live. Instead, Lisbon has become a target for investors who treat housing as a financial asset, meaning real estate is developed to maximise returns rather than to meet residential needs. In this environment, shaped by flexible rental laws, local landlords have capitalised by steadily increasing rents, extracting growing value from a diminishing supply of habitable homes.
The outcome is a city that embraces foreign wealth but effectively excludes many of its own citizens, prioritising the desires of global consumers over the fundamental needs of local communities. Lisbon’s current housing crisis reflects a profound disconnect between wages and property prices; housing costs are now nearing those of global cities, while salaries in Portugal remain among the lowest in Europe. Beyond tourists, central Lisbon is increasingly populated by a transnational class of young, mobile professionals – the new gentrifiers. Meanwhile, local residents are being progressively pushed out or forced to adapt by renting individual rooms instead of entire flats. Concurrently, a rising proportion of household income is being consumed by housing costs, exacerbating social inequality and widening the gap between landlords and the general population.
Contrary to the neoliberal assertion that the market alone can adequately meet the needs of the populace, Lisbon stands as yet another example of market failure – particularly for those who believe housing should primarily serve as a place to live with dignity.
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