Struggling homeowners Face Increased Financial Burden from Rising Rental Prices
Rising Rental Effort Rates in Portuguese Cities
Between Q2 2024 and Q2 2025, there was a general increase in rental effort rates in Portuguese cities, with the national average rising from 82% to 83%, a 1 percentage point increase.
The city of Faro experienced the largest increase, with rental effort rising from 70% to 90%, a 20 percentage point increase. Other notable specific increases in rental effort rates include:
- Ponta Delgada: +15 percentage points
- Guarda: +4 percentage points
- Funchal: +3 percentage points
- Braga: +2 percentage points
- Aveiro: +2 percentage points
- Leiria: +1 percentage point
- Viseu: +1 percentage point
Effort rates in Bragança and Castelo Branco remained unchanged during this period.
Funchal is the city that requires the most financial effort from families to rent a home, requiring 89% of the rent to be spent. In contrast, Castelo Branco, Guarda, Beja, and Portalegre have the lowest rental burdens, with rent impacting household income the least at 34%.
Meanwhile, the effort rate for home purchases remained stable at 71% nationally during this period. However, there were some changes in individual cities:
- Faro saw a 10 percentage point decrease in the effort rate for home purchases.
- Braga saw a 3 percentage point decrease.
- Beja, Coimbra, Évora, Porto, and Vila Real saw no changes.
- Lisbon had a 2 percentage point increase.
- Setúbal saw a 6 percentage point increase.
- Ponta Delgada had a 3 percentage point increase.
- Castelo Branco saw a 4 percentage point decrease.
- Viana do Castelo saw a 1 percentage point decrease.
- Guarda had a 1 percentage point increase.
- Viseu saw a 7 percentage point decrease.
- Aveiro and Leiria saw 1 percentage point increases.
Interestingly, six cities now have a lower than the recommended 33% loan commitment for home purchases: Vila Real (27%), Beja (23%), Portalegre (22%), Bragança (22%), Guarda (17%), and Castelo Branco (17%).
Overall, the rental market in Portugal has become more expensive for renters, while the home purchase market has shown some variation across cities.
- In correlation with the rise in rental effort rates, some individuals might consider investing in real-estate businesses to capitalize on the increased demand for housing.
- Despite the decrease in the effort rate for home purchases in certain cities, such as Faro and Braga, the significant increase in rental effort rates may encourage more families to focus on finance and business strategies for purchasing properties in Portuguese cities.
