House prices likely to increase 15% in Portugal this year

The ratings agency Fitch is not expecting a leveling off or downturn in the upward trend in housing prices in Portugal because there is a limited supply and demand is strong, both from Portuguese and foreigners.

The US agency predicts a nominal house price increase of 15% in 2026, following record price growth in 2025 of 18%.

Juan Garcia, Senior Director of Structured Finance and Bond Ratings at Fitch, said on Wednesday in a webinar on the outlook for Portugal that he does not foresee a reversal in housing prices “because of limited supply and because demand is strong from both domestic and foreign investors,” who may be European or from other parts of the world”.

The analyst pointed out that difficulties in accessing housing persist, particularly because the rate of nominal price increases is faster than the rate of wage growth. In this scenario, “we don’t see a reversal in house prices in the short term,” he said.

Fitch was also questioned about potential risks to the banking sector stemming from mortgage loans, but Julien Grandjean, Director of Banking Ratings, said he saw no significant deviations.

“The price increase is driven by high demand and limited supply,” he reiterated, adding that the Bank of Portugal “has very strict requirements for the loans that banks have to meet,” so “there is another layer of caution.” Furthermore, in the most recent loans there has been an increase in fixed and mixed interest rates, which brings more stability, the analyst noted.

The credit rating agency Fitch upgraded the Portuguese Republic’s outlook from “stable” to “positive”, signalling confidence in the trajectory to reduce public debt and the country’s fiscal management.

The decision came a week after Standard & Poor’s (S&P) also revised Portugal’s outlook upwards. The two agencies sustain the revision with the expectation of the continuance of a prudent fiscal policy and a decrease in the debt ratio.

In 2025, Portugal recorded a budget surplus of 1.3 billion euros and a historical drop in the public debt ratio to 89.6% of GDP, beyond the 90.2% target set in the State Budget, the lowest in 16 years.

Foreign debt also went down last year to 110.9 billion euros, the lowest since the third quarter of 2007, according to the data from the Bank of Portugal.

According to the Minister of State and Finance Joaquim Miranda Sarmento, “this is good news for Portugal and the Portuguese, a fruit of the labour of households and companies”, noting the importance of continuing to work towards reducing debt and boosting the economy’s resilience.

Source: Fitch; Credits: Fitch Portugal