Rather it reflects the buoyancy of the market and the disparity between high demand and lack of supply.
The Bank of Portugal has dedicated a section of its latest issue of its Economic Bulletin to Portugal’s housing market and its experts arrived at their conclusions that the housing market was not facing a bubble by using a price-to-rent ratio.
The calculation shows the way in which the transactional and rental markets are intrinsically interlinked since they represent “alternative forms of access to housing services”.
When the two variables display a similar evolution with a parallel and positive profile, there is appreciation in the two markets.
“Between 2017 and 2024, the average value per square metre of sales increased by around 88%.
And the average value of rents increased by around 81% states the Bank of Portugal for that period.
“In 2025 the average increase in house sales increased 16% resulting in a variation of around 120% for the period between 2017-2025.”
As for rents for the whole of 2025, Portugal’s National Statistics Institute (INE) has not yet released the data for last year.
The price-to-rent ratio – which measures the relationship between the price of the sale of a property and the value of the annual rent associated to it – “increased slightly” between 2017 and 2024 from 17.9 to 18.6”, states the BoP.
This indicator, says the BoP, “enables an estimate of the degree of how much the property has gained in value as an asset compared to the rental income flow that that property can make from rent”.
So, when the ratio increases, the relative appreciation of the property as an asset also increases, associated to future expected appreciation potential, greater demand or a greater attractiveness of the location in which the property stands.
Overall, the results concluded that house and rent price increases in Portugal were “consistent with a market dynamic based on the fundamental determining factors of supply and demand” in other words there are “no clear signs of a speculative bubble in Portugal’s housing market.”
Source: Negócios/BoP.
