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Financial Times

Financial Times UK18 Aug 2026

Por­tugal and Spain top EU hous­ing black spots

Immig­ra­tion puts pres­sure on poli­cy­makers striv­ing to help people buy or rent a home

BARNEY JOPSON — MADRID SÉRGIO ANÍBAL — LISBON Addi­tional report­ing by Car­men Muela

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Por­tugal and Spain are strug­gling with some of the EU’s worst hous­ing crises, as immig­ra­tion-driven pop­u­la­tion growth, bur­eau­cracy and high con­struc­tion costs com­bine to cre­ate severe prop­erty short­ages.

Such short­falls are stok­ing pub­lic dis­con­tent and polit­ical ten­sions across Europe, driv­ing up prices and rents, for­cing people out of their neigh­bour­hoods and leav­ing many unable to afford even a mod­est home.

The strain is par­tic­u­larly acute in the Iberian pen­in­sula’s biggest cit­ies. Por­tugal built 300,000 fewer prop­er­ties than its pop­u­la­tion needed in 2021-25, equi­val­ent to 6.6 per cent of all the coun­try’s house­holds last year, accord­ing to a Bank of Spain study. Spain’s short­fall in the same period was 750,000 units — 3.7 per cent of all house­holds.

By con­trast, the Euro­zone aver­age short­fall equalled 0.5 per cent of all units, the study found. And the two Iberian coun­tries also have some of the low­est stocks of pub­lic hous­ing in the EU.

Bank of Por­tugal gov­ernor Álvaro San­tos Pereira said in writ­ten answers to FT ques­tions: “The hous­ing afford­ab­il­ity prob­lem in Por­tugal is an ongo­ing con­cern, which is felt in sev­eral regions of the coun­try, includ­ing in Lis­bon and Porto, where afford­ab­il­ity issues are more pro­nounced.”

He noted that “high migra­tion inflows have res­ul­ted in an increase in the num­ber of res­id­ent house­holds” but argued that the solu­tion lay in boost­ing the sup­ply of new homes.

A surge in immig­ra­tion to Por­tugal in recent years has included both low-income arrivals from south Asia and wel­loff recip­i­ents of “golden visas”, which could be obtained by buy­ing prop­erty until the rules were tightened in 2023.

But San­tos Pereira said the hous­ing situ­ation was improv­ing. The Bank of Por­tugal said hous­ing con­struc­tion broadly kept up with the rate that new house­holds were formed in 2025, in part owing to reduced immig­ra­tion. However, the cumu­lat­ive hous­ing defi­cit from pre­vi­ous years remains. Centreright Prime Min­is­ter Luís Montenegro, in power since 2024, has eschewed the anti-immig­rant rhet­oric of rightwing pop­u­lists but deterred new arrivals by tight­en­ing entry rules.

San­tos Pereira has sought to shift the focus away from demand. “The emphasis should be put on sup­ply-side meas­ures, given that the lack of sup­ply is at the root of the accu­mu­lated short­fall,” he told the FT.

But the con­struc­tion sec­tor has still not recovered from the dev­ast­at­ing con­sequences of the Euro­zone crisis, said Manuel Maria Gonçalves, chief exec­ut­ive of the Por­tuguese Asso­ci­ation of Prop­erty Developers and Investors. “We lost com­pan­ies, we lost work­ers and we lost pro­duct­ive capa­city,” he said.

Developers were ready to build today, he added, but rising con­struc­tion costs and excess­ive bur­eau­cracy meant it was dif­fi­cult to make a profit from con­struct­ing “middle-class” homes. As a res­ult, they were pushed “towards higher-end seg­ments where those costs can still be absorbed”.

Still, Gonçalves applauded meas­ures approved by the Por­tuguese par­lia­ment this year — includ­ing lower VAT on con­struc­tion work and sim­pler licens­ing pro­ced­ures — say­ing that they “should improve the eco­nom­ics of hous­ing projects”.

The Bank of Spain meas­ured defi­cits by cal­cu­lat­ing the dif­fer­ence between the net num­ber of new house­holds formed every year and the num­ber of res­id­en­tial units approved for con­struc­tion two years earlier, includ­ing the time lag to account for build­ing peri­ods.

It found Ger­many was the big EU eco­nomy with the strongest hous­ing sup­ply, with a sur­plus equi­val­ent to 0.5 per cent of all house­holds from 2021-25, count­ing the num­ber of build­ing per­mits approved. But it acknow­ledged that if the cal­cu­la­tions used the num­ber of new homes com­pleted, the coun­try had a small defi­cit of 0.1 per cent.

In Spain and Por­tugal, the use of apart­ments for tour­ist rent­als is redu­cing hous­ing stock for res­id­ents. Prop­erty developers and civil soci­ety groups say short­ages are for­cing people to sleep on friends’ sofas, rent indi­vidual rooms in units occu­pied by mul­tiple fam­il­ies and endure long com­mutes.

Lis­bon res­id­ents earn­ing the aver­age wage would have to pay more than 110 per cent of their income to rent a typ­ical one-bed­room apart­ment in the city centre — the highest level in Europe, accord­ing to Numbeo, a data pro­vider, as well as Deutsche Bank and FT cal­cu­la­tions. In Mad­rid and Bar­celona, the fig­ure is 75 per cent.

In Spain, hous­ing is voters’ top con­cern, accord­ing to pub­lic poll­ster CIS. Prime Min­is­ter Pedro Sánchez, who leads a leftwing minor­ity gov­ern­ment, main­tains an open-door immig­ra­tion policy that has driven up demand for prop­erty, with the coun­try’s for­eign­born pop­u­la­tion sur­ging by an annual aver­age of 665,000 since 2022.

But Sánchez has been largely sty­mied on hous­ing policy because he can­not get major legis­la­tion through par­lia­ment and because regional gov­ern­ments have more powers in the area.

In April, his gov­ern­ment approved a €7bn hous­ing plan for 2026-30 that includes fin­an­cing for more pub­lic hous­ing and the rehab­il­it­a­tion of empty build­ings. But private developers say the root causes of short­ages lie else­where. Juan José Perucho, man­aging dir­ector of large Span­ish developer Ibosa, said sig­ni­fic­ant obstacles included bur­eau­cracy and legal chal­lenges that meant it took years to obtain per­mis­sion to develop on new plots.

But a big­ger factor, he said, was the rapid growth in the num­ber of work­ing immig­rants who are seek­ing afford­able hous­ing in the same seg­ment of the mar­ket. “For both sales and rent­als, we’re reach­ing a point where prices have hit levels that are no longer com­pat­ible with people’s wages,” he said.