Portugal holds the distinction of having the most overvalued housing market in the EU.
The European Commission projects that housing prices in Portugal are overestimated by about 25%, the highest percentage currently seen across the European Union.
In a report accompanying today’s affordable housing plan, the EU executive notes that, based on the latest data, housing prices in several EU countries remained inflated in the second half of 2025. Portugal leads with an approximate 25% overvaluation, surpassing other real estate markets.
The Commission paints a broader picture of an EU housing crisis: housing price growth began to outpace income growth in 2016, and the gap has widened sharply since then. Portugal, the Netherlands, Hungary, Luxembourg, Ireland, the Czech Republic, and Austria have seen the largest increases over the past decade.
Affordable housing initiative
Today, the European Commission unveiled its first EU-wide plan to promote affordable housing. The plan includes a housing construction strategy that prioritizes vacant homes, renovation and conversion of buildings, and streamlined construction rules (for example, easier permit processes). It also revises state aid rules to make it simpler for Member States to invest in affordable and social housing.
Additional funding is slated from the EU’s long-term budget, cohesion funds, the InvestEU program, and the European Investment Bank. The plan aims to curb real estate speculation through greater sector transparency and introduces a new local accommodation law to provide a clear framework for local authorities.
Young people, including students, are a focus, with measures to boost investment in university residences and to keep mortgage payments from becoming unmanageable.
New governance structures will be created, such as a Housing Alliance that brings together Member States, mayors, and regional authorities, along with market monitoring mechanisms.
Construction targets
Over the next decade, the EU plans to deliver approximately 650,000 new homes each year, supported by public and private investments totaling around €150 billion annually.
The EU faces a housing crisis in countries like Portugal, where rapid price increases for homes and rents have made affordable living harder—especially for young people and low-income families. Across the EU, housing prices have risen by as much as 60% on average since 2015, with some member states recording increases exceeding 200%. Rental costs and energy prices have also climbed.
However, residential building permits have fallen by about 22% since 2011.
Additionally, short-term rentals contribute pressure in several locations, accounting for up to 20% of housing stock in some areas after rising more than 90% over the past decade.
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Join the discussion: would you like to share your view on whether housing policies should prioritize affordability over market freedom? Do you think the EU plan adequately addresses local needs in coastal cities versus inland towns? Share your thoughts in the comments.
