Rent costs increasingly squeezing income levels
In the second quarter of 2025, the financial effort required to rent a home in Portugal increased slightly to 83% of income, up by 1 percentage point from 82% in the same period of 2024. This rise was due to a 3.5% annual increase in rents [2][4].
Notable cities with significant increases in rental effort rates over the past year include Faro (20 percentage point increase), Ponta Delgada (15 percentage points), Guarda (4 percentage points), Funchal (3 percentage points), Braga (2 percentage points), Aveiro (2 percentage points), and Leiria (1 percentage point). Viseu also saw a 1 percentage point rise [2][4].
However, it's worth noting that Bragança and Castelo Branco did not witness any changes in rental effort rates during this period [2][4].
In a positive development, the home purchase effort rate decreased in 12 major cities. These include Funchal (-14 percentage points), Vila Real (-14 percentage points), Faro (-10 percentage points), Bragança (-10 percentage points), Porto (-8 percentage points), Viseu (-7 percentage points), Leiria (-7 percentage points), Castelo Branco (-4 percentage points), Braga (-3 percentage points), Portalegre (-2 percentage points), Viana do Castelo (-1 percentage points), and Beja (-1 percentage points) [2][4].
Setúbal experienced a 6 percentage point increase in the effort rate for home purchases. In the second quarter of this year, the cities with the highest home purchase effort rate were Lisbon (108%), Faro (96%), and Funchal (96%) [2][4].
Interestingly, the national effort rate for home purchases remained stable at 71% in the second quarter of 2025 and 2024. Aveiro and Guarda saw a 1 percentage point increase in the effort rate for home purchases [2][4].
Funchal is the city that requires the most financial effort from families to rent a home, requiring 89% of the rent to be spent [2][4]. The cities where rent impacts household income the least are Castelo Branco, Guarda, Beja, and Portalegre [2][4].
All major cities analysed had rental burden rates above the recommended 33% [2][4].
[2]: Source for Q2 2025 data [4]: Source for Q2 2024 data
In the realm of business, the rising trend in rental rates demonstrates that investing in real-estate in Portugal might demand 83% of one's income, a 1% increase from the previous year's 82%. Meanwhile, the effort required for home purchases has shown a decline in 12 major cities, with Funchal exhibiting a significant reduction of 14 percentage points in this regards.
