Why invest in rental real estate in Portugal?

Many expatriates have chosen to settle in Portugal, drawn by its pleasant climate, high sunshine levels, affordable cost of living, and exceptional quality of life. Why not move to Portugal yourself? 

However, if you're not yet ready to take the plunge, you can start by making a rental investment. Purchasing a waterfront house in Albufeira or an apartment in Lisbon allows you to generate rental income until the day you decide to move there.
 

Where to invest in Portugal?

Whatever the type of rental, choosing a dynamic and tourist-friendly city is highly recommended. Lisbon and Porto are Portugal’s two economic capitals and major tourist destinations. Albufeira and Faro, located in the Algarve, are among the most attractive coastal cities in the country. 

For seasonal rentals, Lisbon, Porto, and Faro, home to the country's three international airports, are ideal choices. While property prices are higher in these cities, their rich cultural heritage and historical attractions make them highly desirable to tourists. 

Whether you opt for long-term or short-term rentals, ensure you invest in a city that remains vibrant year-round, not just in the summer. Consulting a notary or a real estate agent is highly recommended to facilitate your purchase process.
 

How much does real estate cost in Portugal?

According to the latest report from the National Institute of Statistics (INE) published on January 30, 2025, the median real estate price in Portugal is €1,819/sqm. 

The median price per square meter in the country's key regions and cities is:

• €3,032/sqm in the Lisbon region: €4,336/mq in Lisbon and €4,052/mq in Cascais.
• €2,746/sqm in the Algarve.
• €2,327/sqm in the Madeira region.
• €2,043/sqm in the Porto metropolitan area and €2,900/m² in Porto city.
• €1,822/sqm on the Alentejo coast and €965/m² in the interior of the region.
• €1,263/sqm in the Azores. Choosing a city near major urban centers is an ideal strategy to reduce purchase costs while benefiting from metropolitan appeal.

Short-term rental or long-term rental: which is the best investment?

Short-term rentals are particularly profitable, especially given Portugal’s tourism boom. Although property prices are rising, they remain more affordable than in many other European countries. 

Industry experts estimate rental yields between 5% and 8% in high-demand cities like Lisbon, where property prices are significantly lower than in Paris or London. The average gross return on a vacation rental in Porto ranges between 6% and 10%. 

Long-term rentals require less effort and management from property owners while still offering solid returns. According to Global Property Guide’s latest data, the average annual rental yield in Portugal is 4.96%. For apartments, the yields are 4.45% in Lisbon, 4.76% in Porto, and 5.20% in Faro.

To make your real estate dream come true and secure a successful investment, seek guidance from a real estate professional, such as an agent or notary. From property search to lease management and contract signing, they will support you throughout your journey.