Takeaway: Portugal’s housing market rose +17.2% YoY in Q2-2025 versus the UK’s +3.6% in June and +2.8% in July, implying an outperformance spread of roughly +13%. That gap is underpinned by ECB policy at 2.00% vs BoE 4.00%, cheaper Portuguese mortgage new-loan rates (~2.86% in Aug) and still-tight prime supply in Lisbon’s best addresses.
Methodology & Windows (like-for-like)
- Portugal: National House Price Index (INE), Q2-2025 YoY = +17.2%.
- UK: ONS/HMLR monthly UK HPI, June 2025 = +3.6% YoY; July 2025 = +2.8% YoY.
- EU context: Eurostat shows EA +5.1% / EU +5.4% YoY in Q2-2025 with Portugal the standout.
Sources: INE, ONS/HMLR, Eurostat.
1) The 2025 performance spread: Portugal vs UK
Portugal’s national index accelerated to +17.2% YoY (Q2-2025); the Eurostat release flags Portugal as the EU leader for the quarter (EA +5.1% / EU +5.4%). The UK’s official HPI shows +3.6% YoY in June, easing to +2.8% YoY in July. That’s a clean ~13% outperformance on the June window.
2) Why the gap exists: policy-rate divergence & mortgage transmission
The ECB lowered its policy rates in 2025 to a Deposit Facility Rate of 2.00% (5 Jun 2025), while the BoE cut to 4.00% (7 Aug 2025). Cheaper euro funding feeds through to Portuguese mortgage pricing: new housing-loan rate averaged 2.86% in Aug 2025 (BdP series), materially below prevailing UK owner-occupier costs.
ECB DFR (%) ─ 2.25 ─┐
├── 2.00 (5 Jun)
└───────────► 2.00
BoE Bank Rate (%) ───── 4.25 ──┐
└── 4.00 (7 Aug) … 4.00 (Sep)
New PT Loans (avg %, Aug) …………………… 2.86
3) Prime lens: Lisbon vs Prime Central London
Lisbon prime values rose +2.4% in H1-2025 (Savills). Prime Central London (PCL) remains roughly ~21–22% below its 2014 peak per Savills, reflecting tax and cost-of-capital headwinds.
4) Income backdrop: UK rents at records, Lisbon tightness persists
Rightmove Q2-2025 shows average advertised rents at £1,365 pcm outside London and £2,712 pcm in London—useful as a UK comparator for income-led strategies.
5) Deal math at investor ticket sizes (€1.5m / £1.5m)
Portugal purchase @ €1,500,000 (non-PPR)
- IMT: “taxa única” 7.5% for values > €1,128,287 ⇒ €112,500.
- Imposto do Selo: 0.8% ⇒ €12,000.
- Total taxes: €124,500 (~£108,639 @ ECB ref €1=£0.8726).
England purchase @ £1,500,000 (non-resident, additional)
- From 1 Apr 2025: higher rates +5% above standard bands.
- Non-resident surcharge: +2% across bands.
- Estimated SDLT: ~£198,750 (standard bands +7%).
6) Lisbon AL (“Alojamento Local”) containment—what underwriters need
Lisbon’s municipality ran a public consultation (Mar–Apr 2025) to tighten AL in defined “containment areas”. Official notices list the eight central parishes most impacted: Santa Maria Maior, Misericórdia, Santo António, Arroios, Estrela, Penha de França, São Vicente, and Avenidas Novas.
7) Supply & build-cost signals to watch
Construction cost index (INE) shows +4.8% YoY in July 2025 (materials +1.5%; labour +8.9%)—a forward constraint on new supply supporting prime resale values.
Bank appraisals hit a €1,965/m² median in Aug 2025 on ~31.7k reports—consistent with firming collateral values.
8) What this means for UK/EU HNWIs
- Relative-value rotate: With PCL ~21–22% below peak vs Lisbon prime +2.4%, a barbell (income in Lisbon; optionality in PCL) hedges currency and rate risk.
- Finance efficiently: Use euro mortgages (~2.86%) to lower carry. Stress-test 50–100bp ECB scenarios.
- Underwrite AL exposure: Confirm parish status before underwriting short-stay yields in Lisbon.
- Golden Visa 2025: No property route; consider fund or research options.
Deal Card • €1.5m Algarve Villa
Entry costs: IMT €112.5k + IS €12k ≈ €124.5k.
Finance: 55–60% LTV; 3–5y refix, ~150–200bp over swap.
Income: 3.5–4.0% long-let; seasonal Q2–Q3 uplift.
Risks: AL licensing; build-cost inflation.
Comparator • £1.5m London (NR, add’l)
Entry costs: SDLT ~£198,750 (post-Apr 2025 rules).
Finance: Sterling rates 150–250bp higher than euro equivalents.
Income: Strong lettings, slower absorption.
Risks: Tax surcharges; slower capital growth.
FAQs
By how much did Portugal outperform the UK housing market in 2025?
Portugal +17.2% YoY (Q2-2025) vs UK +3.6% (June) / +2.8% (July), implying ~+13% outperformance.
What are the taxes on a €1.5m Portugal purchase in 2025?
IMT: 7.5% “taxa única” above €1,128,287 ⇒ €112,500; Imposto do Selo: 0.8% ⇒ €12,000. Total ≈ €124,500 (~£108,639 @ ECB ref).
Can I still get a Portugal Golden Visa by buying property in 2025?
No. The 2023 “Mais Habitação” law removed real estate from Golden Visa eligibility; only fund, culture, or research routes remain.
