DBRS anticipates gradual slowdown in housing prices in Portugal

Chowever, the financial rating agency believes that “price pressures will remain high” due to housing supply restrictions that will only gradually decrease.

For the time being, DBRS takes away the idea of a real estate bubble in both Portugal and Spain, considering that “the strong supply restrictions and the gradual slowdown in demand” will prevent price reversal.

The agency also notes that this expansion cycle was not driven by debt accumulation, as occurred in the past.

“ The ratio between household debt and disposable income in both countries fell from around 100% in 2008-2012 to approximately 50% in 2025,” he adds.

In its analysis, DBRS Morningstar argues that “the macroeconomic foundations on the demand side, including strong population and employment growth, increased income and low interest rates, supported the growth of real estate prices” both in Portugal and Spain.

According to the agency's estimate, real estate prices in Spain have increased by 50% since 2019 and in Portugal have doubled in the same period.

At the same time, “home supply did not respond quickly enough to meet the increase in demand, resulting in a large housing deficit in each country”.

In Portugal, the accumulated deficit is estimated at more than 300,000 homes, a figure that grows to more than 700 thousand in Spain.

“The weak activity of construction since the collapse of the real estate market in 2008 is one of the main reasons for the restrictions”, continues the analysis, also referring to the shortage of labour in construction, the increase in material costs, the limited supply of land and the slowness of licences.

In both markets, “the supply crisis is aggravated by foreign buyers and the tourist boom, which directed the demand for housing for short-term use”.

For the DBRS, they are “structural restrictions of supply that are difficult to reverse and that will probably exacerbate the gap between supply and demand” in the Iberian space.