Portugal housing market warning from IMF: House prices have increased by 169% since 2015

The rapid housing price increase that has been going on for years in Portugal is now not only an affordable housing problem, but also a closely monitored risk in terms of financial stability.

According to the International Monetary Fund's assessment of the Portuguese financial system, house prices in the country have increased by approximately 169% since 2015. In the same period, the increase in the Eurozone average remained at approximately 55%.

However, the IMF's assessment does not mean that "Portuguese banking system is on the verge of an imminent housing crisis." The institution also emphasizes that current direct bank risks are limited and that the Portuguese banking system has strengthened significantly in recent years.

The difference between Portugal and the Eurozone is huge

According to the data in the IMF's Financial System Stability Assessment report, housing prices in Portugal have increased by 169% since 2015.

The increase in the Eurozone average is approximately 55% in the same comparison.

The report also states that house prices in Portugal increased by approximately 18% in the one-year period until September 2025.

The IMF draws attention to the significant movement of prices away from long-term economic fundamentals.

Despite this, why is the direct risk of banks limited?

The important detail here is the way of purchasing a house in Portugal.

According to the IMF, less than half of home purchases are financed with bank loans.

This situation caused a very sharp correction in housing prices. It is one of the factors that limit the reflection of the entire price decrease directly to banks' mortgage portfolios.

The ratio of Portuguese households' indebtedness to disposable income has also fallen significantly over the last nearly 20 years and has remained below the Eurozone average since 2022.

Therefore, a direct conclusion such as "prices have risen so much, banks are automatically at risk of a major crisis" does not accurately reflect the IMF's analysis.

What is the IMF's main concern?

In the report, one of the main vulnerabilities for the future is defined as the simultaneous emergence of three factors:

rapidly rising housing prices, loosening of credit conditions and the possibility of household indebtedness rising again.

The IMF states that this combination should be closely monitored as credit growth begins to accelerate again.

In other words, today's problem is not just the size of the existing mortgage stock; The risk that may arise in the future if the credit cycle accelerates again with high prices.

The banking system is stronger than before

On the other side of the IMF assessment is the recovery of Portuguese banks over the last decade.

According to the report, banks have strong capital and liquidity buffers and compare well with their international peers in terms of profitability.

The debt reduction process that took place after the European debt crisis in 2012 also increased the resilience of the system.

For this reason, the IMF sees the current financial risks as generally manageable, but says that the development in the housing market should be monitored.

What does this mean for the homebuyer?

The IMF report does not provide a prediction that house prices will fall in the near future.

Likewise, it does not give a date or prediction that "the bubble will burst".

The main conclusion of the report is different: the rise of Portuguese house prices in the last decade is far above the Eurozone average, and this difference now constitutes a vulnerability that must be closely monitored in terms of financial stability policy.

The 169% increase for those considering buying a house in Portugal also shows how the current accessibility problem has accumulated over a long period of time.

The housing problem in Portugal is now two separate headings

The housing market has long been discussed in terms of rental prices, the cost of purchasing a home and housing supply.

The IMF assessment adds a second dimension to this: financial stability.

These two issues are not the same thing.

While high housing prices may make it difficult for citizens and residents to access homes, the main question in terms of financial stability is to what extent the possible change in prices will be reflected in the debt payment capacity of households and the balance sheets of banks.

According to the IMF's assessment, direct bank risk is controllable today. However, the price increase The risk profile may change if credit conditions and household indebtedness begin to move together.

Resources

International Monetary Fund — Portugal: Financial System Stability Assessment, 24 June 2026

https://www.imf.org/en/publications/cr/issues/2026/06/23/portugal-financial-system-stability-assessment-577171

IMF eLibrary — Portugal: Financial System Stability Assessment, Housing Market Vulnerabilities

https://www.elibrary.imf.org/view/journals/002/2026/149/article-A001-en.xml

Idealista News — Preço das casas é principal vulnerabilidade da banca portuguesa, diz FMI, 22 September 2026

https://www.idealista.pt/news/imobiliario/habitacao/2026/09/22/77789-preco-das-casas-e-principal-vulnerabilidade-da-banca-portuguesa-diz-fmi