In February 2020, we published a brief analysis here of the risks the International Monetary Fund had identified in the real estate sector.
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At the time, the world was only days away from entering a period that would profoundly alter many existing economic forecasts. What followed was a pandemic, a sharp rise in inflation, the return of significantly higher interest rates, international conflicts and successive changes in economic and financial conditions.
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Six years later, returning to that analysis allows us to do something more interesting than simply determine whether a forecast proved correct: to understand what has changed and, above all, what has remained.
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House prices continued to rise
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The figures are striking.
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According to the IMF, by the end of 2025 house prices in Portugal were around 180% above their 2015 levels, compared with an accumulated increase of approximately 56% in the euro area over the same period.
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The trend continued into early 2026. According to Eurostat, house prices in Portugal rose by 17.8% year-on-year in the first quarter, the highest increase recorded among European Union countries.
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The IMF also estimates that house prices in Portugal may be between 20% and 40% above the levels suggested by its long-term equilibrium models.
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These figures warrant attention. But not necessarily hasty conclusions.
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The same risk, but not quite the same market
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In 2020, a significant part of the concern centred on the relationship between rising property values, credit growth and financial vulnerability.
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Today, the picture is more complex.
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The IMF considers that mortgage credit has not been the main driver of the strong increase in Portuguese house prices over recent years.
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On average, new credit for home purchases has represented less than half of the value of property transactions carried out in recent years.
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The factors identified include demand from non-residents, Portuguese households using savings to purchase property and, above all, a supply that has struggled to keep pace with growing demand.
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This does not mean that credit is no longer relevant.
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On the contrary. Housing finance has recently accelerated again, recording year-on-year growth of close to 10% in the first quarter of 2026, which is why the IMF recommends that developments in the market continue to be closely monitored.
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Supply has become a central part of the issue
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This is perhaps one of the most significant differences between the debate in 2020 and that of 2026.
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The IMF’s current analysis attributes a significant part of the imbalance in the Portuguese market to supply.
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Insufficient construction, lengthy permitting processes, planning constraints, inefficient use of part of the existing housing stock and certain inefficiencies in the rental market help explain why supply has failed to keep pace with demand.
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The housing issue can therefore no longer be viewed solely through the lens of prices or financing conditions.
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It is also a question of territory, availability, the use of existing property assets and the capacity to deliver new housing where it is needed.
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Risk does not necessarily mean crisis
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There is another aspect of the IMF’s analysis that should not be overlooked.
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Despite developments in house prices, the 2026 assessment considers the Portuguese financial system broadly resilient and systemic risks moderate.
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In the stress tests conducted, banks demonstrated the capacity to absorb significant adverse scenarios, including substantial corrections in property prices.
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Identifying risks, therefore, is not the same as predicting a crisis.
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It means recognising imbalances, understanding their origins and monitoring the factors that may alter their development.
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Six years later, understanding remains essential
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Looking back at 2020 from the perspective of 2026, this may be the most interesting conclusion.
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Prices rose far more than would have been easy to anticipate at the time. Interest rates followed a path that was equally difficult to predict. The market went through a pandemic, inflation, regulatory changes and profound economic and social transformations.
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And yet some of the questions remain.
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What is a sustainable relationship between prices and incomes? How can housing supply be increased? What role should credit play? How can the existing property stock be used more effectively? And how do we distinguish a cyclical trend from a structural transformation?
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There are no simple answers — and probably no single answer for every territory or every person.
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That is precisely why following the market should mean more than simply following prices.
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It means understanding the factors behind them, the context in which they are formed and what they may represent for those buying, selling, investing, managing property or simply seeking to make a more informed decision about their assets.
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Read also: IMF warns of risks in the real estate market — 2020
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Sources: International Monetary Fund (IMF), Portugal — 2026 Article IV Consultation and Financial System Stability Assessment; Eurostat, House Price Index — first quarter of 2026.
Market, UH Perspective