Building more housing doesn't curb prices: the Portuguese case

Building doesn't make housing cheaper: Portugal builds a lot and prices still rise 16.5%

Portugal is seeing the sharpest housing price increase in the entire European Union —16.5% year-on-year in the second quarter— while at the same time ranking among the countries building the most in its region. The paradox, reported by Eurostat, blows up the most repeated recipe in public debate: that all it takes is cranes for prices to fall. In the eurozone the increase was 1.1%, and across the EU as a whole, 1.2%. Portugal, while building, multiplied that average fifteenfold. With those figures, claiming that supply fixes everything requires first explaining why it didn't work there.

Why doesn't building more lower housing prices?

The first counterargument that comes up is the Spanish episode. Between 1998 and 2006 the country built housing at a pace never seen again —in 2006 the figure cited was 600,000 homes a year— and prices, far from moderating, skyrocketed. The explanation that prevails is that this was not a normal market: cheap credit after joining the euro pushed up demand and supply at the same time. Everyone was buying. Even people who had just entered the job market. Those who could bought three or four properties, because they "paid for themselves" through rent.

Two opposing readings emerge from that diagnosis. For some, the problem was never how much was built, but how much was hoarded and with what money it was financed. Land is finite, they say, and adding construction on top of a basic good with rigid demand does not guarantee prices will fall: housing would not be a market like any other. For others, it was a perfect storm of credit, expectations and blocked land, and today conditions are different: over the last twelve years less has been built than in any other comparable period and the population has kept growing. The excess of demand would be the crux, not supply.

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Land, hoarding and financing

There is one point where almost all positions converge: land. The harshest criticism targets the artificial scarcity created by rezoning, paperwork and permits, a mechanism that —it is argued— drives up the final product both through cost and through administrative corruption. Those who advocate liberalising construction on private land with minimal rules argue that the bureaucratic maze protects no one: it only fattens the middleman.

Against that, the objection is that the market does not distribute by need, but by ability to pay. Cheap credit generates demand; expensive credit, paradoxically, also pushes prices up, because it concentrates buying in the hands of those with liquidity. And hoarding does the rest.

Immigration: the demand added to the problem

Part of the analysis focuses on demographics. It is argued that the volume of people arriving each year pushes up rents and purchase prices, especially in large cities, and that without that flow the market would change radically. Others reply that housing accommodates households, not individuals, and that measuring a housing deficit by comparing inhabitants with dwellings is a methodological error.

The figure usually cited in this debate is from the INE (Spain's national statistics institute): Spain went from 46.818 million inhabitants in January 2012 to 49.571 million in January 2026, an increase of 2.75 million. A relevant figure, yes, but far below the 6.7 million that sometimes circulates in these discussions. The difference is not trivial: it completely changes the magnitude of the supposed gap between population and housing stock.

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The public housing that changed price: the Plan Vive case

In parallel, the controversy over protected housing adds another layer. An accusation spread by Podemos leader Ione Belarra claimed that the Plan Vive programme of the Community of Madrid had gone from advertising instalments of 900 euros to actually charging 1,500. The complaint, spread on social media, points to the gap between the promised price and the real price of public rental housing.

Regardless of how that dispute ends, the episode illustrates a pattern: every announcement of affordable housing immediately raises the question of whether it really makes things cheaper or merely relabels what already existed.

What the parties propose

On the political front, the recipes range from controlling immigration, building more and bringing the stock of empty flats to market by giving owners legal certainty. Vox has repeatedly insisted on curbing demand and on a mass construction plan; the PP has backed construction as a lever. None of the major parties seems willing to touch land through pure deregulation, the measure that would most discomfort landowners.

With Portugal rising 16.5% while building, is there any magic formula that makes housing cheaper without at the same time tackling credit, land and hoarding?