Madrid and Lisbon: Population Declines While Housing Prices Rise

Fewer inhabitants, pricier homes: The demand myth

Lisbon had 663,000 inhabitants in 1980. Today it has 504,718. It has lost nearly 100,000 residents over four decades, yet its real estate market is more expensive than Madrid's. This data supports the central thesis: price escalation does not stem from a supposed lack of housing, but from foreign capital and funds buying residential land as a value refuge. Additionally, central Madrid has not grown by even 30% in population density in 40 years, and its population has barely changed by 50,000 people in the last four.

The contradiction is significant. Between 2004 and 2008, demand seemed insatiable. Then, seemingly overnight, it vanished until 2017. Where was that urgent need for property during the years when prices fell and SAREB (Spain’s bank asset management company) accumulated toxic assets that banks failed to sell?

What peine to demand between 2010 and 2016

The most repeated argument justifying high prices is demographic growth. However, the figures cited point elsewhere: the Community of Madrid grew from 4,777,938 inhabitants in June 1983 to 6,921,267 in June 2023. This is real growth, but it applies to the region, not the capital. In the municipality of Madrid, the trend is much more modest, while in Lisbon it is directly negative.

If demand were the driver, it should behave linearly. It did not. It fell for almost a decade and rebounded without the population experiencing an equivalent jump. Some argue that official registration does not reflect the actual population—health cards, unregistered residents, or people living in the capital without registering their address for tax reasons—and this nuance introduces noise into any comparison.

The single-person household argument

The strongest objection to the initial thesis comes not from population data, but from household composition. In 1980, the norm was a family with several children and often a widowed grandmother included in the core. Today, single-person households have multiplied. For the same population size, many more dwellings are needed. This is a verifiable fact that partially dismantles the reasoning that fewer people implies lower demand.

The counter-argument also holds weight: housing prices have increased tenfold or more while wages have remained stagnant since the nineties. A single person has not seen their income grow at the same rate. Hence, the dominant solution is sharing apartments rather than living alone. The series Friends serving as a sociological preview of what was to come is an irony that slips into the conversation.

Tourism, short-term rentals, and funds: The usual suspects

The rise of low-cost airlines and the ease of renting privately through online platforms have turned entire neighborhoods into tourist products. In Lisbon, it is argued, some investors buy five apartments to rent to visitors: at €1,000 per week, it pays off to keep them empty in winter. Digital nomads complete the picture, driving prices up.

A comprehensive calculation of how many homes short-term rentals have absorbed, broken down by area, is the kind of exercise no one completes with official figures. Estimates range from thousands to millions, depending on who presents the data. Without closed numbers, the debate oscillates between intuition and incomplete statistics.

The supply that exists but goes unseen

Another current points to manipulation by real estate portals. The practice would involve listing fictitious properties or fund-owned assets at inflated prices to set a psychological floor: anyone selling below seems naive. The result is that the market closes deals at these artificially high prices, allowing funds that bought at bargain prices to multiply their investment.

Added to this are vacant homes held by owners who do not need to rent them out, and legal uncertainty that discourages bringing them to market. Comparisons with the United States are used both ways: in cities like New York or San Francisco, evictions are quick and bubbles are larger, suggesting the problem is not tenant protection but the freedom of funds to speculate.

Where the analysis hits a wall

With these elements, a reasonable conclusion would be that there is a surplus of homes and a shortage of local buyers. Yet, new blocks fill up as soon as construction ends, parking spots in new developments are fully occupied, and there are no empty flats in the metropolitan periphery. Someone is buying. The question remains who, with what money, and for what purpose, and none of the available figures answer this fully.