Portugal Property Market Outperforms UK by ~13% in 2025: What UK HNWIs Should Do Now

Takeaway: Portugal’s housing market rose +17.2% YoY in Q2-2025 versus the UK’s +3.6% in June and +2.8% in July, implying an outperformance spread of roughly +13%. That gap is underpinned by ECB policy at 2.00% vs BoE 4.00%, cheaper Portuguese mortgage new-loan rates (~2.86% in Aug) and still-tight prime supply in Lisbon’s best addresses.

Methodology & Windows (like-for-like)

Portugal: National House Price Index (INE), Q2-2025 YoY = +17.2%.
UK: ONS/HMLR monthly UK HPI, June 2025 = +3.6% YoY; July 2025 = +2.8% YoY.
EU context: Eurostat shows EA +5.1% / EU +5.4% YoY in Q2-2025 with Portugal the standout.

Sources: INE, ONS/HMLR, Eurostat.

1) The 2025 performance spread: Portugal vs UK

Portugal’s national index accelerated to +17.2% YoY (Q2-2025); the Eurostat release flags Portugal as the EU leader for the quarter (EA +5.1% / EU +5.4%). The UK’s official HPI shows +3.6% YoY in June, easing to +2.8% YoY in July. That’s a clean ~13% outperformance on the June window.

2) Why the gap exists: policy-rate divergence & mortgage transmission

The ECB lowered its policy rates in 2025 to a Deposit Facility Rate of 2.00% (5 Jun 2025), while the BoE cut to 4.00% (7 Aug 2025). Cheaper euro funding feeds through to Portuguese mortgage pricing: new housing-loan rate averaged 2.86% in Aug 2025 (BdP series), materially below prevailing UK owner-occupier costs.

ECB DFR (%) ─ 2.25 ─┐
                     ├── 2.00 (5 Jun)
                     └───────────► 2.00
BoE Bank Rate (%) ───── 4.25 ──┐
                               └── 4.00 (7 Aug) … 4.00 (Sep)
New PT Loans (avg %, Aug) …………………… 2.86

3) Prime lens: Lisbon vs Prime Central London

Lisbon prime values rose +2.4% in H1-2025 (Savills). Prime Central London (PCL) remains roughly ~21–22% below its 2014 peak per Savills, reflecting tax and cost-of-capital headwinds.

4) Income backdrop: UK rents at records, Lisbon tightness persists

Rightmove Q2-2025 shows average advertised rents at £1,365 pcm outside London and £2,712 pcm in London—useful as a UK comparator for income-led strategies.

5) Deal math at investor ticket sizes (€1.5m / £1.5m)

Portugal purchase @ €1,500,000 (non-PPR)

IMT: “taxa única” 7.5% for values > €1,128,287 ⇒ €112,500.
Imposto do Selo: 0.8% ⇒ €12,000.
Total taxes: €124,500 (~£108,639 @ ECB ref €1=£0.8726).

England purchase @ £1,500,000 (non-resident, additional)

From 1 Apr 2025: higher rates +5% above standard bands.
Non-resident surcharge: +2% across bands.
Estimated SDLT: ~£198,750 (standard bands +7%).

ECB ref (3 Oct 2025): €1 = £0.8726 — used for conversions.

6) Lisbon AL (“Alojamento Local”) containment—what underwriters need

Lisbon’s municipality ran a public consultation (Mar–Apr 2025) to tighten AL in defined “containment areas”. Official notices list the eight central parishes most impacted: Santa Maria Maior, Misericórdia, Santo António, Arroios, Estrela, Penha de França, São Vicente, and Avenidas Novas.

7) Supply & build-cost signals to watch

Construction cost index (INE) shows +4.8% YoY in July 2025 (materials +1.5%; labour +8.9%)—a forward constraint on new supply supporting prime resale values.

Bank appraisals hit a €1,965/m² median in Aug 2025 on ~31.7k reports—consistent with firming collateral values.

8) What this means for UK/EU HNWIs

Relative-value rotate: With PCL ~21–22% below peak vs Lisbon prime +2.4%, a barbell (income in Lisbon; optionality in PCL) hedges currency and rate risk.
Finance efficiently: Use euro mortgages (~2.86%) to lower carry. Stress-test 50–100bp ECB scenarios.
Underwrite AL exposure: Confirm parish status before underwriting short-stay yields in Lisbon.
Golden Visa 2025: No property route; consider fund or research options.

Deal Card • €1.5m Algarve Villa

Entry costs: IMT €112.5k + IS €12k ≈ €124.5k.

Finance: 55–60% LTV; 3–5y refix, ~150–200bp over swap.

Income: 3.5–4.0% long-let; seasonal Q2–Q3 uplift.

Risks: AL licensing; build-cost inflation.

Comparator • £1.5m London (NR, add’l)

Entry costs: SDLT ~£198,750 (post-Apr 2025 rules).

Finance: Sterling rates 150–250bp higher than euro equivalents.

Income: Strong lettings, slower absorption.

Risks: Tax surcharges; slower capital growth.

FAQs

By how much did Portugal outperform the UK housing market in 2025?

Portugal +17.2% YoY (Q2-2025) vs UK +3.6% (June) / +2.8% (July), implying ~+13% outperformance.

What are the taxes on a €1.5m Portugal purchase in 2025?

IMT: 7.5% “taxa única” above €1,128,287 ⇒ €112,500; Imposto do Selo: 0.8% ⇒ €12,000. Total ≈ €124,500 (~£108,639 @ ECB ref).

Can I still get a Portugal Golden Visa by buying property in 2025?

No. The 2023 “Mais Habitação” law removed real estate from Golden Visa eligibility; only fund, culture, or research routes remain.