Is housing becoming less affordable? A study of affordability in the Portuguese housing market

João Fragoso Januário; Carlos Oliveira Cruz; Humberto Varum; Vítor Faria e Sousa

Key information

Authors:

João Fragoso Januário (João Fragoso Januário); Carlos Oliveira Cruz (Carlos Oliveira Cruz); Humberto Varum; Vítor Faria e Sousa (Vitor Faria e Sousa)

Published in

June 12, 2023

Abstract

With the growing urbanization, and the pressure of demand for housing in many cities, affordability has gained increased attention from policymakers. Housing affordability is hardly a new topic from a research perspective. Still, the recent post-pandemic worldwide inflation growth has re-centred the housing (research and policy) agenda. Following the 2007-2008 financial crisis, Portugal experienced a significant growth in tourism. However, low wages and job insecurity, especially among the youth, led the country to 5th highest housing price-to-income ratio in the OECD countries. Our results also show the social and geographical disparities in housing affordability in the “homebuyer” culture of Southern European countries. This paper expands on the existing literature on tourism and foreign property investment's influence on local populations and how political measures can influence economic dynamics. This is the most comprehensive analysis yet mounted on a municipal level in the country, delivering a broader analysis of affordability issues encompassing regions outside the two most significant metropolitan areas to consider the differences in equity and marginal buyer effects induced by tourism of foreign residents. It is also the first to conduct a quantile analysis of affordability in a Southern European country.