Portugal’s startup ecosystem has attracted global attention over the past five years, with companies like Feedzai, Outsystems, and Talkdesk building billion-dollar valuations from Lisbon and Porto. Yet beneath the headlines about venture funding and Web Summit attendees lies a structural problem that could quietly undermine the country’s competitive advantage: housing affordability is pricing out the very talent pool that makes Portugal attractive to investors.
The OECD’s January 2026 Economic Survey delivers an uncomfortable reality check. Portugal faces a “structural and persistent housing crisis,” with the organization dedicating an entire chapter to real estate market imbalances. But while policymakers debate property tax reforms and building permits, few in the tech community are connecting the dots. When a junior developer earning €25,000 annually cannot afford rent in central Lisbon—now averaging €1,200 for a one-bedroom apartment—Portugal’s recruitment advantage evaporates quickly.
• Property prices increased 40-50% in Lisbon since 2015
• Construction permits take 545 days in Lisbon, 548 days in Coimbra
• 60% of rental transactions occur informally (undeclared)
• Property valuations for tax purposes unchanged since 2015
Where Portugal Stands in Europe’s Tech Geography
Portugal has positioned itself as a middle ground: lower labor costs than Western Europe, but significantly higher quality infrastructure and regulatory stability than Eastern Europe. Portuguese startups raised €1.2 billion in 2023, though concentrated heavily—60% flowed to just five companies. This concentration reflects both the maturity of some unicorn-track ventures and the thinness of mid-stage funding available to emerging teams.
The real competitive advantage sits in specialized talent. Universities like Instituto Superior Técnico (IST) and FEUP produce exceptional engineers in AI, cybersecurity, and systems design. But this talent increasingly faces a choice: accept lower Portuguese salaries with crushing housing costs, or relocate to Berlin, Amsterdam, or Dublin where compensation packages offset higher living expenses with genuinely affordable housing options. This challenge directly impacts Portugal’s remote work regulations for tech companies, as businesses struggle to attract international talent amid housing constraints.
The Math Behind the Housing Crisis
The OECD identifies a fundamental fiscal asymmetry: Portugal taxes property transactions heavily through transfer taxes (IMT) while maintaining extremely weak annual property taxes (IMI). This creates perverse incentives. Property owners benefit from capital appreciation without proportional tax burden, while younger generations shoulder disproportionate costs when entering the market.
“Portugal’s housing market shows structural impediments that require comprehensive policy reform, particularly in taxation and supply-side measures” – OECD Economic Surveys: Portugal 2026
Real estate valuations for tax purposes haven’t been updated since 2015—a critical oversight given property price appreciation of 40-50% in Lisbon over that period. This creates a gap between actual market values and taxable values, distorting investment signals and failing to capture the true revenue potential from property ownership.
The OECD’s recommended response: shift taxation from transactions toward ownership. This means raising IMI substantially, particularly for vacant properties and underutilized real estate in high-demand zones. It means recalibrating property valuations using current market data rather than decade-old assessments. It means taxing capital gains on residential real estate sales more aggressively—currently exempted if reinvested, a loophole that primarily benefits older property owners with substantial accumulated wealth.
These reforms would address intergenerational inequality, but they carry explicit economic trade-offs that extend beyond housing policy. The reality of Portugal’s hidden living costs becomes particularly acute when housing consumes such a disproportionate share of income.
| City | Average Tech Salary | T1 Rent (Center) | Housing % of Income |
|---|---|---|---|
| Lisbon | €25,000-35,000 | €1,200 | 41-58% |
| Porto | €22,000-30,000 | €900 | 36-49% |
| Berlin | €45,000-60,000 | €1,400 | 28-37% |
| Dublin | €50,000-70,000 | €1,800 | 31-43% |
The Bureaucratic Bottleneck
Building new housing requires navigating a Byzantine permitting system. In Lisbon, construction permits took 545 days to obtain in 2023; in Coimbra, 548 days. These timelines don’t reflect complexity—they reflect administrative fragmentation. Each municipality operates independently with varying urbanization rules, creating inefficiency at scale.
The OECD recommends harmonizing building regulations nationally while digitizing permitting processes. Straightforward on paper, painful in execution. It requires municipalities to surrender authority and requires trained personnel to process applications faster. But the alternative is continued undersupply: fewer new housing units entering the market means sustained price pressure.
The Informal Rental Market Problem
Here’s where Portugal’s housing crisis intersects directly with economic competitiveness. The OECD estimates 60% of rental transactions occur informally—undeclared, unregulated, and tax-free. This creates downside protection for landlords (no property taxes, minimal oversight) but offers zero legal protection for tenants. Evictions happen quickly; contracts disappear if disputes arise.
For professionals relocating to Portugal—whether remotely working for Irish tech companies or joining local startups—this informality is genuinely frightening. Foreign talent wants legal certainty, not handshake agreements in cash-only arrangements. Formalizing the rental market requires tax incentives for landlords to register properties, clearer contractual frameworks, and tenant protections that don’t exist currently.
Without this, Portugal competes at a disadvantage for skilled remote workers and international hires. A German developer considering relocation to Lisbon for a startup position faces housing market uncertainty that Berlin, Amsterdam, or Copenhagen simply don’t present.
• Always insist on formal rental contracts (contrato de arrendamento) even if landlords suggest informal arrangements
• Budget an extra 2-3 months for housing search when relocating—informal market creates artificial scarcity
• Consider Almada, Oeiras, or Cascais for better rental availability while maintaining Lisbon access
Why Tech Leadership Should Care
Portugal’s startup founders are understandably focused on product-market fit and fundraising. Housing policy seems orthogonal to venture capital rounds and technical roadmaps. But talent retention and recruitment are existential competitive factors. When a promising engineer receives competing offers from a Dublin fintech paying €60,000 with affordable housing, or a Lisbon startup paying €35,000 with housing costs consuming 50% of income, the choice becomes obvious.
Feedzai and Outsystems succeeded partly because they built their teams during Portugal’s relative affordability advantage. That advantage is eroding. As housing costs approach Western European levels while salaries remain 30-40% below comparable positions in Berlin or London, Portugal’s positioning weakens. This shift is already visible in Portugal’s evolving job market dynamics, where companies struggle to compete for talent against international remote opportunities.
The structural fixes the OECD prescribes—property tax reform, permit streamlining, rental market formalization—operate on multi-year timelines. Political resistance from property owners is predictable. Bureaucratic implementation will drag beyond stated targets. But delaying these reforms effectively concedes Portugal’s position to competitors who’ve already solved housing accessibility for talent.
Property Tax Reform: 2-3 years for full implementation
Permit Digitization: 18-24 months for major municipalities
Rental Market Formalization: 3-5 years for meaningful impact
Expected Affordability Improvement: 5-7 years if fully implemented
What Comes Next
Portugal’s government faces a choice framed as technical: adjust property tax bases, streamline permitting, regulate rentals. In reality, these decisions determine whether Portugal remains a meaningful node in European tech or becomes a picturesque place where early-career talent cannot afford to live.
The OECD’s recommendations, if implemented fully, would increase property owner tax burden while expanding available housing supply and regulatory clarity. These measures could meaningfully improve affordability within 5-7 years. But political will remains uncertain, and every year of inaction sees talent pipelines redirect toward alternatives with superior housing-to-income ratios.
For founders and investors betting on Portugal’s sustained tech competitiveness, housing reform isn’t a peripheral policy issue. It’s the foundation upon which talent acquisition and retention depends. The success of Portugal’s tech recruitment ecosystem ultimately hinges on whether the country can solve its housing accessibility crisis before losing its competitive edge to more affordable European alternatives.
“Housing market dysfunction threatens Portugal’s position as a competitive destination for international talent, particularly in technology sectors where mobility is high” – OECD Economic Survey Portugal 2026
