Europe’s housing crisis hits low-wage Portugal 2023

Georgina Simoes, like an increasing number of individuals in Portugal, no longer makes enough money to purchase a home.

A quarter of the country’s labor force makes less than 800 euros ($845) each month, as does the 57-year-old nursing home caregiver. For the past ten years, she has gotten by by spending only 300 euros per month for her one-bedroom apartment in an unremarkable Lisbon area.

Now, as rents in the capital skyrocket, her landlord is evicting her. She claims that relocating near her workplace would be too expensive.

“You live in this condition of tension,” she adds in her apartment overlooking the Tagus River. “Every day you wake up wondering, ‘Should I stay or should I go?'”

Simoes and many others, including the middle class, are being priced out of the Portuguese real estate market by rising rents, soaring housing prices, and soaring mortgage rates, which are spurred by factors such as the entry of foreign investors and tourists in need of short-term rentals. In recent days, growing concerns about the stability of financial institutions and the potential of further rising inflation have heightened worry.

The Socialist administration of Portugal published a package of measures to address the issue last month, and the Cabinet is expected to accept some of them on Thursday.

In 2020 and 2021, the price of a home in Portugal increased by 157%. Eurostat, the statistical arm of the European Union, reports that rents would increase by 112% between 2015 and 2021.

Nevertheless, soaring real estate prices only convey part of the tale.

Portugal is one of the poorest countries in Western Europe and has long pushed investment in a low-wage sector. According to Labor Ministry figures, just over half of Portuguese workers earned less than 1,000 euros ($1,054) per month last year.

Recent inflationary pressures, particularly rising food and energy costs, and the lingering economic and labor effects of the COVID-19 epidemic have exacerbated the housing crisis in the 27-nation bloc.

More than 82 million households in the EU struggle to pay their rent, 17 percent of individuals live in overcrowded housing, and just over 10 percent spend more than 40 percent of their income on rent, according to the bloc.

Young people, families with children, the elderly, those with disabilities, and migrants suffer the most from uneven access to adequate, affordable housing.

In Portugal, the problem has been exacerbated by tourism, whose robust growth prior to the pandemic has returned with a vengeance, as well as an influx of foreign investors who discovered relatively low real estate prices in Lisbon and have pushed up prices, forcing locals to leave their neighborhoods.

Despite luring a record 25 million international tourists in 2019, Portugal attracted 15.3 million in 2018 – a 158% increase following pandemic restrictions the year prior. This year, analysts forecast a 33% increase.

For some, the long-awaited national success with international tourists is an example of wishing for the impossible.

Rosa Santos, who was born and reared near to the 14th-century St. George’s Castle in Lisbon, which overlooks the port city, claims that the majority of the residences in her area are inhabited by short-term holiday rentals, primarily for foreign visitors. It is typical to see and hear tourists carrying bags on the cobblestones.

Santos states that the rich customs of the residents have vanished, and there is no longer even a bakery or grocery shop there.

“It is no longer a neighborhood,” she remarked. This is not a city, but rather a theme park.

On a recent rainy day, police assisted municipal workers using backhoes to destroy numerous illegal shacks on the outskirts of Lisbon that lacked electricity and running water. The families who were compelled to live in them begged for them to cease.

The shacks were located within a few kilometers (miles) of the luxurious condominiums being constructed on the Lisbon waterfront, where a four-bedroom flat costs 2,4 million euros.

At Camarate, a low-income neighborhood near Lisbon’s airport, missionary Jose Manuel assists impoverished families, some of whom cannot even afford a room, much alone a house, and are subsequently being forced out of the city.

“We are already discussing a room for 400 euros in Camarate and a home for 600 or 700 euros,” he said. A person earning the minimal income cannot afford a home.

According to Prime Minister Antonio Costa, cities that lose their residents lose their “authenticity” and become tourist “Disneylands.”

Among the actions his administration thinks will rectify the market:

— Obligating the owners of empty homes to rent them out, with preference given to tenants under the age of 35, single-parent families, and families whose income has decreased by more than 20 percent.

– Limiting rent hikes on new leases to 2% over the prior contract.

— Terminating the “golden visa” scheme, which provides residency permits to rich foreign investors who purchase property in Portugal.

— Suspending new permits for short-term holiday rentals through tourist accommodation platforms, except in rural regions.

– Conversion of commercial property to residential usage.

The plans have sparked controversy, with some describing them as heavy-handed and foolish, and others criticizing their lack of operational detail. And some are furious.

Hugo Ferreira Santos, president of the Portuguese Association of Real Estate Developers and Investors, stated that foreign investment has slowed to a standstill while individuals await the outcome of the golden visa amendments.

According to what he has heard from international investors, Portugal is not a reputable nation. It is a country that changes the rules of the game in the middle of the game, and outside investment is not welcome.

Also aggrieved are small-scale investors in apartments for short-term holiday rentals.

Eduardo Miranda, the leader of a Portuguese organisation defending their interests, stated, “There are people who have abandoned their life, established their own enterprises, created employment, and hired employees, just to be pulled down one day without any hope.”

Certain proposals will require the approval of the legislature, while others may be brought to the Constitutional Court for review.

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