Motivated by the combination of government incentives, surging property values, strong demand from tourists and expats, and the great supply of underutilized older buildings. At the midpoint of 2025, the city’s real estate market continues to outshine most of its European peers, commanding significant premiums with renovated properties. I will outline below the key factors that make this profitable, based on current market dynamics.
1. Liberal government incentives and tax benefits
The Portuguese government is very vigorously promoting urban rehabilitation to meet the high housing demand and renew old stock. Programs like the Mais Habitação initiative (open until the beginning of 2023 but was just extended into 2025/26) simplify renovation permits and offer tax exemptions, making it cheaper to buy, fix, and flip or rent properties.
• Key benefits include:
◦ Exemption from Municipal Property Tax-IMI up to 5 years in the case of renovated urban property.
◦ Waiver of the Property Transfer Tax IMT on the first sale of a rehabilitated home if used as the primary residence.
Access to low-interest loans through the IFRRU 2020 fund: €1.4 billion for buildings over 30 years old, with no need to set up a company to apply.
◦ Lisbon-specific RE9 program: 92% of the city’s real estate fall under this program, with up to nine streamlined benefits for rehab projects in urban renewal zones. These can reduce the upfront cost by 20-30%, therefore increasing net returns. For example, energy-efficient upgrades like solar panels or A+ windows are eligible for up to 85% reimbursement through the Programa de Apoio a Edifícios Mais Sustentáveis and appeal to eco-conscious buyers, further improving resale value.
2. High Appreciation and Value-Add Potential
The price of property in Lisbon has almost doubled from €3,000-3,500/m² in 2020 to a median of €5,642/m² as of June 2025, with forecasts for 3-7% growth through the year. Renovated units in historic buildings attract premiums of 20-30% over unrenovated ones in the same neighborhoods, turning “fixer-uppers” into high-margin assets.
• Average Renovation Cost: Generally from €500 to 1,500/m² for standard updates, but post-renovation uplift often yields quick flips; for instance, a €500,000 renovated apartment in trendy Santa Catarina.
• Luxury segment: With 4.5% in 2025, Lisbon ranks in the European top 10 for prime property growth, beating far more established destinations such as Paris and Milan. This is particularly true in regeneration areas such as Marvila and Beato, where former warehouses are being converted into trendy areas now appealing to artists and professionals alike; prices in these areas are rising rapidly.
3. Robust Rentals from Tourism and Expats
Lisbon’s status as one of the best European destinations for conferences, festivals, and remote work fuels a booming short- and mid-term rental market. With more than 2.9 million residents and millions of visitors each year, demand far exceeds supply, with only 900 new units expected in 2025 amid a surge in digital nomads and investors.
• Rental yields: With Lisbon real estate ranking as Europe’s 6th most profitable city for rentals, renovated apartments in the centre yield 5-7% annually, higher for short-term rentals on portals such as Airbnb, where already 50-70% of historic center homes are licensed.
• Post-renovation appeal: Modernized historic flats (retaining azulejo facades and adding modern interiors) can command high demand thanks to their blending of charm and comfort, sometimes renting 20-40% above unrenovated peers.
• Flipping for cash flow: Improved properties in high-demand locations such as Príncipe Real or Campo de Ourique sell out fast to international buyers. 15% of stock is still empty but ready for renovation for passive incomes.
4. Plenty of Distressed Properties
Lisbon counts at least 44,000 dilapidated buildings-10,000 in the center alone-abandoned since 2008 or kept as speculative assets. This places buyers in a strong position to snap up cheap acquisitions, from 3,000-4,000 euros per square meter for units to renovate to 9,000-9,500 euros per square meter for fully renovated ones, while urban planning rules favor rehabilitation of Lisbon apartments over new builds in historic areas.
• Over 700,000 vacant units countrywide, many in Lisbon, present very low entry points for investors. Programs, such as the just-ended Golden Visa, also encouraged the rehabilitation of more than 30-year-old properties, breathing life into neighborhoods and sustaining momentum.
Potential Risks to Consider
While profitable, success isn’t ensured, so focus on high-demand areas like the historic center or emerging spots like Marvila to avoid rural pitfalls. The country has seen growing labor costs and increased regulations on construction at heritage sites. Partnering with local experts helps ensure compliance. Overall, with stable economic growth in which Portugal’s GDP went up moderately in 2025, coupled with Lisbon’s global appeal, renovations here offer great ROI, often 10-15% annually for savvy investors.
If you have a particular area in mind or project type, then I can give more valuable advice.
Propertylisbon and partner have been sourcing, renovating, then renting out or selling Lisbon buildings for over 20 years now, we know what not to do! And we will save you a lot of time and money. Get in in touch for a meeting at our Lisbon office.
Already have an account? Log In
Enter your email address and we'll send you a link you can use to pick a new password.
Can't find what you are looking for?
Never miss a thing!
Never miss a thing!
Can't find what you are looking for?
