Portugal has some of the most expensive real estate when we compare with the average salary. The country has been a go-to place for foreigners looking to invest in property, and retirees looking to spend their last years in a sunny and welcoming country. This has driven the prices of real estate higher in the most important areas of the country, Lisbon, Porto and the Algarve. The spike in real estate prices around these regions has made it impossible for portuguese with lower salaries to buy or even rent a property. Portugal seems to be the biggest real estate bubble in Europe. As 60% of portuguese make less than €800 a month, the rise in property prices has forced them to allocate most of their salaries to rent or to pay mortgages.
As a way of preventing this kind of situation, some countries, namely in Europe, have set up laws to protect tenants. These rent control laws allow every tenant to get an affordable house with standard living conditions. Many view this as an interference of governments in the free market. Real estate prices in countries with rent controls tend to be affected, reflecting the inability to raise prices. Prices should not be regulated, and governments should not interfere with the free market, but at the same time, some countries are deeply affected by high property prices. Housing has always made up most of a family’s spending, and it is to be expected. When these levels reach over 50% of the spending, then the situation changes.
The reasons behind high property prices
One of the reasons behind the surge in property prices is the amount of capital that is just laying around ready to be deployed. Not everyone knows how to allocate capital in the best way, and real estate becomes an easy and simple way of doing it. This in turn creates a housing shortage that could last for a long time, and has a deep impact on different socioeconomic levels of society. Although there is no simple solution for this problem, rent controls emerge as the most obvious and simple way governments can address the issue at hand.
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