Are you thinking about moving to Portugal because of the quality of life? You need to know that financial planning is essential since in recent years there has been an increase in the cost of living in the country and in this article, we’ll help you to understand it a little bit better.

The increase in the cost of living in Portugal in recent years

The cost of living in Portugal has been increasing considerably in recent years and according to the numbers, will worsen in 2023, which has been leaving the population a little apprehensive.

What motivated the increase in the cost of living in recent years?

Tourism and strong immigration were the two main factors that led to the increase in the cost of living in Portugal in recent years, especially with regard to property rentals. It’s the law of supply and demand. But can you blame us? Portugal is AMAZING!

But also, the Ukrainian War (that just completed one year) impacted Portugal visibly in terms of economy. Operating costs of Portuguese companies increased more than 15%, due to the difficulty in accessing raw materials and energy – the energy crisis and its direct and indirect impacts are the main villains for the increase in the cost of living in European countries and not only in Portugal – let’s point that out!

What about Inflation? 

Throughout 2022, we observed inflation levels rise and reach historical values in Portugal, and in October of the same year, it reached a peak of 10.2%, the highest value of Portuguese inflation in the last 30 years. WOW!

We all could feel the impact of it with every trip to the supermarket. Most people started resorting to white labels as a way to save money.

And when it comes to the implicit interest rate on home loans, Portugal also recorded a significant increase. According to the last INE report released in January 2023, the interest rate rose to 2.217%, the highest value recorded since June 2012. But, it’’ still lower than in many other countries!

What about the rental price? Is it still going up?

YES! Prices have increased significantly, especially in the Lisbon and Porto regions.

If you look at just the cities of Lisbon and Porto, you will see a huge variation in rental prices. To have an idea, Lisbon had an increase from €15.60 in March 2019 to €18.90 in March 2023. And Porto, on the other hand, jumped from €10.50 in March 2019 to €14.80 in March from 2023.

And rent consumes the largest share of monthly expenses, that’s the main reason why we say that the cost of living in Portugal is getting higher.

Are there places where the cost of living remained stable in Portugal?

Inland cities and non-tourist cities still maintain a more stable cost of living, mainly because they do not suffer as much from the rise in real estate. However, when it comes to the supermarket and basic energy bills, the countryside population has also felt the change in the prices.

Nevertheless, living in the countryside of Portugal can be a great alternative for retirees looking for peace, security and quality of life. However, for those looking for work opportunities, it may not be a good option, since the big cities offer much better conditions.

Those who don’t give up living in busier cities, but want to find lower rents, the ideal would be to look for a place to live on the outskirts of Lisbon or on the outskirts of Porto, for example.

Tips on how to get around the rising cost of living in Portugal

If you are organizing your so dreamt move to Portugal, avoiding some things in Portugal can help you save on your budget. Here are some tips to save some money:

• Try to live outside the big cities, Portugal is very small and moving around the country is very fast. In addition, it has a good network of public transport and roads to get you from one city to another quickly and efficiently;
• When going to the supermarket, choose to buy white-label products, which are much cheaper and with excellent quality. Also, make cards for each supermarket to take advantage of discounts;
• Register at the Health Center and use the public health system in Portugal and save with the health plan. Although we think this is an important point and should be considered in your financial planning;
• Enroll your children in public schools. Portugal offers an excellent quality of public education.

Remember: crises are transitory and shouldn’t stop you from living your dream. Come to Portugal and if you need any help, we are just one e-mail away!