Lisbon's Housing Crisis: A Threat to Regional Competitiveness and Talent Retention

The Housing Crisis in Lisbon

The housing crisis in the Lisbon metropolitan area is jeopardizing the region's ability to attract and retain talent, leading to a brain drain of skilled professionals moving to areas with a better income-to-cost of living ratio.

Economic Transformations

A recent study by the association Causa Pública analyzes the economic transformations in the Lisbon metropolitan area and the challenges arising from an increasing dependence on tourism and the real estate sector. The report highlights a decline in productivity and the impact of this trend on economic growth and national competitiveness.

Over the last decade, the region has seen a reconfiguration of its economic structure, with a growing specialization in low-productivity sectors such as tourism, commerce, and real estate. This shift has resulted in a stagnation of higher technological activities, compromising the region's capacity for innovation. Consequently, productivity per worker has fallen, contrasting with other comparable European metropolitan areas.

Impact of Real Estate Valuation

Another critical point raised in the report is the impact of real estate valuation on housing accessibility and the mobility of the working population. The high cost of housing has led to a phenomenon of residents relocating to peripheral municipalities, increasing transportation costs and complicating the integrated functioning of the labor market in the metropolitan region.

The report further emphasizes that the housing crisis compromises Lisbon's ability to attract and retain talent, resulting in a flight of qualified professionals to regions where the salary-to-cost of living ratio is more favorable. Additionally, rising rents and commercial property prices make it more expensive for innovative companies to set up, making the region's economy less diverse and more vulnerable to external shocks.

"The trends described in this report show that the region hosting the Portuguese capital has experienced a decade of skyrocketing property prices alongside a notable economic expansion in low-productivity sectors typically associated with tourism," reads the document.

Key Insights

• The Lisbon Metropolitan Area (AML) is at the center of Portugal's housing crisis.
• While prices have surged, the AML's economic structure is shifting towards sectors like tourism and real estate.
• Over the past decade, productivity per worker in AML has declined, diverging from comparable European cities, while higher value technological activities have stagnated.
• The housing costs in AML are significantly higher than in competing European metropolitan areas, impacting salary competitiveness and contributing to a brain drain.
• The economic geography of AML has changed, with population growth in peripheral areas but job growth remaining centralized, leading to fragmentation in the labor market.

The report warns that without effective public policies to reverse this trend, the Lisbon metropolitan area may continue to lose international competitiveness. Measures such as increasing investment in affordable housing, diversifying the economy towards higher value-added sectors, and modernizing transport infrastructure are essential to rebalance regional development.

You can read the full study here. Causa Pública is an association committed to creating new pathways for Portugal through public debate focused on development models and governance options from various leftist perspectives.