The cheap relocation paradise that became a nightmare: The turmoil experienced by the European country — "Suitcase wheels are driving people crazy"

In recent years, Portugal has become an increasingly familiar name in Israel as well. Some Israelis arrived there thanks to the possibility of obtaining a European passport, others were looking for a destination for relocation, real estate investment, or simply a quieter and cheaper place to live.

Lisbon, Porto, Cascais, and the Algarve have become familiar names for Israeli real estate investors, as part of a much wider influx of foreigners to Portugal. The capital that arrived from outside injected money into the cities and the local economy, but alongside the investments, there has also been a sharp rise in housing prices and a growing sense of exhaustion among some of the residents.

To understand what happened to the Portuguese housing market and what the influx of foreigners looks like from the perspective of the locals, we spoke with Dr. Luís Mendes, a geographer and researcher at the University of Lisbon, who has been dealing with gentrification, housing policy, and urban changes for over two decades.

"If you look at the Israelis in Portugal, it is important first of all to put the numbers in proportion," says Mendes in a conversation with Maariv. "According to the official data for 2024, we are talking about only about 1,600 Israelis, out of about 1.5 million foreigners living in the country. That is about a tenth of a percent of all foreigners in Portugal."

"Since October 2023, we have indeed seen more interest from Israelis looking for a second home or a move to Portugal. They are attracted by the weather, the lower cost of living, and the sense of security. But to understand the impact on the housing market, one must look at the Israelis as part of a much wider wave of residents and foreign investors who have arrived in Portugal in the last decade and a half."

Economic Dependency

From here, says Mendes, one must take a step back and understand the economic structure of Portugal. "We are a country in Southern Europe, and that means we are very dependent on tourism and real estate," he explains. According to him, after the financial crisis of 2008-2009, Portugal relied increasingly on these two sectors to accelerate recovery.

"These are sectors that are capable of moving the urban economy very quickly," he says, but adds that this dependency also has a price: it makes the economy more sensitive to movements of foreign capital and demand coming from outside. While Portugal does have an industrial base, it is not an industrial economy in the sense that Germany or France are.

From Lisbon to the suburbs: The wave of price increases

The demand from foreigners for apartments in Portugal has risen significantly, especially in Lisbon, Porto, and the Algarve. Mendes emphasizes that it is not correct to claim that foreigners alone drive the entire housing market, but in certain areas, they have become a central player.

"There are places where almost half of the transactions are related to foreign buyers," he says, and especially to members of the upper-middle class and investors who purchase a property even without living in it permanently. Apartment prices in the city of Lisbon have more than doubled within a decade, and in some of the suburbs, they have even tripled.

"It's like throwing a stone into a lake," describes Mendes. "The investments and foreign demand enter first of all into the sought-after and expensive areas in the city center, and there they push prices upward. Afterward, waves are created that spread outward: people who can no longer afford to live in the center look for cheaper alternatives, the demand moves to neighborhoods and suburbs, and subsequently, the prices there also begin to rise."

"Not gentrification, but super-gentrification"

From Mendes's perspective, what happened in Lisbon is a deeper process of "super-gentrification." It is no longer just a situation where members of the middle class enter a cheap neighborhood and displace a weaker population, but a situation where even neighborhoods that have already undergone gentrification are now attracting much wealthier capital owners. The change does not stop at apartments: small shops and neighborhood businesses struggle to meet costs, and in their place come cafes, pubs, and souvenir shops catering to tourists.

"We are seeing not only the gentrification of housing but also the gentrification of commerce," says Mendes. "Local businesses are gradually disappearing, and in their place come businesses that are more adapted to tourists and new residents with higher purchasing power."

"People are exhausted"

Mendes emphasizes that in Lisbon, there is still no "tourist-phobia" like that which is sometimes identified with Barcelona. However, in the historic neighborhoods of Lisbon, such as Alfama and Bairro Alto, the feeling is harder. "People are tired," he says. "They are exhausted."

This fatigue is being translated into political activity. In the last decade, social movements have strengthened that demand the "right to the city" and the right to housing. Mendes gives a small example that illustrates the fatigue: "Just hearing the small suitcase wheels on the Portuguese calçada can drive people crazy," he says. "They live with it 24 hours a day, seven days a week."

As for the Israelis, they are part of the same broad wave of relatively affluent residents and investors who arrive from outside. For an Israeli arriving with an Israeli salary or capital, Portugal might still seem cheap, but for a Portuguese person earning a local salary, the same prices can be very heavy.