Is buying rental property in Lisbon and the surrounding areas still a good investment?

It depends on your expectations and your strategy. 

If you are targeting Lisbon itself and looking for an immediate ROI of 10-12% through Airbnb, unfortunately this is not possible anymore. Regulations on Alojamento Local (vacation rentals) have been drastically tightened in the past couple of years as that segment of the rental market had gotten out of control. As a result, it is today basically impossible to get new short term licenses in the center of Lisbon.

However, several types of opportunities still exist:

- Target other areas and towns (such as Costa de Caparica, Ericeira, Peniche and the Silver Coast, etc) that are still cheaper than Lisbon but popular with certain categories of short term renters, such as surfers or digital nomads.

- Invest in Lisbon but focus on medium (3-12 months) or long term (3 years minimum) rentals, for a return of up to 6% -- if you are careful to optimize your taxes. Important to note: Officially, the minimum length of a lease agreement is now 3 years. This recent law is meant to protect renters, but it also prevents owners from raising prices in line with the fast growth of the market. The good news is that there are ways around that.

- Invest in Lisbon or elsewhere but simply aim for a neutral operation where the rent initially pays for the property, interest and taxes. Then plan to sell the asset off in a few years for a profit, or keep it long term to ultimately generate passive income once the loan has been paid off.