In this paper, we make use of the rapid expansion of short-term rentals in Portugal, based on a policy change in 2014, to estimate the effects on house prices. Using a novel dataset consisting of property transaction data, from 2010 to 2017, for the metropolitan areas of Lisbon and Porto, we causally identify the impact of these reforms through a two-way fixed effects model, at the quarterly level, where we control for property specific characteristics and location and time fixed effects. The evidence suggests that a one-unit increment in the number of local lodging establishments results in a 0.17% increase in the value of transaction, which is ensured by a set of robustness exercises. Stronger effects are found for properties with four or more bedrooms, owned by citizens outside of the European Union, in the municipality of Porto and at the upper quantiles. We also document a decrease in the number of transactions of new buildings and a positive effect on the value of commercial properties.

This paper examines the rapid rise in short-term rentals (STRs) in Portugal and their impact on the performance of local businesses. Using comprehensive firm-level data covering all private companies, we find that exposure to STRs increases the probability of business closures, particularly for low-performing firms. For surviving incumbent firms, we estimate a significant surge in sales for both resident- and tourist-oriented businesses, along with increases in employment, wage bill, and liquidity for the latter. In civil parishes with greater STR exposure, we observe a higher probability of new firm entry, reshaping the urban business landscape.