For example, when my siblings were kids we all lived in 1 house. I have 3 siblings so there were 6 of us including my parents. In 1 house.
As we graduated from college we moved out. Now there were 6 of us in 5 houses.
Beyond the raw house count, you're going to need more space. Multi-bedroom homes have shared common space. The house we grew up in had 1 dining room, 1 kitchen, 1 living room, 4 bedrooms, and 2 bathrooms.
If we each moved out on our own, we now needed a minimum of 5 dining rooms, 5 kitchens, 5 living rooms, 5 bedrooms, and 5 bathrooms.
The number of people is the same. Still just 6. But we needed more housing and more space since we didn't share common space anymore. We didn't expect more than we had before (well, beyond the practicalities - it's difficult to share a bathroom with someone you don't live with), we expected the same as we had before we moved out.
I think that your thrust was that smaller average household sizes means more dwellings are required. This is a good point.
Shrinking average household sizes could be explained by the shrinking size of the average family, or it could be explained by shifting expectations, by people wanting more.
If you take a population where all single people are willing to live in share houses, your average size of your household goes up. If all the single people expect to live in their own apartment because they want their own space, own bathroom/kitchen, then this would drive down the average household size.
I would expect both of these dynamics to be at play here. Average family sizes are decreasing in most developed countries. People's expectations have also risen with regards to housing.
I wonder what effect each has on the demand for housing in Portugal?
BTW: Your personal example is possibly a good example of shifting expectations in society, whether you recognise it or not. Every sibling moved into a place by themselves? Did no one move into a sharehouse? I probably do not live in the same country as you, but it used to be in my country that when you first move out of home it is not the norm to live by yourself. What's the norm these days?
People definitely want to live by themselves even if they cannot afford to, and other things also factor into it.
(Disclaimer, I'm American, so can't speak directly about the Portuguese experience.) But as an example, at this point I don't remember the last time I saw a bunk bed in a non-dorm room setting. This used to be extremely common in low-income housing in particular [1] but as an example I have never, ever seen anyone share a bunk bed with a stranger.
One other effect is location, location, location. In Lisbon in particular, like most European cities there is generally a height limit imposed on most of the city (higher than most places in the US, but not so high that tall buildings are allowed). There is only ten buildings above 80 meters in all of Portugal. If your building is so short, there is only going to be so many ways to subdivide it before you can't split it more to accommodate people.
Most younger people share accommodations (e.g. have a roommate). Most older people share accommodations (e.g. have a family). There is also some, for the lack of a more sensitive word, attrition as time goes on. Yes, your family has grown and the amount of space your family needs in order to maintain their quality of life has increased. Yet it has only increased by a relatively small amount.
I am also going to echo what was said earlier: dining rooms are not a necessity. They are mainly intended for people who entertain guests. Many apartments and smaller family homes don't even include a dining room, since the expectation is that people will eat in the kitchen.
Housing supply doesn’t grow by all that much though, so a “relatively small amount” is enough to tighten a market.
In any case, censuses define a household as people living together in a unit, which would account for roommates. Portugal has gone from 3.7 in 1960 to 2.6 in 2011. Housing 10.3M people at 3.7 requires 2.8m units; 2.6 requires 4m units. And that may be just what Portuguese people have to put up with, but not their desired end state; if they were at the EU average of 2.2, then it would require 4.6m units.
You don't need a dinning room. That's a luxury feature.
It is possible to share bathrooms if you build housing more like school dooms or single room occupancy.
Having a place to eat at home is not a luxury feature, unless the city has a population density that is high enough to support having a broad array of dining options that are open for most of the day. Tokyo is one example of such a city, but having restaurants that are open 24x7 is not common at all in Europe.
Growing up (middle-class; both parents were teachers), we used our dining room to eat maybe 3 times a year. We ate around 1000 meals/year at the kitchen table and maybe 3 at the dining room table.
For example, when my siblings were kids we all lived in 1 house. I have 3 siblings so there were 6 of us including my parents. In 1 house.
As we graduated from college we moved out. Now there were 6 of us in 5 houses.
Beyond the raw house count, you're going to need more space. Multi-bedroom homes have shared common space. The house we grew up in had 1 dining room, 1 kitchen, 1 living room, 4 bedrooms, and 2 bathrooms.
If we each moved out on our own, we now needed a minimum of 5 dining rooms, 5 kitchens, 5 living rooms, 5 bedrooms, and 5 bathrooms.
The number of people is the same. Still just 6. But we needed more housing and more space since we didn't share common space anymore. We didn't expect more than we had before (well, beyond the practicalities - it's difficult to share a bathroom with someone you don't live with), we expected the same as we had before we moved out.