Portugal’s ‘guaranteed mortgage’ scheme for first-time buyers is a government-backed programme to help the under 35s get on the property ladder, but what effect is it having on the market?
Unlike previous State-run schemes that seem to have done more harm than good, this initiative is having the desired effect, especially in inland areas where property prices are lower and the support package on offer is more generous.
Mostly working from home, the influx of young singles and couples to rural Portugal’s countryside, villages and towns has been noticeable. The qualifying income and residency criteria are not onerous, and the guaranteed mortgage scheme is working well, with fast-track approval of mortgage applications giving a boost to off-season property sales, notably in the €100,000-€150,000 price bracket.
The lenient interest rates being charged reflect banks’ lowered risk and with taxpayer-backed guarantees for successful applicants, many deals have been at rates lower than the market average. Additionally, a 40-year repayment term is available, making the monthly mortgage significantly lower than previous rental payments.
For the under 35s applying for mortgages on properties in inland areas, away from high-priced hot-spots, mortgages of 90-100% are being snapped up by delighted applicants.
Rural Properties is selling a village house to one young couple who made it clear that the purchase was subject to bank approval. Normally I avoid having to deal with buyers needing mortgages, especially on properties under €100,000, but the thought of a young couple with two toddlers moving to a village where the average age is around 70 was compelling.
Property portal Idealista.pt proclaimed last week that ‘Home buying in Portugal gained new momentum in the second half of 2024, fuelled by lower interest rates on home loans and exemption from IMT (Property Transfer Tax) for young people’.
Finance Minister Joaquim Miranda Sarmento stated that 16,000 young buyers saved a total of €62 million last year as they did not have to pay IMT or stamp duty. He denied that these measures had any effect on house prices, but economists claim that more demand and a static supply will have caused a rise.
Certainly, supply of properties is increasingly scarce in the qualifying price bracket with estate agent Mandy Walker at iad.pt in the Central Region’s Castanheira de Pêra working hard to find suitable properties for those of her enquirers keen to complete a purchase under the guaranteed mortgage scheme.
Whether as a lifestyle choice or an economic necessity for first-time homeowners, the Central Region’s magic soon works its way into the most hardened urbanite as noise levels plummet, diets improve, wallets come under less pressure, stress-related conditions ease and dreams switch from traffic delays to the choice between Dão and Bairrada wine to complement tomorrow’s dinner.
Demand for property in higher price brackets has been steady through the holiday period and well into January, traditionally a slower month for property enquiries and sales in the Central Region and elsewhere.
One of Mandy Walker’s listings, a €400,000+ edge-of-village property with central heating, pool and river frontage sold quickly to a couple moving here from South Africa who did not have time to visit the house but bought it anyway.
Enquiries at Rural Properties include an increasing number of expatriates living in the Algarve, often for decades, looking at a move north or at least to have a second home in an inland area where crime is low, water security is guaranteed, and prices remain reasonable. This group has specific needs, including a subsection whose heavy-duty gardening days are nearing an end and who don’t want to be paying someone to look after a lawn, plants and fruit trees in their absence.
Many village properties fit the bill as paved yard space is easily maintained as are town houses with an upper terrace space for relaxation and pot plants rather than lawns and weeds.
Lock-and-leave properties offer a sensible solution for those looking to get a foothold in the region but not to live here full time. Personally, as long as I can sit out and read a book on a summer’s evening, an upper terrace with a lovely view is perfect as I am too busy to enjoy a garden, let alone maintain one.
As for the new first timers, what a great place to buy a home and one day, Deus queira, bring up their children.
By Paul Rees
The author runs Rural Properties, an innovative business that invests in the Central Region, buying, renovating and selling properties. For investment enquiries: www.rural-properties.com or contact info@rural-properties.com
