Only a month ago, Portugal’ AD government announced a raft of measures to galvanise the housing construction market and (ostensibly) bring ‘moderate priced housing for everyone’. But yesterday in parliament, minister for Infrastructure and Housing Miguel Pinto Luz admitted that a key element of the ‘shock policy’ is unlikely to kick in before the second quarter of 2026.
As a result, realtors association APPII predicts ‘housing construction nationally will be halted for six months…’
“The market will come to a standstill”, APPII’s head Manuel Maria Gonçalves tells Lusa. “Nothing will move forward” until the current 23% VAT levied on construction costs has reduced, as promised by the prime minister, to 6%.
All companies/ investors will simply sit things out until it becomes financially more attractive to start building.
This is so far from ideal – albeit Gonçalves is welcoming what he calls “the investment” being made by the government.
Inklings of this major failing in the ‘brave plan’ outlined at the end of September have been emerging quietly over recent days.
Last week, minister of finance Joaquim Miranda Sarmento said he expected the “major effect” of the reduction in VAT on construction from 23% to 6% to only emerge from 2027 onwards, “because the impact is not immediate”.
Miranda Sarmento blamed the delay on the fact that the 6% VAT is designed to apply “to new projects submitted to local councils”, which will happen “when the law comes into force”, in 2026.
“The major effect will begin to be felt in 2027, due to this delay between the submission of projects, their approval and the start of construction,” he said.
Pinto Luz also highlighted the work that still has to be done in parliament to ensure the draft bill passes into law. “We believe that by the first quarter of next year, we will have VAT at 6% for projects that come in after that date, but it will also depend a lot on this house, on the discussion and approval process,” he told MPs sitting in on detailed discussion of the 2026 draft State Budget bill.
In other words, criticism that this AD government – very much like the PS administration before it – is big on announcements, but short on delivery, is starting to look relevant. The PM’s announcement of a ‘fiscal shock’ for the housing market – reducing VAT to 6% for the construction of homes for sale up to €648,000 and/ or, for rent up to a monthly rent of €2,300 – was trumpeted through the media, and now it is beginning to look more like ‘word salad’ than an effective policy. The VAT regime ‘will remain in force until 2029’, the PM said at the time, which actually gives very little time for the construction sector to benefit.
As it is, the draft bill for reducing VAT has yet to be submitted to parliament – and, according to Lusa, it is not even part of the 2026 State Budget initiative.
source material: LUSA
