Following on from initial moves to try and fix the housing crisis – measures that have failed completely to stem the meteoric rise in prices – the government has advanced on to phase two, which it describes as “a shock policy” to “shake up the construction and rental market”, and potentially bring 45,000 new homes into being.
The main measure of the masterplan outlined by the Prime Minister – and to a lesser extent the Minister for Infrastructure and Housing – is the reduction of VAT to 6% on the construction and renovation of houses intended for sale or rent.
This measure only applies to properties with a sale value of up to €648,000, or with monthly rents of up to €2,300. And it comes with added ‘perks’ of no IMT (property transfer tax) on property transactions and no IMI (rates) to be charged for eight years, with a 50% reduction planned from the 9th year onwards.
Along with what Jornal de Negócios calls “changes to the public procurement code, and measures to facilitate the construction of housing on building sites”, housing minister Miguel Pinto Luz announced that more than 1,000 entry visas have already been issued to construction workers – presumably in readiness for a veritable construction stampede.
Regarding ‘demand’ (buyers and renters), Pinto Luz highlighted “discussions with banks over flexibility of access to housing credit, and to construction capital” (this second, more oriented towards builders/developers).
Following Pinto Luz’s announcements, PM Luís Montenegro explained that the government is doing away with the concept of affordable rent and creating a new concept of ‘moderate rent’.
Moderate rent is particularly geared towards the middle classes, he said, and will include income tax deductions for tenants, as well as for landlords. Tenants, for example, will be able to deduct €900 in rental payments in 2026, and €1,000 in 2027 (as long as they have three-year leases). Landlords will be spared the 25% levy they pay on their rental income now, and see it reduced to 10%.
Reporting on the prime minister’s speech, tabloid Correio da Manhã said: “The government wants to agitate the rental market, and capture, among other properties, around 45,000 homes of the more than 300,000 that are out of this market.” State property company ESTAMO will, meantime, be looking at the 60,000 buildings on its inventory to see which of these could be ‘released to the rental market’.
“The prime minister also assures that all decisions have been taken with financial responsibility in order to maintain budget surpluses in the coming years,” adds Negócios online.
A ‘sting in the tail’ of the PM’s announcements was that property transfer taxes would be increasing for non-resident foreign buyers (excluding emigrés).
Members of the press listening to the masterplan were not entitled to questions. Thus, the dust only settled over the following days.
Property valuations by banks increase year-on-year by 18%
But before one goes into ‘reactions’ to the government’s proposals (which will have to be approved by parliament), it is important to stress that initial measures last year under the ‘Construir Portugal’ banner – those more geared towards helping young people – have ultimately failed spectacularly. Even the doing away with property transfer tax for buyers under the age of 35 seems to have contributed to an overall rise in house prices, with bank valuations rising by 18% since August 2024.
As with all countries, there are areas where prices are just ‘impossible’ for everyday working people. The average price per square metre in the Algarve, for example, has reached €2,682 (as opposed to just €1,077 in Trás-os-Montes). In the Greater Lisbon area, prices are even higher: €2,991 per square metre.
Government “completely out of touch with reality”
Parties of the left have been the ones most flabbergasted by the government’s plans – albeit the prime minister was buttonholed by a furious member of the public at a municipal election rally on Sunday, stunned by the concept that a rental of€2,300 could be considered moderate.
This has been the fly (perhaps large bluebottle) in the ointment: the social democrats’ idea of ‘moderate’.
Former PS housing minister Mariana Gonçalves said the government appears to be “completely out of touch with reality”. It is an opinion echoed by right-wing CHEGA.
Socialist (PS) party leader José Luís Carneiro believes the government is in danger of turning housing into “an explosive factor in our collective lives”. In his opinion, rents can only increase with the handing out of fiscal benefits for the construction of properties which can be put on the market for as much as €2,300 a month (in a country where the average earnings barely reach €1,800).
PCP communists have said they are “appalled” by the proposals; PAN has said they ‘won’t work’; LIVRE for the time being is waiting for more details.
Ironically, even APPII, the Association of Real Estate Developers and Investors, is unhappy, suggesting the very idea to tax non-resident foreign buyers an increased amount of IMT property transfer tax is misguided. It might “send out a message that foreign investment is not welcome”, association president Hugo Santos Ferreira tells Jornal Económico.
Tourism, ‘certain migrations’ must ‘respect Portuguese cultural cohesion’
The reality is that it is due, in large part, to foreign investment that property prices in Portugal have risen so rapidly in recent years.
At a tourism conference on Monday, President Marcelo Rebelo de Sousa drew a direct correlation between the rampant increase in tourism and house prices.
In a speech lasting around 40 minutes, the head of state stressed how important it is to respect Portuguese cultural cohesion, as only then can tourism be “good for everyone”. He also identified the drawbacks of “certain migrations” with the “economic and financial effect of purchasing power well above” that of the Portuguese – alluding to the increase in Italians, French, Americans and Canadians in this country.
Brussels moves on “genuinely affordable housing”
At a conference on housing affordability in Copenhagen this week, European Commissioner Dan Jørgensen said that the EU will be presenting a plan to see “genuinely affordable” homes, free from speculation and what he terms the ‘financialisation’ of a ‘basic need’.
The plan, to be announced later this year, will include a revision of state aid rules, “allowing national governments to use public funds to build homes for middle-class families priced out of the market”, explains Politico.
This is not a feature in the PSD/CDS-PP (AD government) housing blueprint. There is nothing about public funds to build homes – which is precisely what many feel is at the root of the country’s quite desperate housing crisis. Nor is there anything about ‘genuinely affordable homes’.
Another area where ‘nothing’ is mentioned is short-term holiday rentals, or AL (Alojamento Local).
According to Dan Jørgensen, these will now become a priority for the EU.
“The conversion of housing stock into tourist flats is seen as a major factor in rising costs, with authorities moving to ban these properties altogether in places like Barcelona,” writes Politico.
The commissioner vowed to address the “complex” issue “firmly but fairly.”
“This crisis presents a defining test for our European democracy,” said Jørgensen. ” It is a fight we cannot afford to lose.”
