Youth Tax Exemption Law Sparks 67% Demand Surge in Portuguese Property Market
The Portuguese government has announced that a new law providing significant tax exemptions for young homebuyers has led to a dramatic shift in the national real estate market. An analysis published by the property portal Idealista, one year after the legislation came into effect, shows that demand for homes priced up to €324,000 has increased by 67%. This surge is a direct consequence of the new government policy aimed at improving housing accessibility for citizens under 35.
The specific details of what the new law entails are a full exemption from the Municipal Property Transfer Tax (IMT) and the Stamp Duty (IS) for the purchase of a primary residence valued up to €324,000. The legislation also includes a partial exemption for properties valued between €324,000 and €648,000. The implementation timeline began in the second half of 2024, and the market has been adapting to its effects over the past twelve months. The objective of the law is to reduce the initial financial burden on young people entering the property market.
The individuals most affected by this new legislation are first-time homebuyers under the age of 35. The market data shows this demographic has responded enthusiastically. In major cities, the increase in demand has been particularly sharp. Lisbon saw a 96% rise in inquiries from young buyers for properties in the fully exempt price range, while Porto recorded a 55% increase. In cities like Coimbra and Leiria, interest from this group more than doubled. This indicates that the policy is successfully stimulating demand among its target audience.
However, the compliance requirements and necessary procedures for sellers have been met with a challenging market reality: a significant decrease in supply. While demand soared, the number of available homes for sale priced up to €324,000 fell by 32% nationwide. The supply contraction was most severe in Lisbon, where it dropped by 50%. Setúbal and Coimbra saw a 41% reduction, and Porto's supply decreased by 14%. This mismatch between soaring demand and falling supply is creating intense competition for available properties.
The industry reaction to the legislative changes has been mixed. While real estate agencies welcome the increased market activity, there are growing concerns about the impact on affordability. A spokesperson for a national real estate association stated, 'While the stimulus is positive for transaction volumes, the pressure on prices is a significant side effect. The fundamental issue remains the lack of housing stock, and this policy, in isolation, intensifies competition for the few homes available.' Legal professionals and mortgage advisors are now guiding a wave of new buyers through the process, ensuring they meet the criteria for the tax exemption.
The government's rationale for the changes was to provide tangible support for youth housing. However, the data suggests that related legislation or regulations may be needed to address the supply side of the equation. Without measures to increase the number of available homes, the financial benefits of the tax exemption could be eroded by rising property prices. The current market dynamics suggest that while the law has been successful in boosting demand, its ultimate goal of improving affordability may be compromised by the pre-existing housing shortage. Navigate Portuguese property regulations with expert guidance at realestate-lisbon.com.
