Analyst Proposes Legislative Overhaul of Real Estate Commissions to Curb Housing Inflation
A new legislative framework governing the remuneration of real estate agencies in Portugal has been proposed as a measure to control the country's escalating housing prices. In a detailed analysis, commentator António Pedro Machado argues that the current commission model, based on a percentage of the sale price, creates a “perverse incentive” for agencies to inflate property values. The government is being urged to consider new legislation that would shift this model towards a fixed-fee or hybrid structure, a move that proponents claim would stabilize the market. The objective of such a law would be to align the interests of real estate agencies with market accessibility rather than price maximization.
The proposed legislation stems from the observation that under the current system, an agency's profit is directly proportional to the sale price of a property. With commissions typically ranging from 3% to 6% plus VAT, an agency earns significantly more from a higher-priced sale. This financial incentive, it is argued, encourages practices that contribute to artificial price inflation. The proposal suggests that if agencies were to charge a fixed fee for their services, their business incentive would shift towards completing a higher volume of transactions more quickly, which would naturally favor more competitive pricing. This change in the legal and business framework is presented as a direct tool to address the housing affordability crisis.
The call for new regulations is supported by data indicating that both real estate agencies and the state have benefited financially from rising property prices. Agency profits have grown by 200-300% in the last decade, largely due to the doubling of the average transaction value. Concurrently, state revenues from property taxes like the IMT (Municipal Property Transfer Tax) have reached record highs, yielding €1.73 billion for municipalities in 2024. This interconnected financial benefit is cited as a primary reason for the lack of political will to reform the system. The proposed legislation would therefore need to address the potential impact on state and municipal tax revenues.
Several alternative remuneration models are being put forward for legislative consideration. The primary proposal is a fixed-fee model, where an agency would charge a predetermined amount for its services, independent of the property's final price. Other options include an optional service model, allowing clients to pay for specific services like marketing or negotiation, and a mixed model combining a base fee with a legally capped variable component. These potential regulations would aim to introduce greater transparency and fairness into the market, with possible exemptions for smaller, local agencies to ensure market competitiveness. The successful implementation of such a law would represent a significant intervention in the Portuguese real estate market.
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