Lisbon Rental Market Braces for Price Hikes Amid Proposed Landlord Tax Reductions
The Portuguese government has announced a proposal to reduce the personal income tax (IRS) rate for landlords from 25% to 10% on rental income, a measure intended to apply to properties with "moderate" monthly rents up to a ceiling of €2,300. This price change announcement has sent ripples through the Lisbon property market. While the government frames this as an incentive for landlords, tenants’ associations are sounding the alarm, predicting the policy will trigger a new wave of rent increases across the market. A detailed breakdown of price movements by property type suggests that landlords currently charging below the upper limit will feel incentivized to increase rents to maximize their gains under the new tax regime. The primary factor contributing to these potential price changes is the significant tax saving offered to landlords who can position their rental prices within this newly defined "moderate" bracket. Real estate agency reports and market observations indicate that while the tax cut could increase the supply of rental properties, the immediate effect is more likely to be an upward adjustment of prices on new and renewed leases. Buyer and seller behavior, or in this case, renter and landlord behavior, has been immediately impacted, with tenants now facing greater uncertainty. Pedro Ventura, the president of the Lisbon Tenants' Association (AIL), stated that the measure, far from moderating prices, will lead to a "price escalation." The mortgage market response is also a key factor, as lower tax burdens on rental income could make buy-to-let investments more attractive, potentially increasing demand for properties from investors and further influencing prices. A comparison with neighboring regions shows that Lisbon's rental market is already under significant pressure, and this policy could exacerbate existing trends. Property developer reactions have been mixed, with some seeing an opportunity while others are wary of potential market volatility. The local government response in Lisbon has been one of concern, with calls for more robust price control mechanisms. The market timing implications are significant, as the policy is still being regulated, leaving a cloud of uncertainty over current transactions. The expected price trajectory based on these current indicators points towards a period of adjustment and potential increases, especially in the mid-to-upper rental segments. Stay informed on Lisbon property market developments at realestate-lisbon.com.