Portugal Reinforces Youth Housing Guarantee with Additional €350 Million
The Portuguese Government has announced it will reinforce the public guarantee scheme aimed at facilitating the purchase of permanent homes for young people with an additional 350 million euros. The decision responds to the significant demand observed since the measure was first introduced at the beginning of this year, as reported by Jornal de Negócios. This policy is a central part of the executive's strategy to address housing access challenges for younger demographics.
The primary objective of the state-backed guarantee is to enable financial institutions to offer 100% financing on mortgages for young first-time buyers, thereby removing the significant barrier of a large initial down payment. The program was initially launched with a total fund of one billion euros, which was subsequently increased by 200 million euros to accommodate the high number of applications. This new injection of capital elevates the total program funding to 1.55 billion euros.
The implementation strategy, overseen by the current administration under Prime Minister Luís Montenegro, has maintained from its inception that the program's funding could be adjusted based on demand. This latest increase fulfills that commitment, ensuring the continuity of the support mechanism. The program is structured to have the State guarantee a portion of the loan, reducing the risk for banks and encouraging lending under more favorable terms for eligible young buyers.
The measure affects young individuals and couples up to a certain age limit who are purchasing their first permanent home and do not own other properties. The guarantee covers a percentage of the property's acquisition value, allowing banks to finance the entire amount without requiring the traditional 'entrada', or down payment, from the buyer. This has been particularly impactful in high-value areas such as the Lisbon metropolitan area, where property prices have made saving for a deposit a formidable challenge.
According to official data released by the Bank of Portugal, the program's budget has been rapidly utilized. By the end of July, approximately 348 million euros, corresponding to 32.1% of the previously allocated total, had already been committed through approved guarantees. This rate of absorption over just seven months highlighted the necessity for additional funding to prevent the program from stalling and to continue serving new applicants throughout the year.
Stakeholder consultation has been a component of the policy's review, with feedback from banking associations and consumer groups indicating broad support for the initiative's goals. The banking sector has noted that some institutions with smaller initial allocations of the guarantee fund were approaching full utilization, making the government's reinforcement timely. The policy is seen as a key intervention to stimulate the property market at the entry-level, which can have cascading positive effects on the broader real estate sector.
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The expected economic and social impact includes increased homeownership rates among young adults, greater financial stability for this demographic, and sustained activity in the real estate and construction sectors. By facilitating access to property, the government aims to anchor young professionals and families in the country, counteracting demographic trends of emigration and delayed household formation. The measure is also seen as a way to balance the market, which has seen significant pressure from foreign investment and tourism-related property uses in recent years.
The monitoring and evaluation framework for the program is managed by government financial bodies in coordination with the Bank of Portugal. Data on the number of guarantees issued, the total value of financed properties, and the geographic distribution of the loans are continuously tracked to assess the program's effectiveness and inform future policy adjustments. The government has not ruled out further reinforcements if demand continues at the current pace.
This policy runs parallel to other government initiatives aimed at increasing the housing supply and moderating rental prices. The comprehensive approach seeks to tackle the housing crisis from multiple angles, combining demand-side support like the youth guarantee with supply-side incentives for new construction and renovation. The political debate surrounding the measure has been largely positive, although some opposition voices have called for more emphasis on increasing the public housing stock as a long-term solution.
The future legislative agenda includes ongoing reviews of housing policies to ensure they remain aligned with market dynamics and the needs of the population. The success of the youth guarantee program will likely serve as a model for future demand-side interventions, demonstrating the effectiveness of targeted financial support in achieving specific social and economic objectives within the housing sector.
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