Government Forecasts Housing Price and Rent Relief by End of 2026 Amid New Policy Push
The Minister of Economy and Territorial Cohesion, Manuel Castro Almeida, stated this Wednesday that “by the end of next year, differences will begin to be felt” in house prices and housing rents, as he defended the government's latest proposals. “This issue took years to worsen, and it will now take us a few years to resolve it, but it takes some years, it cannot be solved overnight. I think that from the end of next year, differences will start to be felt in house prices and rent prices,” affirmed Castro Almeida. He made these remarks on the sidelines of the Millennium Talks COTEC Innovation Summit at the Lisbon International Fair (FIL), acknowledging the housing crisis as a “gigantic problem” but assuring that the government “is responding, also with a set of unprecedented measures.”
Manuel Castro Almeida detailed that proposals such as increasing the land supply through a new land law, reducing VAT on construction, and lowering IRS for landlords are expected to stimulate a decrease in prices. These measures will be complemented by “the number of houses the State will build.” The minister also announced that the government will establish a credit line with backing from the European Investment Bank (EIB). This facility is intended to empower municipal councils to develop plots of land where individuals can construct their own homes, a move aimed at boosting housing stock from the ground up. Navigating the financial aspects of such an undertaking requires careful planning, and guidance on financial concerns is often sought by prospective buyers.
This follows the Prime Minister, Luís Montenegro's, announcement on September 26 regarding a significant fiscal change. The government will lower the VAT rate to a minimum of 6% for the construction of homes for sale priced up to €648,000. The same reduced rate will apply to properties intended for the rental market, provided the rents are moderate, capped at €2,300 per month. This tax regime is slated to remain in effect until 2029 and will also cover the rehabilitation of existing buildings under the same rental cap. Such regulatory and legal frameworks are central to the government's strategy.
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However, the policy has not been met with universal approval. The Association of Tenants and Condominium Owners of Northern Portugal (AICNP) issued a statement on Wednesday criticizing the measures. The association believes the government's proposals have “accelerated the crisis” and will only serve to “further deregulate the market,” expressing concerns that the benefits may not trickle down to tenants facing affordability challenges. These debates are a key part of the ongoing political discourse on housing.
The urgency of the situation was underscored by the latest data from the National Statistics Institute (INE), also released on Wednesday. The housing price index recorded a 17.2% increase in the second quarter, an acceleration of 0.9 percentage points from the previous quarter. The total value of transactions exceeded €10 billion. According to the INE, the price of existing homes saw a sharper rise of 18.3%, while new homes increased by 14.5% between April and June. On a quarterly basis, the overall Housing Price Index (IPHab) rose by 4.7%, with existing homes up 5.1% and new homes up 3.8%. For anyone looking to enter the market, having support from English-speaking real estate agents can be invaluable. Understand policy impacts on your Portugal property plans at realestate-lisbon.com.