Housing Minister Guarantees “Sound Accounts” Amidst Major Fiscal Changes for Portuguese Real Estate
The Portuguese Minister of Infrastructure and Housing, Miguel Pinto Luz, has publicly guaranteed that the country’s public finances will remain stable following the recent approval of a sweeping package of housing measures, which he described as “the biggest fiscal shock” ever applied to the sector. The policy announcement confirms the government's strategic direction, which includes significant tax reductions for landlords and new construction, alongside a targeted tax increase for some foreign property buyers.
The primary objective of the new policies is to address Portugal's housing affordability crisis by stimulating supply and regulating the rental market. The government's implementation strategy involves a multi-pronged approach. A key measure is the reduction of the Value Added Tax (VAT) on new housing construction to 6% for properties with a value up to €648,000. This is intended to lower development costs and incentivize the creation of new housing stock across the country.
In the rental sector, the government is introducing benefits for both tenants and landlords. Tenants will see their annual IRS (personal income tax) deduction for rental expenses increase progressively, rising from the current €700 to €900 in 2026, and reaching €1,000 in 2027. For landlords, the government has approved a substantial tax cut, lowering the IRS rate on rental income from 25% to 10%. This preferential rate applies to landlords who offer rental contracts with monthly rents up to €2,300, a figure the government defines as a moderate rent ceiling.
However, the package also includes a significant change for international investors. Minister Pinto Luz confirmed the government will proceed with an increase in the IMT (Property Transfer Tax) for non-resident buyers. He clarified that Portuguese emigrants will be exempt from this hike. While the exact percentage of the increase is still being calculated, the minister stated it would be “sufficient to help balance” the fiscal cost of the other measures.
During an interview with RTP, Pinto Luz addressed concerns about the impact of this IMT increase on foreign investment. “It will not jeopardize the market that has been generated, because we have to continue to attract that investment,” he stated, adding that the measure is expected to affect only “a very small fringe of those who invest in Portugal.” This suggests a targeted approach aimed at a specific segment of the market, likely high-end or purely speculative investment, rather than a broad deterrent.
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The minister refrained from providing a precise figure for the overall budgetary impact of the housing package, stating that the complete fiscal scenario will be detailed by Finance Minister Joaquim Miranda Sarmento later this month. He countered criticism from opposition parties by asserting that the tax reductions are a necessary intervention to stimulate a market that has failed to provide adequate housing solutions.
Political analysts are interpreting these moves as a clear signal of the new government's priorities. “This is a decisive intervention,” commented a political scientist from the University of Lisbon. “The government is using fiscal policy as its primary tool to reshape the housing market, rewarding landlords who comply with moderate rent caps while simultaneously increasing the cost of entry for certain foreign buyers. The political gamble is whether these measures will lead to a more balanced market or create unintended distortions.”
The legislative agenda for these changes is expected to move forward in conjunction with the State Budget for 2026. Minister Pinto Luz expressed confidence in the new political stability in the Assembly of the Republic, hoping for a responsible and collaborative budget process to avoid the instability of previous years.
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