Portuguese Government Announces New Housing Package with Tax Changes for Developers and Non-Residents
The Portuguese Government, led by Prime Minister Luís Montenegro, announced a new package of housing measures on Thursday following a Council of Ministers meeting. The initiative, described as a 'shock policy' intended to 'shake up the market,' introduces several key changes, including a reduction in VAT for construction, an increase in the Property Transfer Tax (IMT) for non-residents, and a simplification of licensing processes. The government's stated objective is to address the ongoing housing crisis characterized by a scarcity of available homes and soaring prices.
Under the new rules, the VAT (IVA in Portuguese) on construction for new homes will be lowered to 6%. This reduced rate applies to properties sold for up to €648,000 and to homes built for the rental market with monthly rents not exceeding €2,300. This measure is expected to lower the cost base for developers operating within these price brackets. However, critics immediately questioned whether these savings would be passed on to the final consumer or simply increase developer profits, citing a recent precedent in the restaurant sector where a similar VAT reduction did not lead to lower prices for customers.
The policy package also includes a targeted tax increase for foreign buyers, with the IMT for non-resident citizens set to rise. This move signals the government's intent to potentially curb foreign demand or increase its tax revenue from international transactions. The specifics of the IMT hike were not immediately detailed but represent a significant policy shift for international investors who have been a major force in the Portuguese property market, particularly in urban centers like Lisbon and Porto and the Algarve region.
Need Expert Guidance?
Get personalized insights from verified real estate professionals, lawyers, architects, and more.
Commentators have pointed out a significant disconnect between the policy's price ceilings and the financial reality of the average Portuguese citizen. With the national average gross monthly salary at €1,525, according to the National Statistics Institute, homes priced at €648,000 or renting for €2,300 remain far out of reach for the majority of the local population. This has led to accusations that the measures will primarily benefit developers and investors in the upper-middle market segment, rather than alleviating the affordability crisis for young people and average-income families.
An alternative strategy proposed by policy critics involves redirecting the state funds from the VAT reduction towards programs that directly support the construction of controlled-cost housing and affordable rental units. Proponents of this approach argue for stronger collaboration with municipalities to implement housing solutions that meet the real needs of local communities. As the government moves forward with this 'fictitious' package, as one columnist dubbed it, the real estate market will be watching closely to see whether the 'shock' leads to genuine relief or simply reinforces existing market dynamics. Understand policy impacts on your Portugal property plans at realestate-lisbon.com.