Portugal's Rental Market Shake-Up: Government Signals End to 2% Rent Cap, Impacting Lisbon Investors

Portuguese Government Proposes End to 2% Rent Increase Cap

The Portuguese government has announced its intention to overhaul the nation's rental laws, signaling a potential end to the 2% cap on rent increases for new contracts. The proposed measures, aimed at stimulating the housing market and addressing supply shortages, also include simplifying eviction procedures for non-payment. This move is part of a wider strategy to combat the ongoing housing crisis that has seen prices escalate, particularly in urban centers like Lisbon and Porto. The government is studying the removal of the price control for new leases on properties that were available on the rental market at any point in the preceding five years. A spokesperson for the Ministry of Housing stated that the goal is to “dynamize the market and combat the scarcity of housing supply.” The current cap, a measure from the previous government's 'More Housing' package, has been criticized by landlord associations for discouraging property owners from placing their homes on the long-term rental market.

In parallel with the rental law adjustments, the government plans to auction off state-owned properties to increase the housing stock. Estamo, the public real estate management company, will be responsible for mapping these assets and launching public tenders for concessions. This initiative is expected to bring a portfolio of underutilized state buildings into the residential market. According to a statement from the government, these actions are designed to “limit the growth of prices” by fundamentally increasing the number of available homes. The proposal to facilitate evictions in cases of default is also a significant component of the plan, addressing a long-standing concern from property owners about the legal difficulties and delays in resolving such situations. The combination of these measures represents a clear shift in housing policy, moving towards a more market-driven approach. The announcement has already sparked debate among tenant associations and real estate professionals, with the former expressing concern over potential rent hikes and the latter welcoming the move as a necessary step to unblock the market. The government has indicated that these proposals will be subject to further discussion before being formally presented as legislation.

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