Housing prices have risen sharply in recent years and it is very difficult, especially for young people, to buy their first home. For this reason, the Portuguese Government has put forward the ‘Building Portugal’ strategy.
These are measures to boost and strengthen the supply of housing, especially in the private market, continuing the measures already approved for public supply.
Among the priorities are the simplification of renting, the creation of tax incentives for the private supply of housing and the mobilisation of society to stimulate the placing of properties on the market, both for rent and for purchase. The increase in supply will expand opportunities for access to housing and contribute to price adjustments.
One of the main measures is the reduction of VAT to 6% on the construction and renovation of houses for sale or rent. The measure applies to homes with a sale value of up to €648,000 or with monthly rents of up to €2,300. This housing package also includes changes to licensing, several clarifications to the Legal Regime for Urbanisation and Construction (RJUE) and changes to tax incentives for the middle class, especially in areas of high housing demand.
Here are some examples: for tenants, there will be an increase in 2026 to €900 and in 2027 to €1,000 in the maximum deduction from income tax on housing rental costs up to €2,300. For landlords, there will be a reduction in the income tax rate from 25% to 10% on rental contracts for properties with rents up to €2,300.
There will also be a higher Municipal Property Transfer Tax (IMT) for non-residents (except emigrants) who wish to buy a home in Portugal.
The licensing process will now have ‘less prior control to promote investment decisions’ and if the capital gains are invested in rental properties up to €2,300.00, they will no longer be subject to income tax. Until now, only those who bought a home as their primary residence were exempt from paying it.
In addition to these measures, the Government of the Republic is discussing with the banking sector the relaxation of access to mortgage loans and capital for construction.
