Portugal continues to experience an unprecedented housing crisis, with the real estate market reaching levels of inaccessibility that threaten to further fragment the nation’s social fabric.
These housing issues are the result of a combination of factors: the sharp increase in real estate prices and in rents, the stagnation of household income, and the tightening of financial conditions.
According to the National Statistic Institute (INE), in the last 5 years, the average rent for new contracts has been increasing at an average annual growth rate of 8,3%. In parallel, also in the last 5 years, real estate prices have been increasing at an average annual growth rate of 10%.
In contrast, according to the data revealed by the Bank of Portugal, in the last 4 years, disposable income per capita only increased at an average annual growth rate of 5.9%. It should be noted here that this already started from an established base of low income.
Obviously, there is a discrepancy between the increase of prices and that of disposable income. Considering the scenario, there are fewer and stricter financing options available and, on top of that, there is also a shortage in the housing supply. Consequently, more and more families cannot find sustainable housing solutions, and the demographic fragmentation continues to get worse.
Being aware of this very real, expanding, and pressing problem, the Portuguese Government introduced a program to fight it. Among the most relevant proposals are:
- the provision of public housing properties with affordable rents and/or prices;
- the amendment of the land law (Lei do Solo) to allow the use of rustic land for sustainable housing solutions;
- the reduction of VAT to a minimum rate of 6% for housing rehabilitation and construction works;
- the unlocking of 25,000 homes from the resilience and recovery plan (PRR);
- the revocation of forced renting;
- the exemption of IMT and Imposto de Selo on the purchase of the first home for young people up to 35 years old, in properties up to 316,000 euros.
Experts, however, do not 100% agree with the expected efficacy of these measures. Some critics argue that the targeting program does not go far enough to tackle the structural problems that create the crisis. To them, problems such as real estate price speculation and the lack of regulation directed towards the short term renting market need further attention and a better overall response.
