Measures to be applicable in Portuguese Housing Market

Housing has been a topic that has been discussed for several years, both in relation to leasing of assets and in relation to the purchase of those. Prices are inflated and wages do not cover expenses and even so, there are no properties to rent. Therefore, the Portuguese Government proposed several measures to be taken in the so-called Program “Mais Habitação” which promises to bring solutions.

This program aims to increase the supply of residential properties, making state properties available and converting the use of commercial properties or services, such as shops, for residential use, since there are several properties of this type available. This is a measure that we think is advantageous, on a positive note the fact that it encourages the rehabilitation of degraded and abandoned properties, motivating the maintenance of properties that may not be ideal for commerce, due to several factors, such as location, but ideal for housing purposes.

Another measure that the government intends to adopt is the simplification of licensing processes, even if this does not occur on the part of public services involved, but by the designers. These must sign a term of responsibility, licensing being almost automatic. This means an increased responsibility for them, as they may be held responsible for something that does not go according to plan. The Government also proposes that default interest be applied for non-compliance with the licensing deadlines, considering that sometimes this delay is very significant.

The third measure is the increase of houses on the rental market. And it is intended to do so by reinforcing the confidence of landlords, thus intervening the State as tenant who subleases the property and guarantees payment after 3 months of non-compliance, charging, supporting or evicting the tenant.

We then began to focus on the measures that best fit the existing housing crisis and that will certainly make a difference in the market and in everyone’s lives. One of them is the exemption of capital gains, when the property is sold to the State. This is beneficial for both sides, considering that capital gains are, as a rule, 50% of the profit obtained.

Another measure is the mandatory leasing of vacant houses, considering thar works here are necessary and a must be, which will give more life quality to the localities in which these buildings are located. Also, the incentive to transfer to habitational purposes houses in local accommodation (AL), but the truth is that the income obtained in a local accommodation is, as a rule, much higher than that obtained with an annual/permanent lease, and what is intended as a rule is to obtain the highest possible financial benefit. However, there is an intention to apply a rate of 35% to the taxable amount, which will harm this financial benefit in forcing the transfer of AL to housing. There is also the issue of paying capital gains in the allocation of the property in local accommodation for the personal sphere, so if this is mandatory, it will be an added expense that will not help to convince the owners.

The Government also proposed tax exemption for affordable rent. One of the best proposed measures. But again, considering that most landlords want a higher rent, one has to evaluate which option is more advantageous, affordable leasing, with lower rents and tax exemption, or managing to rent, opting for a higher value that ends up offset the tax exemption and maybe still increase the profit?!

It is also intended to end the Golden Visas Program, which as basic requirements had the possibility of investing between 400 to 500 thousand euros, among others, to acquire a property. Now, it is not easy for a mere Portuguese citizen, who earns the minimum wage, to acquire a property worth 250 thousand euros, let alone 500 thousand euros. Considering that some of these investors buy the property and rent it out, or make investments in the business sector, putting an end to Golden Visas means cutting off a considerable slice of the Portuguese external economy, not being effectively linked to the housing crisis that the country is going through.

The government also intends to guarantee a fair income in new contracts. Although this is appreciated, the truth is that it is not easy to determine what “fair income” is, in addition to the fact that this could eventually sacrifice the contractual freedom provided for by law.

Finally, we have the banking institutions, where the Government intends to exempt capital gains for the amortization of mortgage loans and also in this matter, that banks are obliged to offer a fixed rate and protection against interest rate rises.

This concludes, in essence, the measures presented by the Government on the 16th of February, which will be discussed again on the 30th of this month.

We agree with some, we don’t understand others, but we hope that, if not all, at least some of the measures can make a difference in the lives of citizens residing in Portugal and that our country remains attractive as an investment and tourism destination.

We will follow this issue closely and will once again publish more factual and legal material relating to it.

Dra Lucia Costa

Trainee Lawyer