February 16 – the Friday 13 of Portugal’s real estate sector

 In APPII, Associations, House prices, Housing, News, Real Estate, RRP, SIL

The State of Portugal’s Real Estate Sector’ was the key theme for debate at this year’s Portugal Property Exhibition 2023. It was one of a round of debates organised by SIL Investment Pro – Powered by the Portuguese Association of Real Estate Developers and Investors (APPII) and took place on Friday.

The debate centred around the Government’s ‘More Housing’ Package which was criticised as an attack on investor confidence and the market according to real estate sector associations and players.

The speakers condemned the programme as an example of “blind ideology” and criticised the demonisation of the Golden Visa programme and Local Accommodation, both of which had brought millions into the Government’s and Lisbon City Council coffers.

The problem of the low salaries paid in Portugal, and its impact on young people being able to secure a mortgage, and the desperate need for more affordable housing for the middle classes to counter speculation, were all under the spotlight.

The idea of providing empty government properties for rental housing was praised, while speakers also called on licensing procedures and processes to be streamlined, fast-tracked and modernised.

Opening the debate the President of the APPII, Hugo Santos Ferreira said that the Government’s Housing Package was exactly what the sector didn’t need because it had “dealt a blow” to the confidence of both investors and property owners.

“It has undermined confidence and the with the rental law confidence is being undermined even more. Many investments have been shelved, stalled, or cancelled since February 16 . We’ve been getting telephone calls asking us where was the State’s credibility”, he said.

But there was also recognition that the Portuguese Government has dome a U-turn on some of the More Housing Package’s most controversial aspects, namely backtracking on the abrupt cancellation date of the Golden Visa programme which had initially been set retroactively from the day the More Housing Package had been announced on February 16, leaving hundreds of investors who were in the middle of having their applications processed, in the dark.

Also on the Golden Visa Programme, which has been in force since October 8, 2012, Hugo Santos Ferreira said: “Investors are thankful. The U-turn means that the 10,000 investors who couldn’t renew their visas, can now do so.

“Terminating the programme (so abruptly) is not good for (the Government’s) credibility not to mention the (threat of) lawsuits and all that would imply,” added the APPII president.

And continued: “The associations would like to see market confidence and credibility in the country restored. It is not down to the sector to mitigate against the damages done. Regarding the Golden Visa the (More Housing) package is not positive”.

The APPII president recognised the willingness of the Government to “provide tax sweeteners” on the VAT regime governing urban rehabilitation projects (13% or 6%) in a sub-sector that had helped the building, estate agency and real estate sector in general to recover from 2014 onwards.

With a view to encouraging the investment and renovation of the historical areas which are typically the most degraded, the Portuguese government added Article 45 to the Portuguese Tax Benefits Law, which provides tax exemption on the acquisitions of properties for urban rehabilitation.

This exemption is applicable on (i) Property Transfer Tax (IMT) whereby, after the conclusion of the rehabilitation works, the Portuguese Tax Authorities refund the Taxpayer of the IMT property tax paid at the time of the property acquisition; and (ii) Property Annual Tax (IMI) through an exemption on its payment for the first 3 years (which may be renewed for 5 additional years upon request) if the property is for the owner’s or the tenant’s primary habitation.

However, Hugo Santos Ferreira warned that exemptions would not work within a disconnected legislative framework. “There has to be some guarantee that the tax benefits will remain stable (and not change) which would bring instability.”

The APPII president also welcomed the Government’s willingness to give ground on State-owned properties that are empty for rental, or to make state-owned tracts of land available for new build affordable housing development.

“It is important that the sector works to design a good affordable rental programme and the making available of plots of land for construction would enable private companies to offer affordable rents”, he said.

And added: “For the first time we’ll have a programme of affordable rents that works”, said Hugo Santos Ferreira.

However, he also asked the thorny question of how operators would tell the 350,000 owners of empty buildings that (although) inflation is running at 7%, rents would only be updated by 2%.

Attacks on Local Accommodation

The APPII president warned that the sector needed to be attentive to the “attacks on Local Accommodation” and the “Non-Habitual Resident (NHR) regime by the “majority of the left-wing parties”.

Menezes Leitão, the president of the Lisbon Landlords Association (ALP) also slammed the Government’s More Housing package by saying: “It has had an impact that we have not suffered since the times of the PREC (Ongoing Revolutionary Process) which after the 1974 Revolution led to the forcible occupation and expropriation of private lands and properties.

While perhaps a slight exaggeration in comparison, he said current measures were “blind ideology” and designed in a “skewed and biased manner”.

It was an opinion shared by Paulo Caiado, president of the Portuguese Estate Agencies and Estate Agents Association (APEMIP) who said: “The foundations of this programme is poisoned by ideology and just doesn’t make any rational sense.”

Menezes Leitão regretted that there has not been a back-track on coercive rental. “The buildings belong to people of some age and they are reminded of the past (25 April Revolution). The ‘Cristas Law’ was “no tragedy at all”. Landlords want to have confidence of who they (the municipal councils) are putting in their houses.

He then went on to elaborate further on the Cristas Law of 2012 (Assunção Cristas was a politician who was an important figure in the CDS party, a centre-right conservative party which shared power with the PSD party of Pedro Passos Coelho from 2011 with the fall in Portugal of the PS government led by José Sócrates after the IMF had to be called in)

In 2012 the Lei Cristas, according to the left-wing parties, increased the number of forced expulsions from properties and introduced tax benefits that spurred property speculation, freed up local accommodation, and introduced the Golden Visa scheme and extended the NHR scheme “creating a perfect storm for families”.

In fact, the introduction of the new rental scheme was introduced at the insistence of the IMF/EC/ECB troika which wanted rents to be brought more in line with market values after property owners could not make ends meet, or carry out urgent repairs on their properties because rents had been frozen at a peppercorn rate since the 1970s.

Portugal – a low salaries economy

Luís Gamboa, Chief Operational Officer of VIC Properties pointed to the low salaries in Portugal being part of the housing problem.

“Its a cash-flow problem. People earn little in Portugal and this has to be at the root of the discussion”, he said.

Paulo Caiado strongly criticised reducing house prices. “Seventy-three per cent of families own their own homes and 65% have paid off their mortgages; the rest are mortgaged. From this point of view, “when speaking about lowering prices and since a house is a store of value, this means making families poorer. No one is interested in selling a property at a cheaper price”.

And added: “The (housing) measures should safeguard the value of real estate assets which is the main store of value for 4 million families”.

Francisco Bacelar, the vice-president of the Association of Estate Agents of Portugal (ASMIP) reminded that: “Cooperatives had been a solution for the middle classes some years ago”, but today “the lack of supply and increase in prices has made purchasing a property unaffordable while prices were not likely to stabilise.”

Daniel Tareco of Habitat Invest, recognised the difficulties of “competitive prices” caused by the “lengthy licensing processes and red tape” as well as the “high cost of construction” made “worse by the pandemic and inflation”, not to mention the sky high taxes in Portugal.

It order to get around these obstacles, he made a suggestion that offices, shopping centres and other buildings could be readapted for housing. “There are loads of alternative places because of constraints on new construction in city centres”.

Speculation caused by lack of housing

Hugo Santos Ferreira (APPII) said that Portugal’s housing problem had to do with (lack of) offer and that the (More Housing) package should not restrict demand, but rather bring more supply to the market and it was here the package had failed.

“It was a view shared by Claude Kandiyoti of Krest who believed it was the lack of housing that was fuelling speculation in Portugal.

The head of the Belgian real estate investment company recommended replicating the model implemented in Belgium to make up for the lack of homes. “Public Private Partnerships like we have in Belgium, put on an equal footing” he said before lampooning the Government ’s affordable rents policy as being “too generic and very ideological”.

“In 2008-2010, Portugal was not attracting overseas investors” which changed with the changes to the Rental Law. (Cristas Law) The problem now is the lack of supply to meet demand”, said Patrícia Barão, Head of Residential at real estate consultancy JLL. “The increase in prices was to be expected. Demand puts pressure on the market and the prices go up”.

Overseas investors

Patrícia Barão says the numbers don’t lie. “The sale of houses in Portugal beat records in 2022. 168,000 homes were sold worth €31.9Bn, which was an increase of 10% like-for-like.

JLL says that house transactions from International market represented 15% of the total, which pours scorn on those who claimed that Portugal’s property stock was being bought up by foreigners.

“More than 80% of Portugal’s housing stock is being bought by the Portuguese. From the 15% purchased by overseas buyers, 18% was bought by the French (€157 million) and 13% by the Americans (€115 million).


There was an overall call for an improvement, acceleration and simplification of planning permission processes with the current “interpretations of each municipal council being rather puzzling.

The time it takes for local municipal councils to process planning applications has been a bête noire for developers. The President of the APPII Hugo Santos Ferreira said that the political goodwill to speed things up was positive and to “sort out the bureaucracy and delays” and said that the problem of planning permission was not a cooperative problem but rather a Portuguese problem. “The main stumbling block to housing is licensing”.

Tiago Belo of Solyd Property Developers said that everyone needed to get involved. “Planning licensing has an impact on our sales. It is not enough to legislate, simplify and hope that the entities comply. Compliance has to be checked and supervised”.

Miguel Cabrita of Mexto Property Investment said: “Developers have been calling for this (streamlined and faster planning processes for some time. The time it takes to get planning permission impacts the final price of the housing”, he said. “There are the same and other problems everywhere you look. In Lisbon I have one problem, in Faro others. With council Master Development Plans that are all different it is difficult to meet the levels of response that we require. I applaud the initiative, and just hope that they are approved and implemented quickly”, he added.

Manuel Reis Campos, the president of the Portuguese Confederation of Real Estate and Construction (CPCI) called on these complex planing processes to be “faster and more efficient”, which was at the basis of the Proposed Law 77/XV which aims to establish “a simplification of processes in the area of urban and territorial planning as a priority, contributing towards reducing the costs of real estate projects”.

Golden Visas and Local Accommodation

The panelists argued that Portugal’s Golden Visa programme and Local Accommodation are not to blame for Portugal’s chronic housing shortage problems.

Manuel Reis Campos said that building affordable housing was a priority for society and that a broad approach with adequate policies was needed, one that took an across-the-board view.

“Public investment is vital, particularly when the challenge of carrying out and applying the funds from the Portugal Recovery and Resilience Programme was concerned.

As part of ‘Component 2 – Housing’, the investment that has been earmarked from the Recovery and Resilience Fund to finance projects to build public housing at affordable prices for rental is €774.8 million, with €607 million to finance 5,210 homes under the aegis of the Urban Rehabilitation Institute.

Then there is an amount of €167.8 million to be lent for the rehabilitation, construction, or acquisition of properties earmarked for accessible rent (1,590 homes), for families who cannot find homes for sale on the market that mach their incomes.

Manuel Reis Campos pointed out that the “number of new homes over the past decade totalled 152,000 which corresponded to an annual average of 15,000 homes. The previous decade prior to 2011, 68,000 had been built.

“When it comes to social housing, we continue to have around 120,000 homes, or 1.9% of all existing housing stock and over the past decade almost nothing has been built”, he said.

“Portugal currently has 253,889 buildings that need serious work and more homes need to be renovated or built,” he added.

Real Estate Investment

Real estate investment reached €35.6Bn in 2022 of which €5.6Bn was from overseas investors. “Our country continues to be attractive with an excellent real estate offer”, said Manuel Reis Campos (CPCI).

Housing is decisive and the real estate market has to be seen as a priority for the economy, since investors need a “stable tax and legislative framework”.

“And please don’t place the blame for housing issues at the doorstep of the Golden Visa programme (which was critically important for our economy) or Local Accommodation which only accounts for 13.8% of all rented houses in Portugal”.