Economy

Housing Crisis in Portugal! What Can Be Done?

05 Oct 2024 min reading

Portugal is facing an unprecedented housing crisis, with an urgent need to build 45,000 homes per year to address the housing shortage. This figure represents an increase of 13,000 units compared to the constructions completed in 2023, highlighting the severity of the current situation. The Government's response to this crisis involves a new housing program aimed at stimulating the construction of new homes. While this plan is viewed positively by the construction sector, it is not without criticism and challenges.
The new Government program has been well received by various representatives of the construction sector, who believe that the proposed measures, if implemented correctly, could provide a quick response to the country's housing needs. However, some experts warn that the excessive focus on the quantity of new constructions may not be enough to resolve the structural problems in Portugal's real estate market. They emphasize that the quality of the existing housing stock also needs attention, something that is not clearly addressed in the proposed measures.
Among the most significant measures in the program are public-private partnerships for large-scale construction and rehabilitation of homes, as well as the promotion of new housing concepts such as "build to rent" and modular construction. The Government also aims to boost private, public, and cooperative housing promotion by mobilizing underused state properties and land. Additionally, it plans to ease restrictions on land use and urban densities, allowing for high-rise construction and the expansion of urban perimeters.
To support young people in buying their first home, the Government commits to providing public guarantees for bank financing of the full purchase price, along with exemptions from IMT (Municipal Property Transfer Tax) and Stamp Duty. Another central point of the program is the temporary reduction of VAT on construction and rehabilitation of homes from 23% to the minimum rate of 6%, a measure that has been widely praised by industry stakeholders. This tax reduction is seen as a necessary incentive to lower construction costs and stimulate the development of new housing projects.
However, despite the good intentions, the program faces criticism for not clearly and decisively addressing some fundamental issues. The absence of details on the reform of licensing processes and the lack of commitment to updating the building code are seen as weaknesses that could undermine the effectiveness of the measures in the medium and long term. Furthermore, the lack of specific financial support for vulnerable families who spend a significant portion of their income on housing is a major gap that the Government does not seem to have adequately addressed.
The housing crisis is most acute in urban areas such as Lisbon, Cascais, and Oeiras, where house prices have soared, making it impossible for many people to buy a home. According to recent data, housing prices increased by 5% in the first three months of the year compared to the same period last year. For many residents, the only option has been to live in rented rooms due to low wages and the high cost of housing.
The situation is exacerbated by the impact of foreign property buyers, who often pay high prices, further limiting market access for Portuguese citizens. The Government's program includes measures to ease this pressure, but there are doubts about their long-term effectiveness. The reduction in VAT on construction and the easing of urban planning rules are steps in the right direction, but these measures must be accompanied by a more comprehensive strategy that includes direct support for struggling families and a substantial increase in the supply of public housing.
In summary, Portugal is facing a housing crisis that requires a coordinated and effective response. The Government's program is a start, but it must be strengthened with additional measures to ensure that all citizens have access to decent and affordable housing, regardless of their location or financial condition. The success of the plan will depend on careful implementation and the ability to adapt to the real needs of the market and the population.

Economy