Can you buy a house in the conditions of taxes and fees? Not foreigners, but those who buy with cash can do it.

The rise in housing prices is not a surprise, as it follows the trend of recent years. However, a large part of the cost of a home is not related to the house itself, but to the taxes and fees imposed by the government. In other words, each type of tax has a significant fiscal impact on the final purchase price.

Gonsalo Nascimento Rodrigues, a real estate consultant and author of the blog Out of the Box, helps to clarify the essence of this issue. "From 25% to 30% of the final sale price of a house consists of taxes. These are distributed among property tax on real estate transactions, property tax, stamp duty, VAT on construction, and corporate income tax, which the developer must pay as profit tax," he explains. "This is a significant amount, and among all the taxes that contribute to this price increase, the most significant is the VAT on construction," he emphasizes.

In an article on Out of the Box, Gonçalo Nascimento Rodrigues presents calculations using a simple example of purchasing a house worth 200,000 euros in mainland Portugal, "for living and ownership." "Let's also assume that a housing loan of 154,000 euros is taken out, which represents the financing-to-collateral ratio for housing loans, as averaged in the market in 2022," it can be read. After calculations, taking into account various taxes such as property tax on real estate transactions, stamp duty, property tax, VAT on construction, and income tax, "the fiscal burden on the sale of a new house worth 200,000 euros amounts to 54,554 euros, which is 27% of the sale price." "In construction, the VAT paid constitutes the largest share of tax payments (40%), followed by property tax on real estate transactions (29%) and income tax (19%). The net profit for the developer would be 20% of the sale price of the house," it is explained at the end.

So what should be done to change the situation? According to the real estate consultant, the answer is obvious: "lower taxes." However, it is important to consider "the goal that needs to be achieved." "Taxes are not lowered solely because it is believed that the tax burden in a certain segment or in a specific investment market is too high. There must be a strategic goal," he adds. Thus, if the goal is "to increase the supply of new housing, it would be interesting to significantly reduce the VAT rate on the construction of new homes. If the goal is to acquire permanent housing, a first home, for young people or young families, then it would probably be better to reconsider, for example, the property tax tables for real estate transactions. So, it depends," he concludes.

Who buys houses in Portugal? Considering all these facts, there is only one question: in the end, who can actually buy a house? Gonzalo Nascimento Rodrigues notes that "in Portugal, real estate is purchased by Portuguese people and Portuguese families using a mortgage." However, one detail should be taken into account: "Portugal is very small, but very large. Housing is very diverse; completely different people buy houses in Santa Maria da Feira and Loulé." "In some areas, mainly in large cities, people are more likely to seek a loan for this purpose. In medium-sized cities and in the outskirts of the country, they are less likely to seek a loan," he explains. "On average, most Portuguese are forced to apply for a loan to purchase permanent housing. More than 70% of homes sold in Portugal are associated with a loan, and about 50% of housing sales in Portugal are made using a loan," he says.

The data obtained confirms this situation. In 2022, "financial institutions registered in Portugal entered into 2 million new credit agreements with 1.5 million people for a total of 28 billion euros.

Regarding the purchase of housing, "169 thousand people took out a mortgage in 2022, two thousand more than in 2021." And who are they? According to the data, "two out of three" lived in the "Northern region and the Lisbon metropolitan area" and "were predominantly employed and had a higher level of education." As for age, "61% of the mortgages issued in 2022 were granted to individuals under 40 years old," "19% of new mortgages were provided to individuals under 30 years old," and only "1% of the total mortgage amount issued in 2022 was received by retirees." "In Portugal, half of the total volume of mortgages granted to retirees in 2022 was provided to foreign citizens (mainly from Brazil and the USA)," the Bank of Portugal's release also notes.

On the other hand, "considering only the Algarve region, 85% of the total volume of mortgage loans granted to retirees in 2022 was provided to foreign citizens (mainly from the USA, the UK, and Sweden)."

However, it shouldn't be assumed that everyone is taking out loans in Portugal. Although this varies from region to region and depends on families' purchasing power, there are still those who pay the necessary amount upfront. Filipe Garcia from One House Coimbra explains that "there are many" people who buy homes with cash. "This year we closed only 15 deals, and only one of them was with a foreign family. The other seven or eight were paid in cash. And we are talking about the mid to mid-high market, in the range of 300 to 500 thousand euros. This is the reality here in Coimbra," he says.

According to an entrepreneur who has been working in real estate for 10 years, it was "a reality that was difficult to grasp for a long time" at the beginning of One House. "We spent two to three years trying to understand the dynamics of Coimbra. It really is something special."

However, Philip points out one thing: "Here in Coimbra, we mainly have a service market, meaning people like doctors, lawyers, and teachers. Of course, we also have companies and entrepreneurs, but compared to others, it's a small number. And these people, for various reasons, whether due to their connection to the public sector or more stable jobs, do not experience a loss of purchasing power." "These are people from wealthy families who also own property in key areas, and when they want to sell, these zones are highly valued. They can afford to significantly increase the flow of buying and selling. There is a high level of sales and purchases, but since they are very limited and only want specific areas, this is a market that doesn't stop," Philip explains.

Gonçalo Nascimento Rodrigues confirms this trend and adds that there are other areas where this is observed, including the Azores. "For example, on the island of São Miguel, this is also happening, mainly locals are buying homes using their own savings, and they are relying less on loans."

The discussion is about selling an old house, which allows for funds to be raised for the purchase of the next one. Not always, says the consultant. "It depends on the history. If the first house purchase was made using a loan, then the loan needs to be paid off. When the decision to buy a house is made, it means that a different type of house is needed, a larger one, with different conditions, and over time, house prices keep rising. People either save money for this, or they will have to continue applying for loans, which often happens," he explains.

Are foreigners buying all the houses? According to a real estate consultant, the idea that foreigners can buy more houses in Portugal than the Portuguese is "incorrect, populist, and a biased political ideological notion that a certain sector of the market wants to promote." "Data from the National Institute of Statistics shows that about 90% of transactions in the real estate market in Portugal or the volume of housing sales in Portugal is occupied...