** The reduction in house prices in the country exceeds 40% over the last decade.

Portugal's housing supply shortage problem is no longer temporary but has become structural, warns the president of the Association of the Construction Sector and Real Estate (AICCOPN). The solution requires "a strong stake and encouragement in construction and renovation". Over the last decade, the number of residential homes available for sale in Portugal has fallen by almost 40%, namely 38.6%. In the second quarter of this year, there were just over 58 thousand properties on the market, but by the end of 2014 - already after the troika left the country - there were around 95 thousand. Since that year, agencies' residential portfolios have been gradually shrinking, especially from 2018 through June, say data from Confidential Real Estate, based on the Housing Information System. Although these figures are not exhaustive (there is always a supply that escapes the statistics), their broad coverage allows to identify a trend, says Ricardo Guimaraes, director of the consultancy. And "they emphasize what the industry is saying. There is a lack of supply," he emphasizes. This is the result of "an increase in demand in an environment of low levels of new construction".

There are several factors that explain the demand for housing. The 2021 census showed a significant increase in single parent households in Portugal. That year, 579,971 households consisting of a mother or father and children were recorded, a 20.7% increase from 2011, due to an increase in divorce and separation. The country has also become known internationally as a place to live and work. Since 2015, there has been an increasing number of foreigners living in the country. There are now almost 782,000, 393,000 more than seven years ago. Improved employment and historically low interest rates have also given a new impetus to family buying. All of this need has been met with a distinct lack of market response.

"The last decade has seen a deteriorating housing stock, a lack of public investment in housing and a slowdown in private investment."explains Manuel Reis Campos, president of AICCOPN (an association representing the construction industry).

Opposing effects

As a solution, the More Housing program raises many doubts among sector participants. According to Ricardo Guimaraes, "all the measures already have the opposite effects compared to the desired ones". And in the rental sector, "it is a disaster". As he points out, renting serves as a social stabilizer in times of crisis, but that is not what it is doing now. "This is the first time it's not working," he says. The crisis in the real estate market, with falling sales and rising interest rates, has not increased supply in this market or lowered the cost of renting. Quite the opposite. "The construction industry also does not have the ability to build for the middle class. It has VAT on construction, high costs, lengthy permitting procedures... Family income has fallen due to interest and inflation. This product is becoming impossible," he emphasizes. "The supply of construction will shrink, and what remains will be offered in the high price category."

According to Reis Campos, the housing problem "will only be definitively solved with strong interest rates and incentives in the construction and renovation of houses." The AICCOPN president calls on the state to restore investor confidence - which has been eroded by the government package and has already led to a slowdown in activity, to create favorable credit lines for construction, to support the development of companies by encouraging the use of new efficient building processes such as modular and exterior construction, and to use real estate tax policy to encourage private investment. At the fiscal level, he demands "the application of a reduced VAT rate to all construction, renovation and preservation of residential real estate, the abolition of the AIMI tax, the property tax that goes to the public treasury, the updating of the property purchase tax table according to the increase in property values and others" that he considers "necessary to reduce the cost" of housing in Portugal. Paulo Caiado is also in favor of a number of measures to stimulate the rental market. In his opinion, attractive tax incentives should be created for owners to offer properties at controlled prices, the adaptation, renovation and construction of public fund properties with rental opportunities should be accelerated, and private promotion should be encouraged and enabled by providing land or tax incentives.