Why Portugal’s Housing Plans Failed to Stop a New Wave of Price Rises

Portugal property keeps climbing despite a flurry of government fixes

The Portugal property market is still climbing even after the Democratic Alliance government launched an ambitious housing programme. Two years after the launch of Construir Portugal and a package of 30 measures, house prices continued to rise: housing inflation was +18% in Q3 2025 on a like-for-like basis and the national average price per square metre reached €3,000, rising to €4,500 in Lisbon. That mismatch between policy effort and market outcomes is where buyers, investors and expats need clarity.

In this piece we unpack the numbers, review the policies, and give practical guidance for anyone considering buying, renting or investing in real estate in Portugal now. Our analysis is based on reporting by Expresso and Dinheiro Vivo and the government announcements tied to the Recovery and Resilience Programme.

What the government did: an overview of the 30 measures and the Construir Portugal plan

When the Democratic Alliance presented its housing strategy in May 2024 the emphasis was simple: increase supply and make purchase and rental access easier for key groups. The headline actions included:

• Building 25,000 new homes financed through the Recovery and Resilience Programme.
• Revising the Land Law (Lei dos Solos) to allow rural land to be used for affordable rental housing.
• Making some unused publicly owned buildings available for renovation into affordable rentals.
• Offering IMT (property transfer) and stamp duty exemptions for buyers under 35 purchasing homes up to €316,000.
• Providing a 100% public guarantee on mortgages for qualifying young buyers to encourage lending.
• Raising the IMT for non-residents to a fixed 7.5% to discourage speculative foreign purchases while allowing reimbursement if the purchaser becomes a tax resident within two years and rents the property at moderate prices.
• Cutting VAT on construction to 6% and lowering the IRS tax on rental income to 10% for landlords who offer moderated rents up to €2,300 per month.
• Revoking forced rental of vacant homes and loosening restrictions on licensing local accommodation.
• Measures to speed the sale of properties in undivided inheritance inventories, affecting about €700,000 worth of properties, according to the government.

These steps were a mix of supply-side interventions and targeted fiscal incentives designed to support first-time buyers and encourage the release of existing stock into the rental market. Some of the measures are clearly aimed at reshaping investor behaviour, especially the changes that affect foreign buyers and the Golden Visa era.

Why prices kept rising: demand outstrips policy gains

Despite the policy push, prices kept rising. The government has acknowledged several structural drivers that are still in play:

• Persistent shortage of new-build housing relative to demand.
• Strong demand from tourism-related sectors, short-term rental markets and platforms catering to digital nomads.
• Continued interest from immigration flows and the after-effects of the Golden Visa programme.
• Concentration of demand in high-demand municipalities such as Lisbon, Cascais, Oeiras, Porto and Funchal where affordable stock is scarce.

Recent numbers underline how robust demand remains. In January 2026 national house prices rose 13.1% year-on-year, with an average price of €3,047 per sq m. Other datasets point to even higher year-on-year rises of 17.7% to 20%, the latter levels ranking second highest in the EU for that period.

Supply-side measures such as the construction of 25,000 homes will take time to impact the market. New completions, planning, conversion of public buildings and rural land development are multi-year processes while price expectations and speculative flows react faster. That timing mismatch explains why policy has not yet tamed inflation in the resale sector.

Who wins and who loses: distributional impacts for buyers, landlords and investors

These measures have clear winners and losers. We break this down by stakeholder group.

Winners

• Young buyers under 35 who can access IMT and stamp duty exemptions and a 100% mortgage guarantee. For eligible buyers purchasing properties up to €316,000 the upfront tax relief is meaningful and the guarantee improves mortgage availability.
• Landlords offering moderated rents qualify for a reduced IRS rate of 10% and exemption from the additional IMI. The reduced tax burden can make long-term rental more attractive.
• Institutional and public-sector developers that receive Recovery and Resilience Programme funds to deliver the 25,000 homes.

Losers and those who face new costs

• Non-resident buyers face a higher upfront tax hurdle with a fixed IMT rate of 7.5%, aimed at cooling speculative demand.
• Middle-income households in sought-after municipalities continue to face affordability pressure as market prices keep increasing above wage growth.
• Short-term rental operators benefit from loosened licensing but risk tighter market sentiment and future regulation that targets tourist rentals.

For foreign investors the package is mixed. It penalises speculative acquisitions with a higher IMT but provides a route back to tax neutrality if investors commit to residency and renting at moderated prices. That is a policy lever designed to shift investor behaviour from speculative ownership to income-producing, long-term rental, but the enforcement and attractiveness of the reimbursement pathway will determine if it works.

Practical advice for buyers, investors and expats

We offer a pragmatic checklist based on the current policy environment and the way the market is moving.

If you are considering buying to live

• Consider eligibility for the under-35 IMT and stamp duty exemptions and the public mortgage guarantee. Those measures can lower your upfront cost and improve financing terms.
• Prioritise realistic budgets in markets like Lisbon where the average is €4,500/sq m. The €316,000 cap for tax relief will not cover typical homes in central Lisbon.
• Think long term about neighbourhoods outside the top-tier municipalities where new supply and rural conversions may ease pressures.

If you are considering buy-to-let or rental income

• Assess whether you can meet the government’s definition of “moderate rent” to access the 10% IRS rate and other exemptions.