In line with what the Government had already announced, on 25 September 2025, the Council of Ministers approved a series of proposals aimed at addressing what is an undeniable reality – there is a deep housing crisis in Portugal and swift and disruptive measures must be taken.
To this end, on 25 September 2025, the Government announced a set of measures aimed at increasing the supply of affordable housing and balancing the property market, as part of the “Construir Portugal” (Building Portugal) strategy.
Among the priorities identified are:
- simplifying rental processes
- creating tax incentives for private housing supply
- mobilising society to effectively stimulate the placement of properties on the market, both for rent and for sale.
Among the measures taken by the Government, the following stand out:
- the creation of a reduced VAT rate of 6% applicable to the construction of housing for sale or rent at affordable prices;
- the proposed legislative authorisation to amend the Legal Regime for Urbanisation and Construction (Decree-Law No. 555/99), with the aim of simplifying procedures and speeding up licensing deadlines for housing construction.
At the same Council of Ministers meeting, the Government also approved a resolution defining the National Strategy for the Implementation of Building Information Modelling, known as ‘PortugalBIM’, as a way of promoting digitisation and efficiency in the civil construction sector. With this new strategy, the Government expects that the adoption of BIM will enable savings of between 10% and 20% in the capital costs of building and infrastructure construction projects.
This set of measures aims to:
- reduce construction costs,
- encourage private investment, and
- facilitate access to housing solutions for the middle class at a time when purchase and rental prices remain very high in much of the country.
The reduced VAT rate of 6% will apply to construction projects whose final sale price does not exceed the limit of around €648,000, or whose rent is compatible with values considered moderate, estimated at up to €2,300 per month.
Although these limits may still be specified more precisely in the final legislation, the political intention is clear: to encourage the production of new housing that is accessible to the middle class and resident demand, strengthening supply in a segment that is currently strangled.
The Government has also acted on a sensitive issue, in social terms, which has caused much public uproar, and which concerns the conditions under which Urban Rehabilitation is permitted.
The Government has been sensitive to the need to introduce changes in taxation. In this regard, there are plans to reduce the income tax rate from 25% to 10% on moderate-rent housing leases. Another change will end capital gains tax on the sale of homes if the proceeds are reinvested in moderate-rent properties.
In conclusion, the Government believes that these changes could come into force in the first quarter of 2026. Despite this rapid adoption, the impact on the market may take time to be felt, given the usual cycles of property development – from project design to licensing, construction and marketing. It is therefore estimated that the most significant effects will only be felt in 2027.
For further information on the above article, please contact: Luís Nobre Guedes, Nobre Guedes & Associados Thank you to Rodrigo Ferreira de Campos (Trainee Lawyer) for their contribution to the above article.
