(Translated by Google)
Young people up to the age of 35 will now be able to buy a house in Portugal without having to pay IMT and Stamp Tax, after the proposal from the Government of Montenegro was approved in Parliament this Wednesday, June 12th. This is a “positive” measure that will facilitate access to housing for young people and also has the potential to boost the purchase of homes by these families, admit the various experts interviewed by idealista/news. But they also warn that there are risks to be considered, namely the potential for house prices to rise even further due to increased demand, and also the fact that it covers the young population who do not need support to purchase a house.
It was this Wednesday, June 12th, that the proposal for legislative authorization from the Government of Montenegro regarding the exemption from IMT and Stamp Tax on the purchase of their first home by young people was voted in Parliament. And it got the green light with the votes in favor of the Democratic Alliance bench (PSD and CDS-PP) and the representatives of Chega, IL and PAN. PCP and Livre voted against, while BE and PS abstained.
The Executive's idea is that the exemption from Municipal Tax on Onerous Property Transfers (IMT) and Stamp Tax on the purchase of a house up to 316,772 euros will come into force in August this year. It should be noted that the measure also includes a partial exemption for the purchase of houses by young people with values between 316,772 euros and 633,453 euros (with a rate of 8% applicable to this portion).
This is a “welcome” and “positive” measure that helps young people buy a home , according to several real estate market experts interviewed by idealista/news. But they also warn that there are risks to consider and adjustments that could have been made. On the one hand, the house price ceiling is too high. And, on the other, the age of buyers is too low, ending up not covering all families who need to purchase their first home.
Exemption from IMT for young people is positive – and boosts home purchases
The young population in Portugal has been faced with a series of challenges that have hampered their access to housing. First of all, they have low wages and job instability. And then, there is little supply of houses at prices compatible with their income and housing credit remains expensive, as interest rates remain high despite the slight declines felt in recent months.
In this context, more and more young people are emigrating in search of better working conditions, better wages and quality of life. And many young people who decide to stay in Portugal end up having to live with their parents because they don't have the savings to become emancipated. This entire scenario has serious implications for the country's demography , reflected in the aging of the Portuguese population.
This is exactly why all the real estate experts consulted by idealista/news applaud the new support for the purchase of a home by younger people, be it the exemption from IMT and Stamp Tax already approved in plenary, or the public guarantee to access to 100% housing credit, which will still be debated in Parliament. “The exemption from paying taxes on the purchase is a good measure, because it will lower the initial cost of the acquisition”, highlights Gonçalo Nascimento Rodrigues, coordinator of the postgraduate course in Real Estate Investments at Iscte Executive Education.
“The measures approved by the Executive aimed at young people purchasing housing are, in fact, positive. And, without a doubt, they will be the lever, the initial help that many young people needed to acquire their first home”, considers Hugo Santos Ferreira, president of the Portuguese Association of Real Estate Developers and Investors (APPII). Many of these young people can take advantage of the IMT and Stamp Tax exemption “to leave their parents' homes and move forward with their plans to start a family”, he also highlights.
And there may even be changes in the buying and selling market, with more young people up to the age of 35 buying a house. This is what Rui Torgal, CEO of ERA Portugal, says to idealista/news: “The young segment (under 35 years old) is one that has been less active in the real estate market for obvious reasons, therefore these measures could bring greater business dynamism to this segment of the population.”
“These measures approved by the Government to facilitate young people's access to housing seem to me to have the potential to boost property acquisition , as incentives are offered that can considerably reduce initial costs and financial barriers for young buyers, encouraging also the market”, says Nuno Garcia, general director of GesConsult.
By making it easier for younger people to purchase homes , this measure also helps promote their “financial stability”, considers Clélia Brás, partner and Real Estate coordinator at PRA – Raposo, Sá Miranda & Associados. Furthermore, it also alleviates the pressure on the rental market: “The home purchase policy fails to maximize the impact on the rental crisis for these same young people, which is increasingly accentuated”, she points out.
Young people will buy a house with their parents’ support – and prices may rise
Despite considering that the measures that help young people buy their first home are positive, market experts also warn of the following risks:
- Exemption from IMT has limited scope in the young population: “The housing support measures aimed at young people up to the age of 35 will only cover a small slice of the young population, namely those who have some type of extra support, for example from their parents . Because in a country where 75% of young people earn up to 1,000 euros per month, it will hardly be possible for them to obtain access to bank credit to purchase a property at the values currently practiced in the real estate market”, points out Alfredo Valente, CEO of iad Portugal. Clélia Brás also agrees that by promoting the sale of houses to young people “many parents also have to help with the purchase of these same properties”;
- IMT exemption supports young people who don't need it: “The Government will have gone a little too far with the purchase value set at 316,772 euros. Likewise for the limit regarding the public guarantee [up to 450 thousand euros]”, warns Gonçalo Nascimento Rodrigues. In his view, the proposed ceilings are “well above the average” for the purchase of a house, which is less than 200 thousand euros, which could “benefit a much wider range of potential young buyers”, instead of “seeking to help and benefit, first and foremost, those who really need it”;
- House prices could rise even further: in the view of Alfredo Valente, from iad Portugal, these measures “could generate an opposite effect”, since “with the increase in demand, house prices will continue to rise, if there is no supply of new housing.” The same warning is given by Gonçalo Nascimento Rodrigues, stating that “it is essential that these measures are monitored on the supply side. Otherwise, and given its scarcity, the market will tend to absorb the impact desired by the implementation of the measures in the price, which could lead to further price increases ”, he warns.
Should the IMT exemption on home purchases be extended to other age groups?
The exemption from IMT and Stamp Tax for the purchase of their first home by young people reached the Assembly of the Republic in the form of a proposal for legislative authorization and not as a bill. This was a way for the Government of Montenegro to feign debate on opposition projects. Thus, the proposal was approved without parliamentary negotiation and adjustments. One of the changes that could have been introduced would have been to extend the IMT exemption to other age groups as long as it was the purchase of the first home, experts admit.
When considering that “housing is, on the one hand, a fundamental right , and, on the other, that access to this asset currently constitutes an intergenerational crisis that has very varied impacts on our society”, Nuno Garcia, from GesConsult, says be “favorable to analyzing the extension of these measures to first-time buyers regardless of their age, taking into account, however, a possible inflationary effect”.
Although he understands the prioritization given to young people up to 35 years of age, Rui Torgal, from ERA Portugal, considers that “these measures could and should be extended to other age groups of the population”. Especially because “the immediately previous generation, between 35 and 45 years old, for example, went through two financial crises and a pandemic since the beginning of their professional career and was never the target of concrete benefits from different Governments in relation to housing. ”, he maintains, remembering that “a substantial part [of this generation] remains without their own home. ”
But the extension of this support for access to housing to other age groups should take place within well-defined rules to reach those who really need it. “The measures can be extended to other age groups, but only for lower income brackets , therefore, for lower purchase values”, believes Gonçalo Nascimento Rodrigues.
The PRA real estate coordinator also agrees that “it would be beneficial to consider expanding these policies to include other age groups and vulnerable groups”. But she admits that these measures should be “duly monitored and at the same time accompanied by policies that aim to increase the supply of housing and do not jeopardize the country's fiscal stability”.
It is in this context that Hugo Santos Ferreira summarizes that it would be “important to evaluate the impact of these measures on different age groups of the population and adjust them according to each person’s needs”.
New support does not solve the problem of access to housing
Although this new help for young people to buy a home is welcome, market experts warn that the incentives will not be enough to solve the current crisis of access to housing that is plaguing Portugal. First of all, the support does not cover the entire population that needs to buy a house. And then, the real problem is the lack of housing supply and high house prices, which continue to rise (albeit more slowly). But not only.
“It is also a fact that this measure does not solve everything, the problem also lies on the side of low wages and lack of supply”, warns the president of APPII, highlighting that “it is essential that these are accompanied by others such as increasing supply of affordable housing and support for social renting”.
The problem of access to housing in Portugal is “complex enough to require a strategy that involves several sectors and multiple actors in combating it”, considers the general director of GesConsult, who points out other measures that are also necessary to resolve the crisis:
- Strengthen the rental market;
- Invest in support programs, for example, to make leasing more robust and resilient, benefiting landlords and tenants.
Rui Torgal, from ERA Portugal, also does not believe that these measures “are sufficient to resolve the crisis of recent decades." "We continue to have a large deficit of houses available on the market and, until this issue is balanced, we will continue to have high prices which could be prohibitive for young people at the beginning of their careers”, he concludes.
