The existence of a “serious housing crisis” is acknowledged in the draft State Budget for 2026 (OE2026)

The existence of a “serious housing crisis” is acknowledged in the draft State Budget for 2026 (OE2026), with the Government identifying as a solution the need to curb the “price escalation, which depends above all on a decisive increase in housing supply.” The document includes several measures related to the real estate sector and the residential market, presented this Thursday (9 October 2025) by the Minister of State and Finance, Joaquim Miranda Sarmento, at the Ministry of Finance, having already been delivered to Parliament one day before the deadline. We explain in detail what will change in the sector.

The draft OE2026, it should be recalled, will be discussed and voted on in general on 27 and 28 October. The final overall vote is scheduled for 27 November, after the detailed debate phase.

How does the Government plan to “curb” the housing crisis?

Changes for the sector included in the OE2026 proposal

  • Transfer of rural properties from the State’s private domain to municipalities

  • Green light for revision of Municipal Master Plans

  • Public Real Estate Asset Information and Management System to be completed by June 2026

  • Infrastructure and Housing Programme absorbs 33.8% of budget allocation

  • IHRU housing expenditure to reach around €1.2 billion in 2026

  • Exemption threshold for the “Young IMT” house purchase benefit increases by 2%

  • PRR to finance €9,367.1 million in investment

  • Fiscal housing measures to take effect only in 2027

How does the Government plan to “curb” the housing crisis?

Prime Minister Luís Montenegro’s Government pledges to make 59,000 homes available over the next six years, of which 33,000 will be newly built with funding from the Recovery and Resilience Plan (PRR). Moreover, following a recently signed agreement with the European Investment Bank (EIB), the construction of 12,000 new homes is planned under the Rental Support Programme.

Regarding public housing supply, €930 million in investment is planned for 2026 in public programmes for the promotion and rehabilitation of housing to accommodate 22,000 people.

On the fiscal front, the Executive has announced a reduction of the VAT rate to 6% for the construction of homes for sale or rent at “moderate prices” (€2,300 per month in rent and €648,000 in construction for rental purposes).

For the rental market, the deduction on personal income tax (IRS) for rent expenses at “moderate” values will increase to €900, alongside a reduction of the IRS rate from 25% to 10% for rental contracts up to €2,300 per month.

Also announced were the abolition of capital gains taxation (IRS) on home sales when the proceeds are reinvested in housing for “moderate” rent levels, and a temporary exemption from both the Municipal Property Transfer Tax (IMT) and the Municipal Property Tax (IMI) for this type of property.

Transfer of rural properties from the State’s private domain to municipalities

The Government intends to transfer ownership of all rural properties from the State’s private domain to municipalities “without requiring any compensation,” aiming to mitigate fire risks. According to the document, “the State owns around 43,000 rural properties” and, in addition, “a further 65,000 are registered in the State’s name due to having no known owner.”

Within the management of State real estate assets—allocated a total budget of €852 million for 2026—the Government states that “ownership of all rural properties forming part of the State’s private domain and registered in its name will be transferred to the respective municipalities, without requiring any compensation, in order to promote reuse of the properties, mitigate fire risks, and ensure local management and cohesion.”

Regarding the land registry and land use monitoring system, within the scope of structural investments in agriculture and forestry, the Government foresees €1 million in investment for 2026, noting that €17 million was invested in 2024 and €60 million this year.

“It will be a priority to register, update, and consolidate the State’s property inventory, as well as to make profitable and enhance the only asset of Consest - Promoção Imobiliária, S.A.,” the OE2026 report states.

Green light for revision of Municipal Master Plans

To promote an “integrated and sustainable vision of the territory,” with an estimated €75 million for 2026, the Government foresees approval of regional spatial planning programmes, as well as the revision of Municipal Master Plans (PDMs).

“Recognising the need for greater agility in municipal planning processes, the Government intends to simplify and reduce bureaucracy in the mechanisms for revising PDMs, facilitating their adaptation to new social, economic and environmental realities,” the document notes.

The proposal also calls for the consolidation of an integrated cadastral system “to ensure effective knowledge of land ownership and use,” indicating that “integration between the property cadastre and the simplified cadastre will improve property registration, prevent conflicts, facilitate planning, and create more favourable conditions for investment and territorial enhancement.”

Public Real Estate Asset Information and Management System to be completed by June 2026

In terms of modernisation, the Government foresees the development of “an information system to support the simplified cadastral assessment of rural property,” as well as “a solution for managing georeferenced information.”

The OE2026 proposal report further states that the investment relating to the implementation of the Public Real Estate Asset Information and Management System (SIGPIP), to inventory and register properties owned by central public administration entities, “will be completed by June 2026.”

Infrastructure and Housing Programme absorbs 33.8% of budget allocation

The Infrastructure and Housing Programme, comprising 116 projects, represents the largest share of the OE2026 proposal, with a total of €5.841 billion—equivalent to 33.8% of the total budget.

National funding for the programme amounts to €4.962 billion, including €1.028 billion in tax revenues. European funding totals €879.2 million, of which €769.8 million comes from the PRR.

Key projects include concessions, construction, refurbishment and maintenance of the rail network and road network—managed by Infraestruturas de Portugal, S.A. (IP)—and the Housing Access Support Programme — 1º Direito and Affordable Housing, under the IHRU, I.P.

IHRU housing expenditure to reach around €1.2 billion in 2026

Under central government structural investments, the IHRU’s housing expenditure for next year is expected to reach almost €1.2 billion. The largest share, around €800 million, is allocated to housing access support programmes.

The public affordable housing stock will receive €360 million, the emergency accommodation fund €28 million, and housing stock rehabilitation €10 million.

The Executive’s priority is the execution of 59,000 public housing units, the implementation of public-private partnerships for vacant State-owned properties suitable for housing, and the release of property portfolios for investors, particularly through “concessions” of buildings “freed up by the concentration of ministries and agencies at Campus XXI.”

In terms of urban planning, the Government commits to simplification, reduced bureaucracy, and faster licensing processes. For the rental market, it promises to:

  • Review the urban rental framework, ensuring landlords can terminate contracts in case of default;

  • Amend rental support programmes, particularly affordable rent schemes, through build-to-rent investment contracts to attract private investment;

  • Streamline all public rent support programmes.

Exemption threshold for the “Young IMT” house purchase benefit increases by 2%

The OE2026 proposal also foresees a 2% update to the IMT (Property Transfer Tax) brackets, raising the exemption threshold by approximately €6,500 to €330,500 for young buyers. The next bracket, subject to an 8% rate, will increase from €648,022 to €660,982.

The IMT Jovem benefit, introduced in August 2024, grants full exemption from this tax, Stamp Duty, and registration fees for homes priced up to €316,000—a threshold that rose to €324,058 this year.

When the exemption limit is exceeded, a marginal IMT rate of 8% applies up to €648,022. Above this value, there is no exemption from IMT or Stamp Duty.

Thus, next year, a €600,000 home will be exempt from IMT and Stamp Duty up to €330,539, with an 8% tax rate applied to the portion above that amount.

For buyers not covered by this scheme (those over 35 or already owning a home, or part of one), OE2026 also introduces changes: exemption from IMT on the purchase of a property priced up to €106,346.

The IMT value currently in effect until the end of this year was updated by 2.3%, with the exemption limit set at €104,261.

PRR to finance €9,367.1 million in investment

According to the OE2026 proposal, the PRR will finance a total of €9.367 billion, mainly for the Ministries of Economy, Finance, Environment and Housing. These ministries—together with Energy and Infrastructure—will account for 68.5% of the plan’s total funds.

The Government also estimates that PRR funding through loans will total €2.578 billion, mainly for projects related to “green and business innovation agendas/alliances,” capital and quasi-capital instruments of the Capitalisation and Resilience Fund, and, to a lesser extent, the public affordable housing stock.

Grants are expected to amount to €6.789 billion.

Fiscal housing measures to take effect only in 2027

Minister of State and Finance Joaquim Miranda Sarmento stated that the fiscal measures for housing announced in the context of personal income tax “will only take effect in 2027.”

Although the tax rate reduction from 25% to 10% for landlords of so-called “moderate rent” properties (up to €2,300 per month) will begin to apply in 2026, taxation will only be reflected in annual returns submitted from April of the following year. The same applies to the €900 annual deduction for tenants’ rent expenses, which will only be declared the following year.

According to the Minister, speaking during the presentation of the OE2026 proposal at the Ministry of Finance in Lisbon, the fiscal measures for housing are “in their final legislative stage.”