State Support for Home Purchase
Public support for home ownership arises as a response to a structural issue in the country: the imbalance between housing prices and households’ disposable income. In 2025, access to home ownership continues to represent a significant challenge, particularly for young people and middle-income households.
The appreciation in the price per square meter, combined with the rigidity of mortgage lending, has heightened the need for intervention by the Portuguese Government. Recent data shows that, in the first quarter of 2025, the average value of mortgage loans rose by 24%. This growth reflects the recovery in demand, but also the positive impact of measures such as the public guarantee for mortgage credit, as well as the exemption from Property Transfer Tax (IMT) and Stamp Duty for individuals up to 35 years old when acquiring their first permanent home.
Despite this, pressure on buyers remains high, particularly in urban centers and metropolitan areas, and the shortage of affordable housing is widely recognized.
Public housing programmes promoted by the Institute for Housing and Urban Rehabilitation (IHRU), together with urban rehabilitation initiatives offering tax benefits, help to increase supply but still fall short of keeping pace with demand, especially regarding the acquisition of first homes.
The Importance of State Support
The main obstacle to accessing home ownership continues to be the initial down payment. Given this scenario, he housing support measures implemented by the Portuguese Government plays a central role in overcoming this barrier. In Portugal, many families lack the savings necessary to cover the minimum deposit required by banks and/or property owners (10% to 20% of the property price), which excludes thousands of citizens from the real estate market.
The measures introduced by the Government, and in force since August 2024, seek to mitigate this difficulty, with emphasis on:
• Exemption from Property Transfer Tax (IMT) and Stamp Duty on the purchase of homes up to €324,058 for young people;
• Subsidised mortgage loans and reduced spreads, in partnership with financial institutions;
• Housing subsidies, such as rent support, which help ease the burden of rental costs;
• Promotion of cooperative housing solutions and support for purchase combined with urban rehabilitation, with increased budgetary allocations;
• Strengthening of the role of the IHRU in managing and providing decentralised housing programmes.
Universal access to housing, enshrined in the Constitution, depends on active public policies adapted to market conditions. The mechanisms created in 2024 are a step in this direction, but they require effective monitoring and simplification of procedures. Coordination between the State, municipalities and the banking sector will be crucial to ensure that support for the acquisition of permanent housing translates into concrete results.
The update of the IMT tax brackets in 2025 also expanded the number of properties eligible for full or partial exemption from this tax, providing an additional incentive for young households. This measure helps reduce initial costs and reinforces the importance of tax benefits for access to first-time homeownership.
Public Guarantees, Subsidized Loans, and Tax Exemptions for Young Buyers up to 35 years old
Solutions for Young First-Time Buyers
In recent years, upfront costs have made first-time homeownership particularly challenging for young people. In response, the support measures implemented by the Portuguese Government have emerged as strategic solutions to facilitate this process.
A key measure implemented is the public guarantee for mortgage loans. With this measure, banks can now finance up to 100% of the property value, eliminating the need for an initial down payment. The State acts as guarantor, covering up to 15% of the loan amount, which encourages banks to grant credit to young borrowers.
Another relevant instrument is the subsidised mortgage loan, developed in collaboration with banking institutions, which ensures lower interest rates, reducing the financial burden in the long term.
These mechanisms are complemented by tax incentives, namely exemptions from Property Transfer Tax (IMT) and Stamp Duty for young people up to the age of 35, reinforced by the update of the tax brackets, which expanded access to properties benefiting from such relief.
These housing programmes aim not only to ease the difficulties faced by young people but also to boost the real estate sector. Demand for first-time homes has increased, which is indicative of the success of these measures. Young people across the country are taking decisive steps towards purchasing their own property.
Continuing this analysis, it's also important to address support for families, including urban rehabilitation initiatives and cooperative models. Here, the focus is on promoting more sustainable housing and creating collective solutions that work together with the community.
Families, Urban Rehabilitation, and Cooperatives: Broader State-Supported Programs
Family housing in an asymmetric market: state-supported alternatives
Access to housing remains limited for many Portuguese families, especially those facing unstable incomes or high costs, such as rent. The current real estate buying and selling model favors those with equity, excluding a large portion of the working population seeking residential stability.
In this context, the support provided by the Portuguese State to families goes beyond mortgage credit. One of the instruments with a growing impact is public housing programmes, which aim to provide homes at controlled costs, with prices below market value. Although traditionally focused on renting, some models allow for future property acquisition under favourable conditions.
Another strategic pillar is urban rehabilitation with public support. The State grants tax incentives for properties acquired with a commitment to rehabilitation. These may include reductions or exemptions from Property Transfer Tax (IMT), Stamp Duty, and, in certain municipalities, Municipal Property Tax (IMI) for a predetermined period. This approach also contributes to the revitalisation of degraded urban areas.
Additionally, housing cooperatives emerge as a participatory model of great relevance for families in the process of purchasing housing. They allow for a shared construction and ownership model, with reduced costs due to economies of scale. Municipal or IHRU support may include land grants, exemptions from urban planning fees, and access to public financing schemes.
Families with children and single-parent households find these mechanisms to be a particularly useful alternative when access to conventional financing proves unfeasible. These solutions strengthen the role of State support as a structural, rather than merely occasional, policy tool. To benefit from these programs, it is essential to understand the eligibility criteria and the procedural steps involved—a topic we address below.
Investment in real estate for rehabilitation
In addition to restoring properties with strong symbolic and cultural value, owners benefit from significant tax advantages and economic incentives promoted by the State. These instruments aim to financially support interventions that restore usefulness to dilapidated buildings, making them both habitable and energy efficient.
Among the factors driving this trend are:
- Urban pressure on central areas, limiting space for new construction;
- Income potential from tourist or long-term rentals;
- Significant price gap between new properties and buildings requiring rehabilitation;
- Public support such as the FNRE and IHRU programmes under favourable conditions;
- Greater awareness of heritage preservation and sustainable rehabilitation.
Support programmes provide simplified access to subsidies for renovation works and credit lines dedicated to urban rehabilitation. This context places investors in a strategic position, especially if they direct their efforts toward Urban Rehabilitation Areas (ARU).
It's important to note that interventions carried out on properties located in ARU may benefit from reduced VAT rates on construction works, exemptions from IMI (Municipal Property Tax) and IMT (Property Transfer Tax), as well as deductions on personal income tax (IRS) relating to rehabilitation expenses. These conditions rarely exist in other real estate transactions.
In addition to the exemptions, property owners can benefit from a reduced VAT rate of 6% on renovation works. This incentive applies when properties are located in ARU zones, making renovation more affordable. IRS deductions, which allow up to 30% of renovation costs to be deducted, up to a defined limit, provide an additional advantage.
Public programmes such as the FNRE and IFRRU 2020 also offer important financing mechanisms, facilitating access to the capital needed for projects that would otherwise be financially unfeasible. These funds are directed toward the recovery of properties with heritage value or located in areas with specific rehabilitation needs.
With these opportunities, the rehabilitation of older properties emerges as a viable solution to revitalise and significantly enhance their long-term value.
Avoiding Surprises: How to Manage Costs and Legal Requirements in Urban Rehabilitation
Starting the renovation of old houses in Portugal without a thorough technical assessment can lead to unforeseen costs and legal obstacles. Legal security must be at the heart of any project, and it's essential to combine financial planning with technical and legal support.
First, it's essential to evaluate the building's structure with qualified engineers or experts. Only through a rigorous survey is it possible to identify construction pathologies, such as cracks, infiltrations, or deficiencies in electrical and plumbing systems. This step allows for accurate estimate of property renovation costs.
Next, it's crucial to address licensing requirements for works on old buildings. Interventions on listed buildings or in Urban Rehabilitation Areas (ARU) require submission of a technical project to the municipal authorities. Non-compliance with these requirements may result in fines or the suspension of work.
Working with specialised professionals is also crucial to accessing tax benefits for construction projects in Portugal. Without a legally compliant project, it will not be possible to benefit from exemptions on IMI (Municipal Property Tax) and IMT (Property Transfer Tax), personal income tax (IRS) deductions for rehabilitation works, or the reduced VAT rate applicable.
Those seeking safe rehabilitation must combine financial planning with technical and legal advice, ensuring compliance with urban rehabilitation legislation in Portugal and avoiding delays and disputes.
Beyond Legal supports owners and investors in the legal strategy of rehabilitation projects for old houses in Portugal, ensuring compliance with subsidy programmes, rehabilitation credit lines, and benefits associated with heritage preservation. This approach safeguards the interests of those investing in historic properties in Portugal with a long-term vision.
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