Portugal’s 2026 Housing Reforms: New Taxes, Incentives, and Policies to Know
Real Estate Law

Portugal’s 2026 Housing Reforms: New Taxes, Incentives, and Policies to Know

Jan 05, 2026 10 min read

Portugal’s 2026 Housing Reforms: New Taxes, Incentives, and Policies to Know

Context: A Housing Market at a Crossroads

Portugal is tackling a severe housing affordability crisis with a sweeping package of reforms effective in 2026. In late 2025, the government approved measures under the “Construir Portugal” (Building Portugal) strategy aimed at boosting affordable housing supply and curbing speculative pressures[1][2]. These changes span tax cuts for affordable rentals, higher taxes for foreign buyers, streamlined construction rules, and enhanced support for tenants and first-time buyers. Below is an overview of the most impactful updates – and what they mean for local residents, expats, and property investors, with sources to verify the facts.

Are you thinking about buying or selling your home?
Contact us today to find out how we can help.

Sell your property Buy a property

Tax Cuts & Incentives for Affordable Housing

To encourage more mid-priced rentals and homes, Portugal is introducing significant tax incentives for 2026:

  • Reduced Landlord Income Tax: Rental income on long-term leases with “moderate” rents (up to €2,300/month) will be taxed at just 10% (down from 25%)[3]. This sharp tax cut rewards landlords who keep rents affordable, boosting their net yield and incentivizing more properties to enter the long-term rental market[4].
  • VAT Slashed for Housing Construction: Developers building new homes for sale under €648,000 (or rentals with ≤€2,300 rent) will benefit from a 6% VAT rate on construction costs (formerly 23%)[5]. This rebate, in effect until 2029, substantially lowers development costs for mid-market housing, aiming to increase the supply of reasonably-priced homes[6][7].
  • Capital Gains Tax Relief: Homeowners who sell a property and reinvest the proceeds into affordable rental housing will now pay no capital gains tax on the sale[8]. Previously, reinvestment exemptions applied only to primary residences; expanding it to moderate-rent investments should motivate investors to fund more rental units[9].
  • Property Tax (AIMI) Exemption: Properties leased at up to €2,300/month are now exempt from AIMI (Additional Municipal Property Tax)[10]. This yearly surcharge waiver further incentivizes owners to offer rentals within the “moderate” rent range, reducing holding costs for those landlords[3].

(These measures are expected to be enacted by early 2026, though full market impact may unfold gradually. Industry experts estimate meaningful effects on housing supply by 2027, given construction and investment lead times[11].)

Higher Taxes & Rules for Foreign Buyers and Investors

In a bid to temper overseas speculative demand and refocus investment into productive sectors, Portugal is tightening rules for foreign property buyers and revising popular expat incentives:

  • Increased Transfer Tax (IMT) for Non-Residents: Property transfer tax (IMT) will be higher for buyers who are not Portuguese residents[12]. While exact rates are pending final legislation, officials signaled an increase from the standard 6.5% up towards ~9% IMT for non-resident purchasers[13]. (Portuguese emigrants abroad are exempt from this surcharge[14].) This hike raises the upfront cost for foreign investors and is intended to ease competition for locals by cooling some demand[15].
  • Golden Visa Real Estate Route Eliminated: Portugal’s famed “Golden Visa” residency-by-investment program no longer accepts real estate purchases as a qualifying investment. This change took effect under the “Mais Habitação” law of Oct 2023, which ended the property-based Golden Visa route[16]. The policy shift responded to concerns that foreign Golden Visa buyers were inflating housing prices in cities like Lisbon and Porto[17][18]. (Alternative Golden Visa pathways – e.g. investment funds, business or cultural investments – remain possible, but new applications overall were suspended in 2023–2024 amid a broader program re-evaluation.)
  • Non-Habitual Resident (NHR) Tax Regime Closed: Another draw for foreign retirees and remote workers was Portugal’s NHR tax regime, which offered flat low tax rates and exemptions for 10 years. As of 2024, the government has discontinued the NHR scheme for new applicants[19]. This move, parallel to housing reforms, aims to level the playing field as officials balance attracting talent with avoiding excessive pressure on the housing market. Existing NHR beneficiaries keep their status, but no new NHR tax breaks will be granted[19].

(For international investors, these changes signal Portugal’s pivot toward sustainable investment. The real estate market remains robust – prices were still up ~16% year-on-year by early 2025 despite the Golden Visa changes[16] – but foreign buyers should budget for higher taxes and fewer residency tax perks moving forward.)

Want to understand how these rules affect your purchase, sale, or investment strategy?
Reach out and we’ll walk through it with you.

Sell your property Buy a property

Tenant Relief & First-Time Buyer Support

Affordability for residents, especially young locals, is a central focus. Several measures directly assist tenants and first-time homebuyers:

  • Higher Rent Tax Deductions: Tenants can now deduct more of their rent in annual income taxes. The housing rent deduction cap rises to €900 in 2026 (and €1,000 in 2027)[20] – up from the previous €502 limit. This significantly boosts tax relief for renters paying moderate rents (≤€2,300/month), directly easing the cost of renting for thousands of households[21].
  • State-Backed Mortgage Guarantees for Youth: The government expanded its credit guarantee program for young first-time buyers under 35, adding €350 million to reach a total €1.55 billion backing pool[22]. Through this program, the state will guarantee up to 15% of a mortgage – enabling some buyers to finance up to 100% of a home purchase (on properties valued up to €450,000)[22]. This is aimed at helping young professionals with good incomes but little savings to finally buy homes, addressing the hurdle of large down payments.
  • Facilitating New Housing Supply: Though not a direct subsidy, the reduced 6% VAT on construction (mentioned above) should also trickle down to benefit buyers by encouraging more mid-priced housing development[23]. Likewise, efforts to ease licensing bottlenecks (see next section) could increase the supply of new homes over time, which is crucial for affordability in the long run.

Streamlined Construction & Rental Regulations

Recognizing that bureaucracy and legal constraints also worsened the housing crunch, authorities are implementing regulatory changes to speed up construction and make the rental market more functional:

  • Faster Building Licenses: A legislative overhaul of the urban planning and construction licensing process is underway[24][25]. The goal is to cut red tape and shorten approval times for new housing projects. By simplifying and digitizing procedures (including adopting Building Information Modelling standards), Portugal aims to reduce development timelines and costs. This should help new projects – especially affordable housing – come to market quicker than the historically slow permitting allowed[26][27].
  • Rent Cap Adjustment: The government lifted the 2% annual rent increase cap on new rental contracts[28]. While existing leases remain indexed to inflation, landlords signing new leases are no longer bound by the temporary 2% rent freeze (which was a pandemic-era measure extended into 2023–2024). This gives property owners more flexibility to set initial rents at market rates, though it’s controversial – intended to encourage owners to rent out vacant units, but tenant advocates worry it could lead to rent hikes[29].
  • Quicker Evictions for Non-Payment: Landlords will get relief through streamlined eviction procedures for tenants who default on rent[30]. Recent legal reforms (Law No. 67/2025) strengthen owners’ rights by treating illegal occupation as a crime and enabling faster court-ordered evictions when there’s clear evidence of unlawful squatting or non-payment[31][32]. Courts can now order “immediate restitution” of a property to the owner during the early stages of a case, drastically shortening the timeline that an apartment can be occupied without payment[31]. These changes, effective from Nov 2025, have been welcomed by property owners as a way to improve rental market confidence – though care is taken to assess social cases in public housing before eviction[33][34].
  • Support for Construction Workers: An innovative aspect addresses the labor side of housing. The government has pledged to provide temporary housing solutions for construction workers[35], many of whom are migrants or working far from home. By ensuring workers have decent accommodations, Portugal hopes to attract and retain the construction workforce needed to build new housing at scale. (Notably, by October 2025 over 1,000 “digital nomad” visas had also been issued to construction sector workers[36] as part of this effort to boost building capacity.)

Why This Matters – And What’s Next

For anyone involved in Portuguese real estate – whether you’re a local family, an expat renter, or a foreign investor – these measures mark a major policy shift. The government is balancing incentives and restrictions: lowering taxes on affordable homes, raising costs on foreign buyers, and tightening rules to protect housing for residents. The reforms are a response to surging prices (over +16% year-on-year in early 2025[16]) that have put homeownership and even renting out of reach for many Portuguese. By boosting supply and curbing speculative demand, officials aim to gradually stabilize prices and rents[37][17].

It’s important to note that some measures are still rolling out – final details (like the exact IMT tax hike for non-residents) will be confirmed in legislation and the 2026 State Budget[38]. Nonetheless, the direction is set. Property owners should stay informed and possibly consult a tax advisor on how the new rules affect them (for example, to take advantage of the 10% rental tax rate or plan around the IMT changes). Renters and prospective buyers, on the other hand, may see new opportunities as more rentals hit the market and mortgage access improves for young buyers.

Overall, Portugal’s 2025–2026 housing reforms represent one of the most ambitious housing policy shifts in recent decades. The coming year will be a test of whether these combined actions can ease the housing crunch. If you’re interested in Portuguese real estate, keep an eye on these developments – they could shape the market’s trajectory heading into 2026 and beyond. 🏠 (Sources linked below for verification.)

If you want a tailored plan based on your situation, get in touch.

Sell your property Buy a property

Sources

Sources: Portuguese Government Press Release[39][40]; Portugal.com news report[41][42]; DWF Insights[7][9]; B&P Property analysis[13]; LVP Advogados briefing[32][31]; Connaught Law report on Golden Visa[16][18]; GetGoldenVisa news[19].

[1] [6] [7] [9] [11] [23] [24] [26] [27] Construction Insights | Portugal | DWF Group
https://dwfgroup.com/en/news-and-insights/insights/2026/1/construction-insights-portugal

[2] [4] [8] [10] [14] [21] [22] [25] [28] [29] [30] [35] [37] [41] [42] Portugal Just Approved a New Set of Housing Measures. Here Is What You Need to Know - Portugal.com
https://www.portugal.com/news/portugal-just-approved-a-new-set-of-housing-measures-here-is-what-you-need-to-know/

[3] [5] [12] [20] [39] [40] Council of Ministers approves housing measures - XXV Constitutional Government
https://www.portugal.gov.pt/en/gc25/communication/news-item?i=council-of-ministers-approves-housing-measures

[13] [15] Are You Ready for the 2026 Property & Tax Changes in Portugal?
https://www.bpaproperty.com/en/blog/portugal-property-tax-changes-2026/

[16] [17] [18] Portugal Golden Visa Real Estate Eliminated 2025 | Top Guide
https://connaughtlaw.com/portugal-golden-visa-real-estate-eliminated/

[19] Portugal Golden Visa 2026: New Rules & Updates for Residency | Get Golden Visa
https://getgoldenvisa.com/portugal-golden-visa-program

[31] [32] [33] [34] Stronger Penalties and Faster Evictions: Portugal’s New Law
https://www.lvpadvogados.com/a-new-legal-era-for-property-owners-law-n-67-2025-strengthens-penalties-for-illegal-occupations-and-enables-immediate-eviction

[36] Housing 'shake-up': Government announces measures to galvanise ...
https://www.portugalresident.com/housing-shake-up-government-announces-measures-to-galvanise-construction-sector/

[38] Real Estate Taxes | 2026 State Budget | PwC Portugal
https://www.pwc.pt/en/pwcinforfisco/statebudget/property-taxes.html