Limits will be applied for certain rental contracts

The initial value of rent for new rental contracts, for houses which have been on the market for the last five years, will not be able to exceed the value of the last rent in the previous contract.

The effect of inflation will be taken into account

It should be mentioned however, that the effect of inflation has been taken into account and an increase of 2% may be applied to new rental contracts, in line with inflation.

For rental contracts that have not been updated in the last five years, the automatic update coefficients of the three previous years may be added. In 2023 this value was 5.43%.

A “necessary” move for Portugal

Earlier this year, António Costa stated that it´s recognised that this move is "a restrictive measure of the evolution of the rent", but it is however considered "reasonable" and "necessary", to stop Portugal creating a system that makes it impossible its residents to afford rent seeing that “the market already has a level of rent much above the families' incomes".

No limit for properties entering rental market

This measure only applies to contracts that have been rented for the last five years and there is currently no limit in place for leases of properties entering the residential rental market.

The measure was given the green light on Thursday 6 July with favourable votes from the Socialist Party (PS), the abstentions of the Left Bloc (BE) and the Portuguese Communist Party (PCP) and the votes against by Social Democratic Party (PSD), Chega (CH) and the Liberal Initiative (IL).

If a rental property undergoes “deep refurbishment or restoration works duly certified by the City Council”, “the value relative to the corresponding expenses borne by the landlord, up to an annual limit of 15%”.

This means that the value of rental contracts for properties that have undergone necessary restoration or refurbishment may increase by 15%, to cover these costs and to ensure the new lease sits in line with the property´s market rental value.

Variety of measures approved

The limit on new rental contracts was one of a number of measures given the green light on Thursday. Other policies in the Mais Habitaçᾶo that were approved yesterday included a suspension of new local accommodation outside the interior of the country, an end to new golden visas through housing investment and an exemption from capital gains on houses sold to the state.