The existence of a "serious housing crisis" is acknowledged in the State Budget Proposal for 2026 (OE2026), with the Government pointing to a solution as a curb on "rising prices, which primarily involves a decisive increase in housing supply."

Several measures related to the real estate and residential sectors are included in the document, presented by the Minister of State and Finance, Joaquim Miranda Sarmento, at the Ministry of Finance. It has already been delivered to Parliament.

The State Budget 2026 proposal, it is worth noting, will be discussed and voted on in general terms between October 27 and 28. The final global vote is scheduled for November 27th, following the debate on the specifics.

Housing crisis

Luís Montenegro's government has committed, for example, to providing 59,000 homes over the next six years, with 33,000 new apartments to be built with financing from the Recovery and Resilience Plan (RRP). Furthermore, following a recently signed agreement with the European Investment Bank (EIB), 12,000 new homes are planned to be built, which will be part of the Rental Support Program.

Regarding affordable housing, an investment of €930 million is planned for 2026 in public promotion and rehabilitation programs designed to house 22,000 people.

On the tax front, the Executive has already announced a reduction to 6% of the VAT rate on the construction of houses for sale or rent at "moderate" prices (€2,300 per month for rent and €648,000 for construction for rent).

In the rental market, the IRS deduction for "moderate" rents is expected to increase to €900, as well as a reduction in the IRS rate from 25% to 10% on rental contracts for homes worth up to €2,300 per month.

The end of the IRS capital gains tax on the sale of homes, when the proceeds are reinvested in properties for rent at "moderate" prices, and the temporary exemption from the Municipal Property Transfer Tax (IMT) and Municipal Property Tax (IMI) for the same type of properties were also announced.

State assets

The Government wants to transfer ownership of all privately owned rural properties from the State to municipalities, "without requiring any compensation," in an effort to mitigate the risk of fires. According to the document, "the State owns approximately 43,000 rural properties," and in addition to these, another 65,000 are registered in the State's favour, "because they have no known owner."

Regarding the management of the State's real estate assets, which has a total budget of 852 million euros for 2026, the Government states that "ownership of all rural properties integrated into the State's private domain and registered in the State's name in the land registry will be transferred to the respective municipalities, without requiring any compensation, to promote the reuse of the respective properties, mitigate fire risk, and manage proximity and cohesion."

Rural properties

Regarding the rural property registry and the land use and monitoring system, as part of the structural investments in agriculture and forestry, the Government estimates an investment of one million euros in 2026, noting that there were 17 million euros in 2024 and 60 million this year.

"The priority will be to register, update, and consolidate the inventory of the State's assets, as well as to monetize and increase the value of the sole asset of Consest - Promoção Imobiliária, S.A.," reads the 2026 State Budget proposal report.

Municipal Master Plans

To promote the "integrated and sustainable vision of the territory," which is estimated at 75 million euros by 2026, there is a prospect of approval of regional land use programs, as well as the review of Municipal Master Plans (PDM).

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

The proposal also suggests the consolidation of an integrated cadastral system, "to guarantee effective knowledge of land ownership and land use," indicating that "the integration between the real estate registry and the land registry will simplify This will improve property registration, prevent conflicts, facilitate planning, and create more favourable conditions for investment and land appreciation.”

33.8% of the budget allocation

The Infrastructure and Housing Program, with a total of 116 projects, is the program the largest budget item in the 2026 State Budget proposal, with an allocation of €5,841.1 billion, equivalent to 33.8% of the total.

National funding for the program totals €4,961.9 billion, of which €1,028 million will come from tax revenues. European funding will amount to €879.2 million, of which €769.8 million will come from the RRP.

This program's highlights include projects related to concessions, construction, requalification, and maintenance of the railway and road network, managed by Infraestruturas de Portugal, S.A. (IP), and the Housing Access Support Program — 1st Right and Affordable Housing, managed by IHRU, I.P.

In the Central Administration's structural investments, the expenditures on Housing IHRU funds will reach nearly €1.2 billion next year. The largest portion, approximately €800 million, is earmarked for housing access support programs.

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

The Executive's priority is the construction of 59,000 public housing units, the establishment of public-private partnerships in vacant state-owned properties with housing potential, and the injection of real estate packages into the market for investors, notably through "concessions," starting with "properties released by the concentration of ministries and entities in Campus XXI."

In urban licensing, the Government is committed to simplifying, reducing bureaucracy, and streamlining processes. And for the rental market, it promises:

- Reviewing the urban rental system, guaranteeing owners the right to terminate contracts in the event of a Noncompliance;

- Change rental programs, particularly affordable rental programs, through the build-to-rent investment contract model to attract private investment;

- Rationalise all public rental assistance programs.

Tax exemptions

The 2026 State Budget proposal also includes a 2% update to the IMT tax brackets, increasing the tax-exempt value of a home for young people by approximately €6,500 to approximately €330,500. The next bracket, still covered by the IMT Jovem (Youth IMT), which is subject to an 8% rate, increases from €648,022 to €660,982.

The IMT Jovem (Youth IMT), as a reminder, began to be implemented in August 2024, providing an exemption. The total amount of this tax, Stamp Duty, and registration fees for homes valued up to €316,000, which this year rose to €324,058.

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

Therefore, next year, a home valued at €600,000 will pay 0% IMT and Stamp Duty up to €330,539, and an 8% tax rate on the portion between that value and the purchase price.

For those who buy a home not covered by this measure (because they are over 35 or because they already own a residential property, or part of it), the 2026 State Budget also introduces changes, with an IMT exemption for the purchase of a home priced up to €106,346.