"Mais Habitação" Package and its Relationship with Foreign Investment

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A set of housing support measures may be approved in Portugal, the well-known and publicized "Mais Habitação" package (More Housing).

Although the insufficient and controversial nature of the measures presented is transversal, they are positive in several situations, not least because Portugal has been very successful in attracting foreign investment in the Real Estate market.

There is an essential factor in the Real Estate sector, which is trust and comfort, especially when we are referring to investment, whether national or international.

Among the planned measures are several tax changes aimed at promoting the housing rental market.

It is worth highlighting the search for an increase in the supply of residential properties and their availability on the rental market, the simplification of licensing processes and the recognition of the importance of the tax aspect in solving the housing problem in Portugal.

The national market for foreign investors has changed over the last year, with several national players focused on attracting and establishing partnerships with foreign investors. For the foreign investor who wants to invest in Portugal, but does not know the details of the country, legislation, jurisdiction, geography and other vicissitudes of the Real Estate business in Portugal, it will be extremely important to find a local partner, a promoter with a track record proven, to invest in joint ventures.

The measures presented in the "Mais Habitação" package, combined with the increase in interest rates and also the fact that the new generations are less "attached" in relation to own housing, could, in the medium term, leverage the BTR (Build to Rent), mainly on the outskirts of large urban centers. This opportunity to create a BTR market is extremely relevant for access to housing, commerce, offices and even examples such as student residences in Portugal.

Alfama view

Photo by Francois Le Nguyen in Unsplash

Attracting Real Estate investment is the best way to overcome some of the existing difficulties. We must not forget that a few years ago, when city centers were extremely degraded, it was through Real Estate investment (much of it international) that it was possible to rehabilitate and renew them.

The art of politics is to signal and create incentives to attract investment, fill market gaps, which is why the Real Estate sector has been asking for a reduction in VAT on construction for some time and finally the Government relented. The Ministers of Infrastructure and Housing ended up lowering VAT from 23% to 6% when it comes to building affordable properties.

The construction of properties for affordable rent thus starts to benefit from the same regime foreseen for housing with controlled costs. In other words, when building houses for affordable rents, the private developer can benefit from 6% VAT, provided that certain conditions are met.

The first condition establishes that the properties must be rented in the first year after construction and the second condition is that the properties remain under the affordable income regime for 25 years from the date of completion of the works. If, during this period, properties are placed on the “traditional” market, that is, outside affordable rents, you will have to return to the State the difference between the 6% and the normal VAT rate (23%).

With the end of important factors, such as Golden Visas, for example, doubts arose about attracting investments to the country. However, the big cities seem to remain and are assumed to be a strong economic attraction, as the market niche continues to be greater than the offer.

The most important thing, and which we highlighted from the beginning, is the existence of a shared vision for the development of territories, with a strong component of rehabilitation and sustainability of projects for all — citizens, investors, public and private entities.

Portugal continues to be an excellent investment option. The resilience of Portugal, in particular, is an excellent example and an increasingly important and differentiating variable from the current situation of other countries in the world for those who want to invest.