On the day the government is preparing to present a package of aid for families who own or want to rent their own homes, João Pereira dos Santos and Vera Gouveia Barros, two of the authors of the study “Real Estate Market in Portugal”, diagnose and suggest ways out of the housing problems in Portugal
More expensive rents and housing credit harder to get. Experts say that the housing problem in Portugal has existed for more than ten years, since the 2008 crisis, but the inflation that arrived in 2022, and lasts into 2023, poses new challenges. It is in this sense that the Government is meeting this Thursday in a Council of Ministers dedicated exclusively to the topic, and at the end of which concrete measures to help families should be presented.
Measures without studies
Most of the problems are identified: there is little construction, wages are low, or the latest inflation. But those in the know say that studies are lacking to know the true extent of the problem and what can be done to reach a solution.
João Pereira dos Santos, who was one of the authors of the study “The Real Estate Market in Portugal“, says that “many of the diagnoses have not been made”, even giving some examples, such as the number of vacant houses, which has remained more or less constant, but which are not on the market, and nobody seems to have an explanation for this.
“Everybody talks about the number of vacant houses, but nobody really knows why these houses are vacant, why they are not on the short or long term rental market,” says the professor from Nova Business School of Economics.
Many of the studies are commissioned by the government itself, but for Vera Gouveia Barros there’s an essential party that’s still not being heard: economists. Also author of the study “The Real Estate Market in Portugal”, the specialist argues that it is essential to listen to these professionals in addition to architects, engineers and sociologists, since they are the ones “in a position to answer” several of the questions raised by the housing problem, namely how the market works.
Vera Gouveia Barros states that “economists have been left out of the debate”, not being present in the various consultations made by the Executive. “There’s a problem here, because when I want to intervene in the market, whether it’s to make legislation, or to understand how the market works, I need someone from Economics,” she adds, pointing out that a simple relationship between supply and demand is not enough to understand the dimension of the issue.
“Buying a house in Lapa is not the same thing as buying an apartment in Alto dos Moinhos,” he points out, remembering that there are different segments. The prices are different, so the public is also different.
Houses there are, but for whom?
In a brief stroll through some of Lisbon’s parishes we find several buildings under construction. Just within a radius of a few kilometers, between Campo Pequeno and Campolide, there are at least four blocks of apartments under construction. At the door they indicate the typologies and offer pictures with beautiful swimming pools or private condominiums. But who are these houses for?
One of the problems already identified is the lack of housing construction, which also affects the available ones. 2022 was, since 2007, the year in which fewer houses were on the market for buying and selling, but that’s not all. The 2008 crisis led to a sharp drop in construction. That year, according to Pordata, 59,256 family homes were built in Portugal. That number in 2021, when it even dropped to 10-year highs, did not exceed 20,000. Only one third of the houses built 13 years earlier.
Vera Gouveia Barros notes that the problem is not new. “As far back as 1947, the Diário de Notícias was already covering the housing issue with a headline that read ‘Cheap houses are what Lisbon lacks'”. The specialist notes that the situation is totally different – we have almost eradicated the shantytowns – but there is a lack of houses. In fact, only 3.1% of the buildings existing in 2021 were built in the decade between 2011 and 2021, according to the latest Census, because at the moment it doesn’t pay for those who make this area a business.
“To the private sector, at least now, it doesn’t matter to be building this type of [affordable rental] housing,” says the expert, stressing that “it is the government that has the obligation to improve housing conditions.”
| Year |
Completed homes in new construction for family housing |
| 2000 | 112.612 |
| 2001 | 115.154 |
| 2002 | 125.708 |
| 2003 | 92.508 |
| 2004 | 74.261 |
| 2005 | 76.123 |
| 2006 | 68.764 |
| 2007 | 67.463 |
| 2008 | 59.256 |
| 2009 | 47.915 |
| 2010 | 35.442 |
| 2011 | 26.362 |
| 2012 | 19.671 |
| 2013 | 12.713 |
| 2014 | 8.297 |
| 2015 | 7.126 |
| 2016 | 7.867 |
| 2017 | 8.156 |
| 2018 | 10.627 |
| 2019 | 12.591 |
| 2020 | 16.914 |
| 2021 | 19.081 |
Source: Pordata
Construction has declined, and what exists is unknown. This is what João Pereira dos Santos says, noting the lack of studies on the typology and destination of new construction. “It’s quite different if the only construction being done is destined for a luxury market or if this little construction is destined for urban rehabilitation,” he notes, arguing that it’s necessary to know the median prices to better understand what measures the Government can take.
The economist agrees that “all the resources in construction are increasingly focused on the luxury market”, rather than on affordable rent. Lack of investment in public housing on the one hand, with blame for the government and the councils, and lack of interest from private companies, who don’t see enough profitability in being able to build cheap houses, not least because land and materials are increasingly expensive, so a price hike is justified to make a profit on the investment made.
“This contributes to the price of the entire market being inflated. We build too little, and the banking system hasn’t helped either. We have the lowest construction rates of the last century,” he adds, seeing this as a sign “particularly important in the big cities.”
What the Government can (and will) do
It will be one of the measures up the sleeve of the government, which recently created the Ministry of Housing. Created in the time of Pedro Passos Coelho, gold visas are often seen as one of the causes for the increase in housing prices. João Pereira dos Santos recalls that 10 thousand visas of this kind were granted in 10 years. A number that seems low and even only represents 1% or 2% of the market each year.
But there is a catch: “If we look at the new construction market, it had a big impact, which contributed to the fact that the resources were focused on the construction of luxury houses, and not on the affordable income segment”, says João Pereira dos Santos
This, together with tourism, leads to a large increase in demand from both regular and non-regular residents. Demand that construction “has not kept up for various reasons,” including lack of investment.
“In big cities the land exists, it’s private, and they want to direct it to the luxury market. Here it would make part of it to be the government intervening,” says the economist.
But how? João Pereira dos Santos and Vera Gouveia Barros point out that it is essential to give tax incentives to homeowners. The professor at the Instituto Superior de Economia e Gestão points out a measure that could work to free up houses: a reduction in the Municipal Property Transfer Tax (IMT). This is, according to the specialist, a possible step to solve another problem: the under-occupancy of houses.
The various analyses made by Vera Gouveia Barros note a pattern: there are often enough houses, but the spaces are under-occupied. That is to say that one or two people can live in a 4 or 5 bedrooms when, in reality, they don’t need all those rooms. The suggestion is to benefit the IMT of people who sell these properties to move to others more suitable to the typology.
For the specialist, these benefits should also reach the urban rehabilitation, which should be one of the Government’s bets, with the creation of tax incentives for the rental of houses that were previously vacant. Incentives that should also reach the rental market of houses hitherto destined for local accommodation, in addition to stimulus for construction of new housing, particularly with a view to increasing the public supply of affordable rent. At this point, land and buildings for housing should be increased. On the table are also other direct supports to the most affected families, namely those whose effort rate has increased to alarming levels following the rise in interest rates on mortgages or those looking for affordable rent.
Vera Gouveia Barros sees a subsidy as a good idea, but warns about the ways in which it can be granted, arguing that a mechanism should be created to protect tenants. “Let’s imagine that the potential tenants were willing to pay a rent of 500 euros. If they now have a subsidy of 200 euros they will be willing to pay 700 euros, so the landlord has negotiating power”, he notes, noting that “a measure designed to ease the burden on tenants would be subsidizing landlords”.
Whatever they are, for Vera Gouveia Barros the measures should bring, especially in the case of leases, a feeling of trust between the different parties: “If I’m constantly making legislative changes I’m introducing insecurity, which comes at a high price.
The millions from the RRP (which are less than at the beginning)
The Recovery and Resilience Plan provides more than a billion for housing investment, much of it earmarked for the Housing Access Support Program. An amount agreed upon even before the rise in inflation and the war in Ukraine, and which may mean much less aid today than a few months ago.
João Pereira dos Santos sees the program as an important incentive, but points out that building materials currently cost much more than before the war. According to the National Institute of Statistics, building a new house cost 6.8% more in December 2022 than in 2021, a number that was even below values registered in other months (it was up to 18.6% more expensive). Now, this has a clear consequence: “From the time they were calculated until the time they will be executed, the price of materials has increased considerably, and this has effects on the number of houses that can be built,” says the economist, who has “many doubts that some municipalities have the capacity to execute everything that is planned.
Even so, and even admitting an ideal scenario in which the whole amount is executed at the levels initially thought, the specialist defends that it’s still not enough, pointing out the examples of other countries like Denmark or the Netherlands, which have a strong presence of public housing, according to the 2021 study by Housing Europe, of the European Union. In this table Portugal is one of the countries with the worst results, with only 2% of public housing.
| Austria | 24% |
| Germany | 3% |
| Belgium | 5,4% |
| Denmark | 21% |
| Czech | 9,4% |
| France | 16% |
| Finland | 11% |
| Greece | no social rent |
| Ireland | 9% |
| Italy | 3,8% |
| Luxembourg | 1% |
| Netherlands | 29,1% |
| Portugal | 2% |
| Slovenia | 6% |
| Spain | 1,1% |
| Sweden | 17% |
Source: Housing Europe
“Our public housing market is extremely low, it’s around 2%. The goal is to increase it to 5%, more than double, and even then, 5% is well below the average of the European Union countries,” he adds.