Portugal is introducing a new plan to help young people access housing. Under this plan, people up to 35 years old can use a state guarantee to secure a 100% mortgage for their first home. This measure aims to assist young buyers who struggle with low incomes and high property prices.
The government has also implemented other measures, such as exemptions from municipal property transfer taxes and stamp duties. However, the new mortgage guarantee law, published on July 10, still requires regulation, which is expected within 60 days. To qualify, young people must earn up to €5,800 gross per month and purchase a home worth no more than €450,000.
Challenges Facing the Plan
Despite the good intentions, the plan faces significant hurdles:
1. Low Incomes: Most young people in Portugal earn less than €1,000 a month, making it unlikely for banks to grant them loans.
2. High House Prices: The sharp rise in property prices further complicates the situation.
Supply and Demand Issues
According to João Pereira dos Santos, an economist at the Instituto Superior de Economia e Gestão, the guarantee might help some young buyers but won’t solve the broader issues. The supply of affordable housing is still insufficient to meet demand. Although the supply has increased by 27,248 homes in 2023, it is still below the levels seen in 2020 and 2021.
Need for Supply-Side Measures
Mário Centeno, the governor of the Bank of Portugal, emphasized the need for caution to avoid further market pressure. Pereira dos Santos suggested that more measures should focus on the supply side, such as improving municipal licensing processes and facilitating construction. He also highlighted the potential for rehabilitating areas to create more housing for young people, especially university students.
The details of the regulations for the new housing measure are expected by September 11. For now, the effectiveness of the plan remains uncertain, and additional steps may be needed to address the underlying issues in Portugal’s housing market.
