• Real Estate Regulations: Portugal Bans Touristic Apartments

    October, 2023

In recent years, investment in the real estate sector in Portugal has grown exponentially, making Lisbon one of the main European cities for real estate investments, largely due to the increase in the supply of touristic apartments.

However, with the high inflation prompted by the war in Ukraine, housing prices and speculation in Portugal have increased dramatically, to the point that in 2022, Lisbon became one of the most expensive European cities to live in.

Lack of affordable housing and low wages make it impossible to keep up with the constantly risen prises in Portugal. Recent studies show that the average selling price in Lisbon in 2022 was higher than in Milan, Madrid or Barcelona, while the average rent price was higher than in the Spanish capital and only slightly lower than in Milan.

The rehabilitation of historic centres of Lisbon and Porto, which have been deteriorating for decades, was one of the positive contributions of the development of new tourist rental platforms, but also led to the displacement of local residents and urban gentrification.

Recently, the number of properties dedicated to touristic apartments has been increasing. In 2022 they accounted for total of 1.8%, approximately 109,000 dwellings, of the total property stock in the country, a figure higher than the 1.2% they represent in Spain. This Law has been aimed to curb this trend with the purpose of increasing the supply of rental housing.

In the programme adopted last July, it stated that the government will stop granting licences except for rural accommodation in inland municipalities where there is no ‘urban pressure’. Those successfully granted will be reviewed in 2030 and reevaluated every five years.

Dwellings used as touristic apartments must follow these conditions:

  • Apartment owners must pay an extraordinary tax of 15%, originally set by the Portuguese government at 35%, but finally reduced to 15%.
  • This regulation is also aimed at the wellbeing of neighbours. If more than two- thirds of neighbours agree that the touristic unit is a nuisance to the community, the touristic apartment licence can be revoked.

Another measure promoted by the government to increase the housing supply has been to change the use of land and buildings intended for other activities. In addition, the government will grant land to various private sector companies for the construction and operation of touristic apartments.

The government aims to increase the supply of rental housing to give owners more confidence to rent out their properties. The government’s plan is to encourage landlords to rent out the approximately 730,000 vacant homes and, in turn, build 26,000 units of public housing by 2026.