Home Buying for Young People Became Easier in 2024

compra da primeira habitação

Buying a first home can be a big challenge for young Portuguese people, especially with high housing costs and the difficulty of saving enough for the down payment. But in 2024, there is good news for young people who want to buy their first home!

With the enactment of Decree-Laws No. 48-A/2024 and No. 48-D/2024, the Government has introduced new measures to facilitate home buying for young people, with tax exemptions that can represent significant savings. Let’s explore how these measures work and who can benefit.

Why is it difficult for young people to buy a house?

It is well known that young people face difficulties when trying to buy their first home. These difficulties are often associated with:

  • Low wages at the beginning of their careers;
  • Job insecurity;
  • Lack of savings for the down payment on a house.

This scenario has led many young people to emigrate, contributing to low demographics as well. The demand for housing has not been matched by the availability of enough housing units, which, combined with rising inflation rates and increasing construction costs, has contributed to high housing costs.

However, the right to housing is a constitutionally guaranteed right, with Article 65(1) of the Constitution stating that “Everyone has the right to housing for themselves and their family, with adequate space, hygiene, and comfort, while preserving personal privacy and family intimacy.

What changed with Decree-Laws No. 48-A/2024 and No. 48-D/2024 to facilitate first-time home purchases?

The obstacles to accessing the housing market are not exclusive to young people, but they are the ones starting their life projects and forming families. That’s why the newly created regime of exemption from Property Transfer Tax (IMT) and Stamp Duty is specifically aimed at this group, approved by Decree-Law No. 48-A/2024 on July 25th.

First, the exemption applies starting from 1/08/2024, and all acquisitions completed before that date are excluded.

Second, the exemption of these two taxes is granted to young people who are 35 years old or younger at the time of acquisition and who are not considered dependents for the purposes of Article 13 of the IRS Code in that year. Note that the exemption expires if the individual becomes a dependent again within six years of the purchase or if the property is used for purposes other than those for which the benefit was granted.

Nationality is irrelevant as the regime applies to anyone meeting the legal requirements for the exemption, regardless of nationality. The exemption only covers purchase values up to €316,772.00, but if the property price exceeds this amount, the exemption applies up to that amount, with the rest subject to the percentage rates provided in the new paragraph b) of Article 17(1) of the IMT Code.

Additional requirements for first-time home purchases

In any case, young people must not own another permanent residence (since the new regime only applies to the first purchase of a property intended for permanent residence), nor may they hold ownership or a partial right (such as usufruct or surface rights) over an urban residential property at the time of the transaction or in the previous three years. Thus, a young person who owns a property or part of it inherited is no longer eligible for the exemption unless the property is sold, and only after three years have passed since the sale.

Joint purchase by spouses

In cases where the property is purchased jointly by spouses, so that it becomes common property, the legal conditions for the exemption are individually verified: if one of them does not meet the conditions for the exemption, such as being over 35 years old or already owning another residential property, that spouse remains liable for IMT and Stamp Duty, and the two taxes must be paid for that spouse. In other words, the exemption in these cases applies only to the part that the other will acquire (50%).

Exemption from registration fees for first-time home purchases

Also important, as it represents cost savings, is the introduction of the exemption from the payment of registration fees for the first acquisition of a permanent residence (where the value does not exceed €316,772.00) and for the registration of a mortgage to secure the loan for that purchase, a saving that can amount to up to €450.

The exemption from registration fees, introduced by Decree-Law No. 48-D/2024 of July 31st, applies from 01/08/2024 and will be reviewed by the Government in the first quarter of 2027.

State guarantee for mortgage loans

Finally, the newly created regime for a personal guarantee provided by the State to credit institutions, aimed at facilitating access to home loans for young people, also deserves attention. The legislator acknowledges that rising home prices in recent years “has made it difficult for young people, even those in the labor market, to have enough capital to cover the remaining price of the property not financed by the credit institution.

According to Decree-Law No. 44/2024 of July 10th, the terms in which the State can provide a personal guarantee for the first purchase of a permanent home for young people up to 35 years old are outlined, but with some restrictions:

  1. First, beneficiaries must have an income up to the 8th IRS bracket.
  2. The borrower must not be the owner of any urban property or autonomous fraction of an urban residential property.
  3. Beneficiaries cannot have used the State guarantee more than once.
  4. Finally, the guarantee only applies to transactions where the value does not exceed €450,000.00, and the guarantee cannot exceed 15% of the transaction value. The remaining 85% must always come from the young buyer’s own capital and the bank financing they obtain.

As stated in the preamble of this law, the Government aimed to “encourage access to housing and create conditions for young people to stay and develop their skills in Portugal.

However, this measure still needs to be regulated jointly by the Ministries of Finance, Housing, and Youth before its application begins.

If you have any questions or need help with buying a first home in 2024, feel free to contact our real estate team. We are here to ensure you take full advantage of all available opportunities and exemptions!

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