Portugal Introduces 100% Mortgages for Young Homebuyers

New Mortgage Initiative for Young People in Portugal

In an effort to assist young individuals in navigating the challenging property market, the Portuguese government is set to introduce a groundbreaking measure enabling citizens aged 35 and under to access 100% mortgages for their first home purchase, backed by a state guarantee. This initiative aims to complement existing government programs, including exemptions from municipal property transfer taxes and stamp duties, thereby easing the financial burden on youth striving to secure their own residences.

The legal framework for this initiative was established on July 10, but its effective implementation hinges on forthcoming regulations, which are expected to be published within the next 60 days. To qualify, applicants must have a gross monthly income not exceeding €5,800 and are restricted to purchasing homes valued at no more than €450,000.

However, this promising plan is already encountering significant hurdles. The majority of young people in Portugal face low income levels, compounded by a substantial increase in property prices. João Pereira dos Santos, an economist and assistant professor at the Instituto Superior de Economia e Gestão, shared insights with Euronews, stating, “While this guarantee may alleviate some barriers for young individuals seeking homes priced up to €450,000, it is not a comprehensive solution to the broader challenges that the younger generation faces in accessing housing.”

Challenges of Supply and Demand

Statistics reveal that two out of three young individuals earn less than €1,000 a month, leading to skepticism among banks regarding the viability of granting loans to this demographic. Additionally, there is a concerning scarcity of affordable housing options available to those with such low incomes.

João Braz, the head of real estate analysis firm idealista/data Portugal, noted, “Since late 2022 and into early 2023, we have witnessed a gradual increase in housing supply; however, it remains significantly below the levels we experienced in 2020 or 2021.” He further emphasized that although supply is on the rise, it still falls short of meeting the current market demand.

Mário Centeno, the governor of the Bank of Portugal, underscored the importance of exercising caution when implementing these measures to prevent exerting further pressure on the market until supply can appropriately adjust.

Despite these challenges, recent data from the National Statistics Institute highlights a positive trend, revealing an increase of 27,248 homes in the Portuguese market in 2023, which translates to a 9.2% rise compared to the previous year. Pereira dos Santos advocates for additional supply-side measures, suggesting, “It would be beneficial to explore initiatives that could streamline municipal licensing processes.”

He further elaborated, “We currently lack detailed information regarding the duration of the council licensing process for individuals. Understanding the reasons behind these lengthy waiting lists could be crucial. Any efforts aimed at simplifying licensing and facilitating construction would be immensely valuable.”

Moreover, the economist recommends identifying areas suitable for rehabilitation into housing, specifically targeting young university students as potential residents.

As of now, the precise details surrounding the regulations necessary for the implementation of this measure remain unknown, but they are anticipated to be made public by September 11.