Rising rents and credit support: what changes for housing in 2024

The year 2024 begins with an unresolved housing shortage, the controversial Mais Habitação programme in force and legislative elections looming. The future of housing in Portugal remains uncertain, but there are several guidelines outlined in 2023 that will continue to affect the Portuguese wallet. From the increase in rents to support for housing loans, including the transitional period for the non-habitual resident (NHR) regime provided for in the 2024 State Budget (OE2024). There are several legacies left by António Costa´s Socialist government - which is currently in office - that will continue to affect housing in our country. Find out what they are in this guide prepared by idealista/news.

House rents can be increased by up to 6.94 per cent

In 2023, rent rises were limited to 2%. But in 2024 house rents will be able to be increased by up to 6.94%, in line with inflation. This is the highest rent increase since 1994.

For some tenants, however, the increase may be steeper as the law allows the landlord to add the value of the previous two years to this figure - if they have chosen not to update their rents in 2022 and 2022. In these cases, the 2 per cent allowed in 2023 and the 0.43 per cent for the previous year can be added to the 6.94 per cent. But it could also happen that there is no increase, since updating rents is not compulsory and the landlord can choose not to do so.

It should also be noted that the Socialist government - which resigned - reinforced support for tenants to cope with this potential rise in rents, by reinforcing extraordinary support (+4.94%), increasing the portion of rents deductible in the IRS to 600 euros and also reducing the withholding tax for holders of rental contracts for permanent housing (by 40 euros).

Extraordinary rent support rises by 4.94 per cent

To help families paying higher rents, the government has decided to reinforce the extraordinary support for rents of 200 euros. In practice, the Executive improves the extraordinary rent support by adding 4.94 per cent to the monthly rent, even if it exceeds the current maximum amount of support. As a result, tenants will only have to pay the remaining 2 per cent of the rent increase.

This measure covers families up to the 6th income bracket and an effort rate of 35% with rent costs, and the update is automatic. And anyone who is not receiving rent support, but whose effort rate exceeds 35 per cent with the 6.94 per cent update, will be allowed to benefit from the measure by request.

Income tax deduction increases to 600 euros

Another measure to mitigate the rise in rents in 2024 is the increase in the limit for the deduction of rents in the IRS from 502 euros to 600 euros, a figure that will be included in the accounts of the IRS that will be submitted in 2025. Displaced students will also have their tax support reinforced, with the deduction for rent being raised from 300 to 400 euros.

New rental contracts with a 2% brake

A measure included in Mais Habitação (More Housing) concerns the 2% brake on rent rises in new rental contracts. Thus, new rental contracts for properties that have been on the market for the last five years are prevented from raising rents by more than 2%. This rule also applies to those buying a house to rent out.

Old rents rise in line with inflation - landlords compensated

There is also news regarding old rents. The Mais Habitação (More Housing) programme has defined that pre-1990 rental contracts that have not been transferred to the New Urban Rental Regime (NRAU) will no longer be transferred either, as long as the tenants can prove they have an income of less than five minimum wages.

In addition, old rents will now be updated in line with inflation and not the tenants´ income - just like most contracts, and could rise next year by up to 6.94 per cent. To compensate landlords, the government has reinforced the support: in addition to exemption from IMI and IRS on property income, landlords will now receive new compensation "up to a limit of 1/15 of the Tax Asset Value" of the property, which will start to be paid from the second half of 2024 and will have to be requested every year.

Amortising home loans: redemption of PPR and suspension of commission continues

Families who have Retirement Savings Plans (PPR) will continue to be able to redeem amounts early in order to amortise their home loans or pay off their house instalments, without any penalties. This measure has been extended to 2024 and has brought new features: for early amortisation (total or partial) the annual limit will now be 24 IAS (Social Support Index), while this year the limit was 12 IAS.

In addition, the government has also extended the suspension of the fee for early repayment of variable rate housing loans (0.5%) to 2024, in order to continue to encourage full or partial repayment of these loans.

Interest subsidy and fixed instalments in 2024

There is even more support for home loans for families who are paying much higher instalments due to the rise in interest rates over the last year. One of these is the interest subsidy, which now has a maximum annual value of 800 euros (instead of 720 euros). What´s more, in order to access this aid, all that´s needed now is for the index used to calculate the instalment of the house to be higher than 3% (regardless of the contracted rate). According to the government´s calculations in the State Budget for 2024, there are 200,000 housing loan contracts eligible for the interest subsidy.

Fixing house instalments for two years is the latest support for home loans. The measure came into force on 2 November and will give discounts on the Euribor of up to 30% over the following 24 months, but the request to fix the instalment must be made to the bank by 31 March 2024. It should be noted that, in the end, families will pay more for their home loans.

IMI will not rise in 2024 - but there are exceptions

There will be no increase in the Municipal Property Tax (IMI) this year, according to the State Budget for 2024, writes ECO. But there are cases in which there will be increases. Specifically, residential buildings that are subject to the automatic triennial update of the tax value in 2024 will see a 6.75 per cent increase in IMI - in the case of properties used in the services, commerce and industry sectors, the tax increase will be 9 per cent. There will also be increases in family IMI in 2024 - up to 140 euros for those with three or more dependents - which will reach 240 municipalities.

Transitional period for the NHR regime has already begun

The end of the non-habitual resident (NHR) regime is included in the State Budget for 2024, which also provides for a transitional period, as well as the creation of a substitute tax incentive aimed at scientific research and innovation.

For the time being, foreigners or emigrants can benefit from the transitional period of the NHR in 2024 as long as they can prove that they were already planning to move to Portugal in 2023, by presenting a rental contract, an employment contract or even a promissory purchase contract. In this way, they can benefit from the NHR, which provides for the payment of only 20 per cent IRS for ten years.

Source: Idealista/News