Tax Relief and State-Backed Mortgages Aid Portugal’s Under-35s, but Prices Rise

The government’s flagship housing incentives for under-35s have racked up impressive statistics—70,000 buyers freed from property-transfer tax and 23,000 mortgages cushioned by a State guarantee—yet they arrive in a market where prices keep climbing faster than wages.

Snapshot of the numbers that matter

• €60 M fiscal cost booked in the 2025 Budget.

• €1.55 B guarantee envelope set aside for banks.

• 330,539 € new cap for full tax relief in 2026.

• Sintra, Vila Nova de Gaia and Seixal lead provincial demand.

• 1 default only so far on State-backed loans.

Why young households still feel the squeeze

Portugal’s housing squeeze did not vanish with the arrival of IMT Jovem. Deposit requirements of 10-20 %, steep borrowing costs after ECB hikes and double-digit price growth in Lisbon and Porto keep ownership out of reach for many graduates. The new schemes shave up-front costs but do little to tame scarce urban supply, estate agents and researchers warn. Some analysts note that tax savings are often capitalised into asking prices within months.

The mechanics of the IMT exemption in 2026

Introduced in August 2024, the exemption scrubs both IMT and the smaller Stamp Duty for first-time buyers up to 35 years old. For this calendar year:

• Full relief applies to homes priced ≤ 330,539 €.

• A sliding discount covers the band 330,539 €–660,982 €.

• Above 660,982 € no saving is available.Eligibility demands fiscal residence in Portugal, no home ownership in the previous three years and the intent to live in the property. Applications land via the Finanças portal and are usually approved within a fortnight, according to tax-service data.

Public guarantee: plugging the deposit hole

Running in parallel, the State guarantee covers up to 15 % of the loan principal, effectively granting 100 % financing without parental collateral. Caixa Geral de Depósitos and Banco CTT topped the 2025 league table, while Santander and BPI followed. By November 2025, the programme had underwritten 22,933 contracts worth €4.5 B, representing 42 % of all mortgages signed by under-35s. Officials highlight the near-perfect repayment record—just one default—as proof of prudent risk thresholds: income must not exceed the 8th IRS bracket (≈ €83,700) and the property ceiling sits at €450,000.

Where the relief is being used—and where it isn’t

Demand clusters around the Lisbon and Porto metropolitan belts, where job opportunities concentrate. Sintra, Vila Nova de Gaia and Seixal top the early 2025 tables, benefiting from commuter-rail links and slightly lower square-meter prices. Interior regions such as Beira Baixa or Alentejo Central show limited take-up, a reminder that incentives alone cannot reverse longstanding migration trends.

Budgetary impact and the road ahead

The Finance Ministry pencilled in €60 M for the tax break in 2025. For 2026 the envelope will rise moderately, as IMT brackets are indexed by roughly 2 %. Officials insist the programme is sustainable, yet the Court of Auditors has warned that recurrent extensions could erode municipal revenue, which partly funds local services. Parliament will revisit both measures during the spring stability-programme debate; expect lobbying from mayors looking for offsetting transfers.

What to watch next

ECB rate trajectory—a cut could boost affordability but also prices.

Supply-side zoning reforms promised for the second half of the year.

A forthcoming evaluation report on whether the guarantee should be capped at lower property values outside metropolitan areas.For thousands of Portuguese millennials still living with parents—or eyeing Spain for work—these tweaks could spell the difference between renting indefinitely and getting a set of keys.