Lisbon, Oct. 31, 2025 (Lusa) - Housing construction in Portugal will be halted for six months pending the reduction in VAT, which "is the worst thing that could happen," Manuel Maria Gonçalves, president of the Portuguese Association of Real Estate Developers and Investors (APPII), told Lusa on Friday.
In response to the announcement by the Minister of Infrastructure and Housing that the 6% VAT rate on construction will remain in force until the first quarter of 2026, Manuel Gonçalves called for a greater need for "urgent" action in implementing the measure.
"In the worst-case scenario, we will have to wait six months for the measure to be implemented, until the end of the first quarter of next year. That is the worst that can happen because nothing will move forward until then," he explained.
Stressing that "the market will come to a standstill" and “wait” for the reduction, which will be 17 percentage points in the VAT rate for housing construction (from the current 23% to 6%), the president of APPII reinforced the need for a "faster consensus" to avoid a halt in the construction of new housing.
Manuel Gonçalves also welcomed the "investment" that the minister for infrastructure and housing is making in this area, but stressed that the VAT reduction "has to happen as soon as possible".
"We believe that by the first quarter of next year, we will have VAT at 6% for projects that come in after that date, but it will also depend a lot on this house, on the discussion and approval process," said Miguel Pinto Luz, who was heard today in parliament as part of the committee stage detailed discussion of the 2026 draft state budget bill.
The minister explained that joint work is being done with the Ministry of Finance in preparing the proposal that must be sent to parliament.
Last week, minister of finance Joaquim Miranda Sarmento said he expected the "major effect" of the reduction in VAT on construction from 23% to 6% to only emerge from 2027 onwards, because the impact is not immediate.
In the Budget, Finance and Public Administration Committee (COFAP), Joaquim Miranda Sarmento explained that the 6% VAT will apply "to new projects submitted to local councils", which will happen "when the law comes into force", expected in 2026. However, he stressed that the effect will not be immediate.
"The major effect will begin to be felt in 2027, due to this delay between the submission of projects, their approval and the start of construction," he said.
The Prime Minister announced on 25 September that the Government will propose to Parliament a reduction in the VAT rate to 6% for the construction of houses for sale up to €648,000 or, in the case of houses intended for rental, with rents up to €2,300.
This tax regime will remain in force until 2029, the prime minister said at the time.
The measure is part of the "Building Portugal - Renting and Simplification" package, designed to boost the supply of affordable housing, including measures in line with the Recovery and Resilience Plan (PRR).
The draft bill for reducing VAT has not yet been submitted to parliament and is not part of the 2026 state budget initiative.
CT/AYLS // AYLS
Lusa
