Portugal restricts rent increases of more than 2%

The value of rents for new lease contracts will now have a new criteria that limits its increase, the Portuguese Prime Minister announced at the end of a meeting of the Council of Ministers held last month.

"For new contracts the new rent must result from the sum of the last rent charged with the updates that could have been made during the contract period," said Antonio Costa. The measure is part of the "More housing" package approved by the Council of Ministers and aims to combat speculation in rental prices.

However, it is imperative to note that these limits will apply only to houses that were already being rented in the last five years. For all properties that only now enter the residential rental market, there will be no limit to the rents charged. "We are not imposing any limit", he said when asked about the issue, specifying that this measure is only "for new contracts [of lease] that succeed contracts signed in the last five years" and that correspond to those in which the rent is already at levels that have contributed to the value of rents moving away from family income.

Costa pointed out that the mechanism that limits the value of the rents will take into account the last rent, as well as the annual updates - set in line with inflation - that the landlord may not have used and the 2 percent inflation target defined by the ECB. As in 2023 the Government has fixed the increase in rental prices at 2 percent, the formula that will limit the value of the new contracts will allow for the 3.43 percent that cannot be used this year.

The limits will apply only to houses that were already being rented in the last five years and aims to combat speculation in rental prices.

According to the Government, in properties that have been on the rental market for the past five years, the initial rent in new contracts cannot exceed 2 percent in relation to the previous rent. To this value the automatic update coefficients of the three previous years may be added - if these have not yet been applied, considering that in 2023 this value was 5,43 percent.

Furthermore, the Prime Minister accepted that this is "a restrictive measure of the evolution of the rent", but considered it "reasonable" and "necessary", before "the circumstances of the market that already has a level of rents much above the families' incomes".

As for the houses that are not in the rental market there is no reference to the previous rent, this limit will not apply to them. However, he indicated that he believes that the new set of measures now approved will contribute for a reinforcement of houses in the housing market and moderate "much of the anomalous growth of rents in recent years".

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