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Portugal Has the Second Highest Amount of Vacant Homes in Europe
16 January 2018
The numbers show that there are a lot of vacant homes in Portugal, but they are not located in areas with high levels of demand.
After Spain, Portugal has the second highest amount of vacant homes in Europe. At the root of this problem is the fact that overbuilding is systemic in Portugal. “Between 1986 and 2007, an average of 80,000 houses were built per year in the country, or one house every five minutes,” said Pedro Bingre do Amaral, a specialist in regional and urban planning and professor at the Polytechnic Institute of Coimbra. But the problem has additional causes. The specialist believes that the level of IMI taxation is “negligible” and that this contributes to a surfeit of empty homes since property owners do not have to use the houses or place them on the rental market to pay the tax charges. In Portugal, “there are so many empty houses because it does not cost the owners much” to keep them, he sums up.
António Frias Marques, president of the National Property Owners Association, has another take on the problem, which focuses on the historic neighbourhoods of Lisbon and Porto. “Rents have been frozen – and remain partly frozen – for dozens of years,” he said. In his opinion, this has prevented homeowners from conducting renovations, as the price of construction has increased over the same period. “When the buildings’ tenants begin to pass away, the property is finally left vacant. The next step would be to rent the houses, but the problem is that they are in such a sorry state that they are no one is interested in renting them. And yet, the landlord is de-capitalised,” he explained.
“In our country, wealth has always been the weakest link in the tax regime. Very little [tax] on wealth is charged, unlike the taxes on consumption and income,” Bingre do Amaral stated. That is why homeowners, especially in Lisbon’s historic neighbourhoods, often keep homes unoccupied for several years, waiting for an increase in prices to sell them.
Frias Marques has a different opinion, pointing to the Portuguese state’s policy on degraded private property. “When a building is empty for one year, the state benefits, as it charges triple the IMI, even if no one wants to live in a degraded house and the landlord is unable to rent,” he explains.
There are reports of owners purposely weakening the structure of buildings and houses by partially destroying the roof and breaking the windows, for example. The idea is to expose the building to the elements, and even pigeons, degrading the property is such a way that, with the passage of time, it can become a danger to public health and safety. This then leads to the demolition of the building, and the land can then be sold, or a new building erected on the site.
Absence of data
No updated data on the number of vacant or unoccupied houses in Portugal currently exists. Rita Silva, a leader of the Habita Association, considers that this statistical void exists because “there has never been a structured and integrated public housing policy,” a policy would have “monitoring and data collection” as one of its primary pillars, she pointed out. “There is a lack of information on many issues related to housing, such as the market, prices, evictions and empty homes. The data on all these questions are nebulous,” she concludes.
Despite the statistical vacuum, the 2011 census showed that there were 735,128 empty houses in the country, 184,909 of which are in Lisbon.
Ms Silva does not believe that these figures represent the current reality because many of the empty houses in the main cities are now occupied or close to being so. “There has been a huge amount of rehabilitation of homes for luxury housing and tourism,” she adds, in a market that is largely oriented towards “international buyers, investment and tourism”, and not towards a socially-aware housing policy.
Changes in sight
Bingre do Amaral also emphasises that the “scenario has changed a lot since 2014”, especially in urban areas, with the tax attractions for foreign citizens domiciled in the country, particularly with golden visas and, more recently, the local tourist housing boom. Rita Silva has a similar point of view: “We have a public policy that actively promotes real estate speculation,” she says, pointing towards the residency visa scheme, which is turning the country’s housing policy into a kind of tax haven for wealthy foreigners.
Bingre do Amaral adds that, while the phenomenon was initially limited to Lisbon, it can now also be seen in Porto and Coimbra. Despite “not having empirically proven statistics,” the housing boom has striking consequences, such as excluding generations younger than 35/40. Why? “Because not only are banks unlikely to extend credit to the younger generations, but people who receive their income through the “green receipts” are also unlikely to get mortgages.”
Possible solutions
With regards to the potential solutions to Portugal’s problems with housing, Bingre do Amaral argues that IMI should be used as a “planning tool”, so that maintaining empty properties is no longer remain financially viable. “The taxation of wealth, income and consumption is out of balance, too low for IMI, and too high for IRS and VAT,” the expert says, who does not doubt that changing tax regulations would free up hundreds of thousands of homes in the country. This is the strategy that prevails in most developed countries, the researcher argues.
Ms Silva, however, supports the creation of a serious housing policy to “return rights to the tenants.” Changing the rental law, curbing speculative excesses and regulating the market are all necessary steps.
Habita’s representative states that no shortage of houses exists, but rather a poor distribution of homes. “We do not need more construction. We have more houses than families,” she says. Ms Silva argues that “municipal councils should increase the public housing stock through private housing, employing either the right of preference and even expropriation.” However, she acknowledges that such a strategy would face difficulties under the current legal framework. “Legislation needs to be changed,” she concludes.
Mr Marques agrees that there are more than enough houses: “We have two million empty houses. Roughly, out of these two million, one million are second homes or vacation homes.” The president of the owners’ association argues that a profound and serious debate is needed between property owners and the Portuguese state. “Owners must enter talks with the state to see how these houses can be recovered,” he says.
Original Story: Sol.Sapo.pt
Translation: Richard Turner