“Demand increases.” IMF recommends end of support for young people when buying a house

Support for young people to buy their first home ended up increasing demand and worsening market imbalances, which is why they should be withdrawn, argues the International Monetary Fund.

In a report released this Wednesday, on Portugal, the International Monetary Fund considers that to reduce imbalances in the real estate market and associated risks supply-side measures must be applied to the financial sector.

Government measures to support young buyers, including public guarantees and tax exemptions, “aim to improve affordability, but increased demand and worsened market imbalances”, said the IMF, which “must be reversed”.

“The Government’s new housing reform package contains elements that can stimulate supply, but increase tax expenditurel”, highlights the institution.

The report recommends that “to achieve lasting improvements in accessibility, reforms must aim to reduce supply restrictionssuch as the flexibility of licensing rules, permissionzoning and land use (as planned), the rebalancing of property taxation and the improvement of the functioning of the rental market”.

Furthermore, “well-targeted support must be provided to vulnerable families through dedicated social housing and housing subsidies“, concludes the IMF.

The regime of exemption from IMT and Stamp Tax was created by the Government in August 2024, together with the public guarantee, to support young people up to 35 years old in purchasing their first home, foresees in 2026 the total exemption up to 330,539 euros and partial exemption of up to 660,982 euros.

In addition to IMT and Stamp Tax, there is exemption from fees due for the registration of the first permanent home purchase by young people up to 35 years of age, as well as for the registration of the mortgage associated with the loan.

The State may also provide personal guarantee to banks to facilitate credit for your first permanent home. The warranty may reach 15% of the capital in debt initially contracted, allowing financing up to 100% of the transaction value, for properties up to 450 thousand euros and young people with income up to the 8th income tax bracket, without another home and with regularized tax and contribution status.

According to data from Banco de Portugal for the first 11 months of 2025, released in January, from the house to Caixa Geral de Depósitos, a total of 23 thousand contracts.

During this period, the amount of public guarantee used was 626 million euros – practically 53% of the total budget made available by the State.

In May, the governor of the Bank of Portugal announced that a , including a more demanding effort rate that customers will have to comply with in real estate credit, will be proposed.

Portuguese banking is resilient but risks must be monitored

The Portuguese financial system, in particular the banking sector, has shown itself to be resilient and is strongest since the debt crisisbut the risks must be monitored closely, the IMF report also notes.

The Stability Assessment of the Portuguese Financial System considers that “banks demonstrate resilience under severe stress tests adverse events, including shocks of similar magnitude to those of the European debt crisis”.

On the other hand, “the rapid appreciation of properties justifies rigorous monitoring, as the real estate credit is booming“, even though macroprudential measures contribute to limiting systemic risks.

For the IMF, authorities must “ensure adequate resources to face emerging challenges”, and the risks of the real estate market “require rigorous monitoring and the Bank of Portugal (BdP) must continue to develop tools to monitor the risks of the banking sector”.

At a press conference, Ranjit Singhhead of the IMF mission for the Financial Sector Assessment Program, signaled that “the financial system is in a stronger position than a decade ago, banks are more capitalized and resilient”.

In this way, the system has the capacity to withstand financial shocks, but looking to the future, the priority must be “preserving resilience while the environment is changing”, particularly in the international context.