That's why "Survive till 25" – survive until 2025! I hear and read this in many places as a catchphrase for the development that is imminent in 2024, in many international studies and expert opinions.

The construction and real estate industry accounts for a significant share of gross value added in Portugal, accounting for almost 15 percent, but the industry is heavily burdened by supply bottlenecks, rising prices, a shortage of skilled workers and high interest rates.

The lack of houses for sale in Portugal has been cited as one of the main factors behind the skyrocketing property prices in the country. This is because the supply of homes for sale is much lower than the demand, making it an even more asset. Data from the National Institute of Statistics (INE) expressed this reality well: in addition to the vacant houses that exist in Portugal, between January and September 2022 only one house was built for every nine houses sold in the country, which has only worsened or worsened in 2023.

But in my opinion, the peak of this development is not even seemingly on the horizon. This means that the crisis is deeper than the figures on building completions and building permits have shown so far.

But there are solutions that only need to be implemented by those who have also been elected to make decisions in the interests of the people and not to constantly postpone them to protect their own interests.

Here is an overview of five measures that I consider to be extremely important so that something finally gets moving in this sector and that we do not say later that we knew about it but did nothing.

1. Reduce the tax burden: To stimulate investment, incentives must be created to invest in this sector as a private individual, which always starts with the tax burden directly as well as indirectly, both must go down. Depreciation in residential construction for wear and tear, modernization, rental housing, and the provision of own real estate stock for the rental sector with a minimum taxation to keep rents down and create more supply.

2. Reduce bureaucracy: Bureaucracy creates space for corruption and nepotism, which must be one of the first things to be taken off the table. Funding for climate-friendly new buildings should not require a permit but should be subsidized when the invoice is submitted with tax identification of the seller and purchaser. The digitisation of model processes such as the submission of a preliminary building inquiry, building permit and renovation should not exceed a maximum deadline of 6 weeks, if the deadlines are violated by the building authorities, these should be considered approved, artificial intelligence can already cope with this today and should also be used for this purpose to increase efficiency in the offices.

3. Back to economic efficiency: This requires a certain realism on the part of politicians as well as the population in Portugal, but it is possible. If I calculate a "cost rent", i.e. rent, I need the following: Construction costs per square meter (approx. 2000 euros), land costs (approx. 500 euros), percent interest rate for 30 years (approx. 4.5 %) to be refinanced.

This model cost rent is around 16.30 euros per square metre, which is a far cry from the average rent for new buildings in Portugal of 14.10 euros per square metre. It does not include taxes or maintenance costs, only the credit line without allowances or profit for the landlord.

4. Moderation in the cities: In recent years, more and more municipalities and their building authorities have used their strong negotiating position vis-à-vis investors to burden them with various municipal tasks from social housing to the construction of new schools, this cannot be the rule but should only be the exception to the rule, because here, too, the end product that everyone complains about becomes more expensive and it does not help with the actual problem of creating living space. In other words, if the requirements are too high, investors will stop building at all.

5. More flexibility in building law: Commercial properties and former office buildings should be able to be converted into residential property with little bureaucratic requirements for conversion without violating statics and building law.

What can we do ourselves? Politics can't solve everything; we should perhaps look at ourselves and our demands and leave the church in the village. Ever better equipment, ever larger living spaces and not paying attention to the construction costs for this, and still not wanting to do without anything, is perhaps also something that slowly must get into our heads.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes