Household expenses in Portugal in 2020

Everything indicates, except in the case of unexpected surprises, that the Portuguese will benefit in 2020 from an increase in purchasing power, thanks to improved economic conditions and falling unemployment, together with an expected rise in wages, on average, above inflation. Even so, we have to prepare for the year that has just started and budget well, because there are increases in sight and bills at home are adding up meaning money is coming out of our accounts. To help you on this mission, we've compiled some of the main expenses you can count on living at home, apart from all the other expenses you might have.

House prices continue to rise

The cost of housing maintains an upward trend in Portugal, having closed the third quarter of 2019 with an increase of 10.3%, according to results recently released by the Portuguese National Statistics Institute (INE).

Although Banco de Portugal, the Portuguese central bank, anticipates that the residential sector may experience a moderation in price growth, given the "slowdown in economic activity, the reduction in demand for local housing and the increase in supply", while the financial services company Moody's forecasts real estate investment increases of 4% for this year, one of the highest in the European Union (below Spain, Ireland and the Netherlands). Another Portuguese bank, Bankinter, also foresees a rise in house prices in Portugal of around 4.5% this year and 3% next year.

Rental prices are rising, but only a little

In contrast, the rental market will see only a small increase this year. The annual update depends on the inflation registered in the 12 months up until August, which stood at 0.51%. This means that monthly rent of 500 euros means tenants will pay just 2,55 euros more per month - this increase is less than half the 1.15% increase recorded for rent in early 2019.

According to the law, landlords are obliged to inform tenants of their intention by a registered letter with acknowledgment of receipt or, alternatively, hand-delivered against signature of a document proving this, always indicating the new value of the rent rounded up to the nearest cent, if applicable.

Another different scenario is the amount that may be charged in new contracts by landlords outside the accessible rental programs, which are governed by different rules. House rent per square meter increased 3.4% last November, compared to the same month in 2018. The Azores, central Portugal and Lisbon were the regions with the highest monthly increases, according to data released by the National Statistics Institute.

Lower interest rates, but higher bank charges

The low interest rate scenario is likely to continue: Euribor future contracts look to be negative until mid 2025. This is good news for those who have to pay a mortgage fee to the bank because it corresponds to a reduction of the interest component by reducing the total amount to be paid each month.

On the other hand, the bank has been unleashing a spread war that is beneficial to those who buy financing for housing. Since the end of 2015, the average propagation of mortgage credit has fallen by more than 40% and this is a movement that should continue this year, although in a less aggressive manner.

But the relationship with the financial sector is going to have another sour mouth this year at committee level. The Portuguese bank, Caixa Geral de Depósitos (CGD) began this year with the announcement of a downturn, and EuroBic also announced that it will raise prices. Globally, the industry has raised the cost of customer service and it is expected to increase further. This, in addition to weighing multilevel accounts for bank customers, also has an effect on the total repayment of loans.

Municipal Property Tax (IMI) and Property Transfer Tax (IMT) bills change this year

Throughout 2019, a review was made of the location coefficients used to determine the equity value of properties entering the municipal property tax (IMI) calculation. The revised proposal was submitted to the Government by “Comisión Nacional de Evaluación de Edificios Urbanos” (the National Commission for the Evaluation of Urban Buildings) and increases the coefficient in the main urban centres such as Lisbon and Porto. But the application is not automatic, it occurs only for new properties or those that have been subject to modification or reconstruction works, or after a new evaluation.

The State Budget 2020 proposal (OE2020) introduces a new property transfer tax (IMT) rate of 7.5% for properties worth more than one million euros, but the document is still pending approval.

Cheaper light on the regulated market

Electricity rates will fall by 0.4% for customers in the regulated market, according to the Energy Services Regulator (ERSE). This variation, for a family with a 44 euro bill, translates into a relief of 18 cents.

Although this decrease is only for the regulated energy market, the 0.4% decrease is a benchmark for companies in the free market, in which case each operator will set its rates, some of which may increase, and others may fall, energy purchase costs and more, or less, aggressive commercial policies.

For social tariff customers, savings should be around 11 cents on a monthly bill of 27 euros, which already includes a monthly social discount of 17,78 euros.

Natural gas maintains its price

Natural gas tariffs were approved by the regulator in May 2019 for the approximately 280,000 consumers who "remain as last resort merchants”. This 2.2% reduction for customers with consumption less than or equal to 10 thousand cubic meters is applied between October 2019 and September 2020, which means that at the beginning of the year there are no changes.

More expensive water

Water bills are not the same throughout the country and differ from one municipality to another, and the price paid by households depends on the decision of the entities that directly manage the customer's supply systems.

In the water provide EPAL, which serves the Lisbon region, national customers face increases of between 1.9% and 2.4% in 2020, according to the company's proposal, which has already been ratified by the sector's regulator. Another provider, ERSAR, also approved some tariffs for multi-municipal water distribution systems that translate into slightly lower prices than 2019 (for example, in Águas do Douro and Paiva).

Telecommunications bills to please everyone

It seems that 2020 will be marked by a competitive offer, with divergent campaigns, among telecommunication operators. The mobile network provider MEO will promote a minimum increase of 50 cents and the company NOS will raise the price of some services. Vodafone and NOWO already guarantee that there will be no price increase.