The value of rents for new lease contracts will now have criteria that limit their increase, according to the Portuguese Prime Minister, António Costa, announced in February at the end of the Council of Ministers. "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," explained the Prime Minister. Besides these two criteria, the value of the new rent may also take into account the inflation target of 2% defined by the European Central Bank (ECB). We have all the details of these new limits on rental price increases in Portugal.
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.
The measure is part of the Mais habitação ("More Housing") package approved in February 2023 by the Council of Ministers and aims to combat speculation in rental prices.
"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.
The mechanism that limits the value of the rents, he detailed, will thus 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% inflation target defined by the ECB.
Fair rent guarantee in new contracts
As in 2023 the Government has fixed the increase in rental prices at 2%, the formula that will limit the value of the new contracts will allow for the 3.43% that cannot be used this year.
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% 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%.
António Costa recognised 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 stated that he hopes that the 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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