Portugal's housing market has seen a remarkable resurgence in 2024, with the number of licenses for new homes reaching levels not seen since 2008. This significant uptick is primarily attributed to the government's "Simplex do Licenciamento" initiative, which aims to simplify and expedite urban licensing procedures. Despite an initial rough start, which had real estate promoters and construction companies voicing their concerns over regulatory uncertainty and lack of process clarity, the new Simplex program seems to finally be achieving the first set of visible results.

The "Simplex do Licenciamento" program has introduced several key measures to streamline the construction process:
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• Elimination of the need to obtain urban planning licenses in certain cases, replacing them with prior communications or exemptions from prior control
• Adoption of a tacit deferral regime for construction licenses, allowing projects to advance automatically if there is no response from the authorities within the stipulated deadlines
• Simplification of administrative procedures for obtaining urban planning licenses, including the reduction of necessary documentation and the streamlining of approval processes
• Clarification of the cognition powers of municipalities when exercising prior urban planning control, limiting their intervention to specific aspects and avoiding redundant analyses

This significant increase in licensing after the month of March (which follows three consecutive months of year-on-year contractions) coincides with the entry into force of the program, which centralizes and changes rules for around 2,500 diplomas and which is part of the package “Mais Habitação”.

Regional Variations

The increase in licensing was not uniform across the country. The Central region stood out with year-on-year growth of 4.7%, accounting for more than 4 thousand licensed homes in the first ten months of the year.

The West and Tagus Valley region also showed a positive performance, with an increase of 13.4%, totalling 2,148 licensed homes. But it was Alentejo that stood out the most, registering the largest percentage increase, with 806 licensed homes, representing a year-on-year growth of 62.8%. The Autonomous Region of the Azores also showed a significant increase of 15.4%, with 496 licensed homes.

However, not all regions followed this positive trend. The Autonomous Region of Madeira suffered a 20.8% reduction in licensed properties. The Greater Lisbon region, traditionally the region with a dynamic real estate market, recorded a year-on-year drop of 11.8% up to October, with 3,553 licensed homes. The Algarve also showed a slight reduction of 3.7%.

The North region, which continues to lead in absolute terms with 12,951 homes licensed for new construction between January and October, remained practically stable, with a slight decrease of 0.4% compared to the previous year.

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Shifting Housing Preferences

The majority of licensed homes continue to be for houses with three rooms (T3): between January and October, 12,209 homes of this type were licensed (43.6% of the total), an increase of 3.5% compared to the same period last year.

In contrast, there is a decrease in licensing for smaller housing. T1 dwellings registered a year-on-year drop of 5.8%, from 4,936 homes licensed in 2023 to 4,648 in 2024. This trend reflects a growing preference for more spacious housing, possibly influenced by changes in living and working patterns post- pandemic.

However, looking at the numbers from ten years ago, it appears that T0 and T1 licensing has increased significantly. If in 2014 less than one in ten licenses for the construction of new houses were for T0 and T1, this year these types represent 16.6% of the total licenses granted.

Looking Ahead

The surge in new home construction is a positive development for Portugal's economy. However, it's essential to monitor regional disparities and ensure that the housing market remains balanced and affordable for all. As the "Simplex do Licenciamento" continues to take effect, it will be crucial to assess its long-term impact on the housing market and its contribution to sustainable urban development, while also ensuring open dialogue with real estate professionals to ensure adequate coordination between the developers, builders and real estate professionals.

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For more details, refer to the original full article here (Jornal ECO).