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Discover how Portugal's 2026 Budget impacts property in the Algarve, from new IMT tax exemptions to housing supply incentives supporting buyers and investors.

By LiveAlgarve on 7th November 2025 - 4 m. reading time

Portugal's Draft State Budget for 2026 includes several measures that directly affect the real-estate market — including here in the Algarve and Lagos. Below is a clear summary of what's changing, why, and how it may influence your next move in the property market.

Economic & Fiscal Overview

• Portugal forecasts 2.3% economic growth in 2026
  Source: Reuters
• Government aims for a budget surplus of 0.1% of GDP in 2026
  Source: Portuguese Public Finance Council (CFP) 
• Public debt projected to fall to 87.8% of GDP in 2026
  Source: The Portugal News

These projections reflect strong confidence in Portugal's financial position moving into 2026 - generally supportive for real-estate investment.

IMT Property Transfer Tax — Updated Thresholds

For buyers of primary residences:

• IMT exemption threshold raised to €106,346
  Source: PwC Portugal

For first-time buyers aged ≤ 35:

• Exemption threshold increased to €330,539
  Source: PwC Portugal

In addition:

• IMT tax brackets updated by ~2%
  Source: Obigaía Real Estate Market Analysis

These changes reduce upfront costs for many buyers — particularly younger purchasers and those targeting small- to mid-priced homes, where Lagos sees strong demand.

Measures Supporting Housing Supply

• A reduced VAT rate (6%) is maintained for the construction of homes at moderate prices/rents
  (Noted in 2026 draft measures and aligned with affordable housing priorities — supported in PwC commentary)
  Source: PwC Portugal
• Strong emphasis on increasing access to housing through supply-side measures
  Source: CFP analysis of the budget's housing focus

The Algarve continues to face housing scarcity — measures supporting new supply may help ease long-term pressure on pricing and expand long-term letting options.

What This Means for the Lagos Property Market

Lagos' fundamentals remain extremely strong. These tax changes support sustainable demand and may draw more domestic buyers into the market.

Live Algarve's Recommendation

If you're considering buying or investing in Lagos, the 2026 Budget environment is increasingly favorable for:

• first-time buyers
• young buyers
• investors in new or rehabilitated rental properties

Meanwhile, premium properties in desirable Lagos neighborhoods continue to benefit from tight supply and high buyer interest.

Thinking of buying or selling property in Lagos?

We can help you:

• Understand how these tax measures affect your specific situation
• Identify homes that qualify for the updated IMT advantages
• Find rental-investment opportunities aligned with budget incentives

Contact us today for personalized guidance from our experienced local team.