Portugal Raises Property Tax for Foreign Buyers and Extends Citizenship

The government has declared massive reform of foreign policy in terms of property investment and immigration in response to the soaring housing affordability crisis. The policies will involve more property transfer taxes on non-residents purchasing properties and extending the residency period of citizenship applications to five to ten years.

New Property Tax Measures Target Foreign Investment

Prime Minister Luis Montenegro affirmed that Portugal will also raise the Municipal Property Transfer tax (IMT) on property acquired by non-residents immediately. This was announced following a cabinet meeting in Lisbon on September 25, 2025, as part of a wide-ranging plan to deal with the housing shortage in the country.  

According to Montenegro, Portugal is in a housing crisis, and the government is determined to make homes more affordable to the residents. An additional point in the new measures is the construction of more housing units, streamlining of the building permit procedures, and tax exemptions to young buyers.  

External foreign buyers are now paying nearly twice the cost that the locals spend on homes. In the first quarter of 2025, the National Statistics Institute of Portugal recorded that non-Europeans paid an average of €451 000 on a property as compared to €225,000 paid by domestic buyers and €310,000 paid by EU buyers.

Also Read: Portugal Tightens Migrant Labour Laws: End of Work Permits for Certain Work

Citizenship Requirements Extended to 10 Years

The Portuguese government has also decided on a major policy change by affirming that the majority of foreigners will now have to spend 10 years in Portugal before they can receive citizenship, as compared to the five years that were being required before.  

According to Cabinet minister Antonio Leitao Amaro, the new stipulation will see the current five-year rule being extended to 10 years for the majority of applicants, with a reduced seven-year limit based on Portuguese-speaking nations like Brazil, Angola, and Mozambique.

New Citizenship Criteria Under the 2025 Law

The updated naturalisation requirements now include:

• Legal residence in Portugal for 10 years (or 7 years for CPLP nationals)

• Demonstrated knowledge of Portuguese culture, rights, and duties

• Declaration of support for democratic principles

• Clean criminal record with no prison convictions

• Proven Portuguese language proficiency

Also Read: Portugal's Golden Visa Scheme: Boosting Affordable Housing for Migrants

Housing Crisis Drives Policy Changes

Portugal's popularity among overseas buyers has been fuelled by mild weather, relatively low living costs, tax incentives, and residency pathways like the golden visa programme. However, this foreign interest has contributed to a housing affordability crisis affecting local residents.

Average home prices in Portugal reached €2,851 per square meter in May 2025, more than double the level recorded in 2015, according to real estate website Idealista. Rising foreign demand is pushing up prices, especially in urban areas like Lisbon and Porto, leaving many locals unable to afford housing.

The government scrapped the real estate investment route of the golden visa programme in October 2023 to control property inflation. However, demand from foreign nationals, particularly from the United States, Brazil, and China, remains strong.

Enhanced Immigration Controls and Family Reunification

The reforms go beyond the property taxes and citizenship requirements. Leitao Amaro clarified that the government will also reevaluate the conditions of family reunification and will present the provisions of the possibility of depriving citizenship of naturalised residents who commit serious crimes. 

We are making major reinforcements in the demands for access to citizenship and naturalisation, according to the guidelines already incorporated in the programme of the government, said Leitao Amaro. The new immigration framework is a greater restructuring of naturalisation laws, which signifies the government's desire to control the amount of migration as well as the domestic housing issues. 

Also Read: Portugal Introduces Work Visa Requirement for Foreign Job Seekers

Economic Implications and Market Response

The extended citizenship requirement, coupled with the property tax increment, is projected to have a direct impact on the real estate market of Portugal. Banking regulations have already changed in accordance with the changes in the previous Golden Visas; financial institutions now introduce more stringent due diligence processes on international property purchasers.  

The Portuguese banks also normally grant a loan-to-value ratio of 80 percent to residents and 70 percent to non-residents, whilst lending policies have been moderately tightened. The new tax policies can also have additional effects on the foreign investment decisions and acquisition patterns of property.  

By the beginning of 2025, 2,098 out of every 100,000 homes in Portugal had been purchased by foreigners, which is equivalent to approximately 5.1 per cent of the total number of property sales, the lowest in years, indicating the policy adjustments may already be having some impact on the market forces. 

Conclusion

The rise in property taxes on foreign buyers and a period of years on citizenship are the most conclusive steps taken by the government so far in the process of solving the housing affordability crisis in the country. These steps will be used to give more emphasis to domestic buyers and ensure that the flow of foreign investment is controlled. The policy shifts indicate a major change in the Portuguese policy towards immigration and real estate investment in terms of the economic advantage and the domestic requirements of housing. The Government of the Portuguese Republic announces enhanced property transfer taxation for non-resident buyers and extended naturalisation requirements. To know more about Portuguese citizenship, visit TerraTern now!