IMT Revenue Peaks, Driven by Young Buyers

IMT (Municipal Tax on Onerous Property Transfers) revenue has become one of the main pillars of municipal finance in Portugal in recent years. The sharp rise in this tax, especially since 2019, reflects not only the evolution of the housing market but also the direct impact of public policies and economic dynamics on the housing sector.

IMT revenue trends since 2019

Between 2019 and 2024, IMT revenue rose to unprecedented levels. In 2019, municipalities collected around €1.001 billion in this tax. By the end of 2024, the figure had reached €1.732.8 billion, setting a new all-time record. This growth of approximately 70% occurred despite a drop in the number of property transactions, which highlights the decisive influence of rising house prices on the total amount collected.

During this period, the number of homes sold fell from 181,478 in 2019 to around 156,325 in 2024, according to data from the National Statistics Institute. Despite the drop, the average transaction value rose significantly, pushing IMT revenue to previously unseen levels. The tax has become the largest contributor to municipal tax revenues, surpassing the traditional Municipal Property Tax (IMI), which remained relatively stable between €1.4 and €1.5 billion annually.

Factors behind the rise in IMT revenue

The growth in IMT revenue is directly linked to the appreciation of the Portuguese property market. House prices have increased by over 10% annually on average since 2019, a trend driven by strong demand, foreign investment, supply shortages, and housing incentive policies, particularly those targeting young buyers.

Measures such as IMT exemptions for young people have had a dual impact: on the one hand, they increased demand from this demographic; on the other, they contributed to price hikes, as property developers absorbed the tax benefit and reflected it in sales prices. Despite forecasts of a drop in IMT revenue due to these exemptions, the opposite occurred: in 2024, tax revenue grew by 0.8% compared to the previous year, defying budget projections.

Moreover, the state covered the cost of the exemptions, financially compensating municipalities for the potential loss in revenue. This allowed local tax income levels to be maintained or even increased.

The role of IMT in municipal finance

The weight of IMT in municipal budgets has become increasingly evident. In 2024, total municipal tax revenue reached €4.07 billion, of which €1.73 billion came from IMT. This figure represents around 42% of all municipal tax income, making IMT the leading source of local government funding, ahead of IMI.

IMT growth accounted for around 70% of the overall rise in municipal tax revenues between 2019 and 2024. In 2022 alone, the property transfer tax was responsible for 80% of the increase in municipal tax income, highlighting the growing reliance of local councils on this tax to balance their budgets.

Implications for the market and taxpayers

The rise in IMT revenue has a direct impact on the housing market and on Portuguese families. On the one hand, rising house prices make it harder to access housing, especially for younger people and low- to middle-income households. On the other, strong municipal revenues can be channelled into infrastructure, social housing and public services, although this depends on the policy priorities of each municipality.

The stagnation of IMI—an annual tax paid by property owners—contrasts with the volatility of IMT, which is directly dependent on the volume and value of transactions. This difference means that councils are more exposed to fluctuations in the property market and may face budgetary difficulties during periods of lower market activity.

Future outlook for IMT revenue

The future of IMT revenue will depend on the evolution of the property market, public housing policies and national and international economic conditions. Continued property appreciation could sustain the upward trend in tax income, but potential changes to tax rates, exemptions or market regulations may reverse this scenario.

The growing dependence of municipalities on IMT raises questions about the sustainability of local public finances and the need to diversify income sources. The debate around the balance between encouraging property transactions, ensuring access to housing and securing municipal financial stability is likely to feature strongly in political discussions in the coming years.

IMT revenue has cemented its position as a central component of municipal finances in Portugal, reflecting housing market dynamics and fiscal policy choices. The challenge now is to ensure that this growth contributes to greater social equity and to the sustainable development of cities and local communities.

Source: SUPERCASA