Real Estate Leasing: A Solution for Young People

The growing difficulty young people face when purchasing their first home has led to the introduction of support measures by the Portuguese government, such as the exemption from IMT (Property Transfer Tax) and the provision of public guarantees enabling 100% financing. However, an alternative with similar characteristics has been left out of these incentives: real estate leasing. Despite its potential to facilitate young people's entry into the real estate market, this option continues to be overlooked in public policies.

While traditional mortgage loans require a significant down payment and often depend on challenging bank approval criteria, real estate leasing can offer 100% financing without the need for an initial deposit. For young people, who often lack savings, this could be the key to home-ownership. However, this solution remains highly limited in Portugal, both in terms of availability and the associated tax burden.

Real estate leasing is a contract in which a financial institution acquires a property and rents it to a customer in exchange for rental payments. At the end of the contract, the customer can choose to purchase the property. This model is widely used in Europe, both in the corporate sector and the private housing market. However, in Portugal, it is still seen almost exclusively as a business tool, with limited use among individuals, particularly young people.

Currently, among the main banks, only Caixa Geral de Depósitos offers a real estate leasing solution for housing. This allows for full financing of the home purchase, with no down payment, a clear advantage over traditional mortgage requirements. Nevertheless, this product is poorly promoted and almost unknown to most young people looking for a home.

Despite its clear advantages, real estate leasing is subject to several tax penalties that make it less competitive. According to the Portuguese Association of Leasing, Factoring, and Renting (ALF), this model is subject to the highest IMT tax rates, is affected by the Additional IMI (Property Tax), and does not benefit from the IMI exemptions usually granted to primary residences.

This situation is even more unfair when considering that young people under 35 are already exempt from IMT and Stamp Duty when purchasing their first home. However, these exemptions do not apply if the purchase is made through real estate leasing, creating a clear disincentive to using this alternative. Furthermore, the AIMI, which targets high-value property, cannot be passed on to the lessee, even though they are the user of the property, increasing costs for the bank and making the solution less viable.

ALF has been alerting the government to these tax discriminations and has already proposed, within the framework of the 2025 State Budget, the removal of IMI, AIMI, and IMT penalties to allow individuals, especially young people, to use leasing as a legitimate and accessible way to acquire home-ownership. The association argues that real estate leasing should be included in the support offered to young people, just as other financing solutions are.

Luís Augusto, president of ALF, emphasizes that due to its characteristics, leasing significantly reduces the risk for both the financial institution and the consumer, offering a realistic option for those who do not have immediate access to traditional bank credit. This model, for example, is widely used by non-resident tax payers, demonstrating its viability when framed within a more favourable tax regime.

According to ALF data, in 2023, 428 real estate leasing contracts for housing were signed, totalling €205 million, a 7% decrease from 2022. The average value per contract was €480,000, a slight increase from the previous year. These figures highlight not only the lack of interest from operators in promoting the product, but also its poor penetration in the private sector due to existing legal and tax barriers.

In a context where housing has become one of the greatest challenges for Portuguese youth, ignoring real estate leasing is to waste a solution with significant potential. Including it in public policies supporting youth housing would diversify funding sources, reduce obstacles to home-ownership, and make the system fairer and more inclusive.

For this to happen, it is essential that the government recognizes real estate leasing as a valid option for young people and removes the tax discriminations that prevent it from being competitive. Just like public guarantee-backed loans, leasing can and should be part of the national strategy to ensure access to housing, especially for those taking their first steps into adulthood.

Source: SUPERCASA