New Law for Construction on Rural Land in Portugal: Economic Impact and Opportunities for Buyers

In response to Portugal's escalating housing crisis, the government enacted Decree-Law 117/2024, published on December 30, 2024, and effective from January 29, 2025. This legislation allows for the reclassification of rural land to urban status, facilitating housing development aimed at increasing affordable housing supply.

Key Provisions of the New Law

The law empowers municipalities to reclassify rural land as urban, provided that at least 70% of the newly designated area is allocated for public housing or homes at controlled costs. This measure seeks to expedite housing projects by reducing bureaucratic hurdles and granting local authorities greater autonomy in land-use decisions.

Economic Implications

The government anticipates that this legislative change will lead to a 20% reduction in property prices in metropolitan areas and district capitals, setting values below those recorded in 2024. By increasing the availability of affordable housing, the law aims to alleviate pressure on the housing market, making homeownership more accessible to middle-class families.

Impact on Real Estate Prices

This drop in prices is expected to be most significant in areas where urban land was previously scarce and expensive. As more rural areas are converted to urban status, the increased supply of buildable plots should reduce competition among developers, thereby lowering construction costs and ultimately making finished properties more affordable.

While this change is positive for buyers seeking affordable homes, it could result in a temporary slowdown in the high-end property market, as potential buyers wait for prices to stabilize or decline.

Boost to the Construction Sector

The construction sector may experience a boost due to new development opportunities on previously restricted rural land. This could result in job creation and stimulate economic growth in related industries, such as construction materials and services. Furthermore, as demand for new housing projects increases, the real estate market may become more dynamic, attracting both local and international investors.

Impact on Buyers

For prospective homebuyers, the reclassification of rural land presents new opportunities to purchase affordable housing, particularly in areas where urban land is scarce. The increased housing supply is expected to stabilize or reduce property prices, making it easier for individuals and families to enter the housing market.

First-time buyers and young families, in particular, are likely to benefit from more affordable home options in desirable locations. Additionally, those looking to invest in real estate could find favorable conditions, as the increased availability of land may encourage more competitive pricing.

Critiques and Concerns

Despite its intentions, the law has faced criticism from environmental groups and urban planners. Concerns have been raised about potential harm to protected natural areas and the risk of unchecked urban sprawl. Critics argue that the conversion of rural land may not effectively address the housing crisis and could lead to negative environmental impacts.

To mitigate these risks, the government has promised strict oversight to ensure that reclassified lands meet sustainable development criteria and do not encroach on protected areas.Decree-Law 117/2024 represents a significant shift in Portugal's approach to land use and housing development. While it offers potential economic benefits by increasing the supply of affordable housing and stimulating the construction sector, it also raises important environmental and planning concerns.

For buyers, this new legislation could mean more opportunities and lower prices, making it an attractive moment to invest in property in Portugal. As always, partnering with a trusted real estate agency like Quintas and Casas can help navigate these changes and secure the best opportunities in the evolving market.