Rent freeze in 2021 in Portugal due to deflation
This is one of the consequences of the deflation that is taking hold in Portugal: residential and commercial rents will not increase in 2021. Indeed, after 5 consecutive years of increase, the inflation rate was zero (-0, 03%) in August, the National Institute of Statistics (INE) confirmed this Thursday, September 10. This zero or negative rate forces the executive to declare a freeze on rental values in 2021. As a result, landlords will not be able to increase their tenant's rent for next year. Lisbob, the # 1 expatriate assistant, tells you all about the rent freeze in Portugal in 2021.
Rent freeze in 2021 in Portugal due to deflation - © Pixels
Rents for homes and businesses will remain unchanged in 2021 in Portugal, after five consecutive years of increases. Indeed the inflation rate was zero in August (-0.03%) according to the National Institute of Statistics (INE), which requires updating the rental values in 2021.
“The change over one year in housing rents per square meter (m2) was 2.3% in August 2020, at the same rate as the previous month. All regions showed positive variations in housing rents from one year to the next, with Lisbon recording the largest increase (2.5%) ”, reads the INE website.
According to the institute, "the average value of housing rents recorded a monthly variation of 0.3%, a rate 0.1% higher than that recorded the previous month". “The regions with the largest monthly variation were Madeira, Lisbon and the Algarve, with a rate of 0.3%, the other regions showing positive variations in the value of rents,” he concludes.
Portuguese law provides that landlords can discount the rents of their tenants based on the value of inflation, i.e. the consumer price index (CPI), excluding property prices . In this case, considering that the inflation for the last 12 months through August is negative, there will be no price update in 2021, and owners will not be able to increase their prices.
This stabilization of the rental value comes after five consecutive years of increases: 0.51% this year, 1.15% in 2019, 1.12% in 2018, 0.54% in 2017 and 0.16% in 2016. The rental discount coefficient applies to residential and commercial rents. Residential leases concluded before 1990 and those concluded before 1995 for businesses are excluded from this update.
Good news for tenants, not so good for owners.