Portugal has an ageing housing stock. About a third of the country's residential buildings were built before 1970, many without architectural projects, without reinforced concrete and with decades of accumulated pathologies. At the same time, urban pressure in medium-sized cities and historic centre peripheries is creating a window of opportunity for those who know how to capitalise on rehabilitation potential.
Rehabilitate vs. Build from Scratch: An Objective Analysis
The decision between rehabilitating an existing building or demolishing and building anew has no universal answer. It depends on variables that need to be analysed case by case: the structure's condition, location, urban constraints, the intended programme and, naturally, the costs and expected return.
When Rehabilitation is Clearly Advantageous
- Properties in classified historic centres (where new construction is highly restricted)
- Buildings with concrete structure in good condition and only superficial pathologies
- Situations with urban rehabilitation tax benefits (ARU/AOU)
- Properties with prime location where the land value exceeds the construction value
- Local accommodation or tourism projects where original charm is an asset
Tax Benefits of Urban Rehabilitation in Portugal
Portugal has a favourable fiscal framework for property rehabilitation in Urban Rehabilitation Areas (ARU). These benefits can significantly change the return equation of a rehabilitation project.
- Reduced VAT rate of 6% on rehabilitation works (vs. 23% standard)
- IMI exemption or reduction for 5 years after the works
- IMT exemption on the first transaction after rehabilitation
- IRS deduction of rehabilitation expenses (tenants and owners)
- Access to subsidised credit lines (BdP, IHRU, European programmes)
Types of Rehabilitation and Expected Costs
Light Rehabilitation (average cost: €300-500/m²)
Includes roof repair, window frame replacement, interior finish renovation, facade painting and updating electrical and water installations. Does not involve structural changes.
Deep Rehabilitation (average cost: €900-1,400/m²)
Keeps only the structural walls and, sometimes, the facades. Everything else is rebuilt: slabs, staircases, installations, finishes. The result is a new building within old walls, with all the fiscal advantages of rehabilitation and the quality seal of contemporary construction.
FYB in Rehabilitation: From Analysis to Final Product
FYB accompanies rehabilitation operations from feasibility analysis to project handover. We assess the property's condition, define the most profitable intervention programme, prepare the architecture and specialist projects, handle licensing and execute the works with our quality control. Contact us.