The New Land Law in Portugal – A Housing Solution or an Agricultural Risk?

What Happens When Real Estate and Agriculture Collide?

Portugal has taken a bold step to address its ongoing housing crisis by passing Decree-Law 117/2024, which allows construction on previously protected rural lands. The government argues that increasing the supply of land for residential development will help lower housing prices. However, this decision has sparked intense debate.

While real estate investors and developers see an opportunity for expansion, farmers and environmentalists warn that this could lead to long-term consequences, including reduced agricultural production and ecological damage.

What Does the New Law Allow?

On December 30, 2024, the Portuguese government approved changes to the country’s land classification rules:

Reclassification of agricultural land – Land previously designated as rural can now be converted for residential construction.
Decision-making power for municipalities – Local governments will have the authority to determine which areas qualify for reclassification.
Protected areas remain off-limits – National ecological reserves and strictly protected agricultural lands will not be affected.
Aiming to increase housing supply – More land for construction is expected to create more housing options, potentially stabilizing or reducing prices.

While the government presents this as a necessary step toward solving the housing crisis, experts are divided on whether it will truly improve affordability or simply drive up land prices.

Ruina (ruin) on agricultural land - a familiar sight in Portugal — Ruin on a rustic land - a familiar sight in Portugal

The big Winners: Real Estate Developers and Foreign Investors

With access to new land for development, real estate firms can expand their projects beyond the crowded urban centers of Lisbon and Porto. Investors, particularly those from abroad, see an opportunity to acquire rural land at lower prices and convert it into high-value residential developments.

For Example: In Alentejo, a region known for its vineyards and agriculture, new listings for farmland are already advertising "future development potential." This could indicate growing interest from real estate developers looking to transform rural landscapes into suburban housing projects.

Losers: Farmers and Environmental Groups

The biggest concern surrounding this law is its potential impact on Portugal’s agricultural industry. Farmers argue that allowing construction on farmland could disrupt local food production and lead to higher prices for agricultural goods.

The Portuguese Farmers' Association has already expressed concern that losing farmland to development could undermine national food security.

Environmental organizations, such as SPEA (Portuguese Society for the Study of Birds), warn that urban expansion into rural areas could harm biodiversity, disrupt ecosystems, and create water supply challenges.

Critics also argue that short-term economic gains might not justify the long-term environmental and agricultural consequences.

This new policy is expected to have both positive and negative effects on the housing market:

Increase in real estate investment – More land for development could lead to a surge in construction projects.
Doubts about lower housing prices – If most of the newly available land is acquired by large developers, housing prices might continue to rise rather than decrease due to speculative investment.
Affordability concerns – While more housing will be built, experts question whether these new properties will be accessible to middle-class and lower-income residents.

Some analysts suggest that while the law might benefit high-income buyers and investors, it may fail to provide affordable housing for those who need it most.

What’s Next?

Short-term impact – A boom in real estate investments is likely, with developers rushing to take advantage of newly available land.
Long-term consequences – If too much agricultural land is converted into residential areas, the government may need to reassess the policy to prevent excessive land loss and environmental damage.
Potential restrictions in the future – Due to growing opposition, future amendments to the law could impose stricter environmental assessments before land reclassification is approved.

It remains to be seen whether this law will effectively balance the demand for housing with the need to protect Portugal’s agricultural and natural resources.

Our Recommendations for Investors and Burtucala community

Looking to buy land? Research which areas qualify for reclassification and analyze long-term market trends. Ensure that the land has real development potential before making a purchase.
Agricultural business owners should monitor land prices to assess whether this law will increase operational costs.
Sustainable development advocates may find opportunities to promote eco-friendly construction projects that integrate with the rural landscape.