5 reasons you should buy property in Portugal
Portugal indeed presents a plethora of attractions for those seeking an international abode. While it often plays second fiddle to its larger neighbor, Spain, Portugal provides a comparable climate and an exceptional quality of life, all at a significantly more budget-friendly cost of living. For those still wavering on the decision, peruse our quintet of compelling motives to ponder Portugal as your property investment destination:
1. Portugal presents a spectrum of lifestyles
Whether one seeks the pulse of a bustling urban existence or the tranquility of rural seclusion, Portugal proffers both extremes. Lisbon boasts cutting-edge technological hubs, while Porto is a dynamic and captivating haven for scholars worldwide. Nevertheless, this is also a nation where farmers still embark on their labor astride donkeys. And why not, given the beguiling and serene countryside? Furthermore, for those looking to buy property in Portugal, it’s worth noting that the country boasts a notably lower population density than many other Western European nations, with a mere 113 inhabitants per square kilometer compared to England’s 420.
2. Taxation in Portugal is favorable
Portugal extends an attractive proposition to foreign residents regarding residency and taxation. The country’s Non-Habitual Resident (NHR) program provides advantageous tax privileges to newcomers for up to a decade. Launched in 2009, this program aimed to entice more individuals to become residents by offering substantial financial incentives.
For instance, if one earns income in Portugal, the tax rate is remarkably low. Alternatively, income derived from foreign investments or pensions remains untaxed. Moreover, there are no gift or inheritance taxes to deplete one’s wealth. This generous tax scheme is a compelling rationale for contemplating Portugal as your relocation destination.
3. Portugal’s real estate and cost of living are affordable
In Portugal, the real estate market exhibits remarkable affordability compared to Western European counterparts such as the United Kingdom, France, and Spain. This translates to greater value for your investment when you buy property in Portugal.
For sun enthusiasts, this is excellent news. A cross-reference of weather data and holiday home prices across Europe revealed that Portugal’s Algarve region offers superior value compared to other Western European hotspots. A 50-square-meter property costs at least a third less than in Spain’s Costa del Sol and half the price of France’s Cote d’Azur while boasting higher sunshine levels than both!
Cost-effectiveness extends beyond property prices. Generally, the cost of living for expats in Portugal remains relatively low, even in urban centers. In 2019, Lisbon ranked as the 93rd most economical European city for residents, with Porto following closely at 97th place (Numbeo). This positions them considerably lower on the expense scale than numerous other destinations. Should you opt to relocate to Portugal, anticipate your currency stretching further.
4. Portugal is conveniently accessible
Portugal boasts exceptional global connectivity, making it an attractive destination to buy property in Portugal. Three major airports in Porto, Lisbon, and Faro ensure year-round accessibility to the nation. While some routes may be seasonal, many run consistently throughout the year, a feature not shared by many Mediterranean destinations. Portugal allows for spontaneous weekend getaways even during the off-season, with easy access from regional airports in the United Kingdom. Ferries to northern Spain or the scenic Sud Express train offer delightful alternatives.
5. Portugal is inherently welcoming to expats
Centuries of camaraderie and cooperation between the British and Portuguese have fostered profound mutual understanding. This rapport is conspicuously evident in the sizable British expat community residing in Portugal, estimated at approximately 42,071 individuals. Consequently, a vibrant expat community awaits.
While living in a foreign land, you’ll never find yourself too distant from a friendly visage or a comforting touch of home, particularly in expat-dense regions like the Eastern Algarve or central Portugal’s Tomar. Conversely, if you yearn to immerse yourself in Portuguese culture, there are countless locales with fewer expat residents for your exploration.
Portugal’s residential real estate market in 2023
Portugal’s real estate prices vary significantly by region. On average, house prices in Portugal amount to €2,536 ($2,818) per square meter. This means that a 200-square-meter house in Portugal has an average price of €507,200 ($563,499) in 2023, reflecting a 6.5% increase compared to the previous year.
Metropolitan Lisbon emerges as the costliest region for purchasing a house in Portugal, with prices soaring to €3,507 ($3,896) per square meter. The average cost of buying a house in Lisbon is €701,400 ($779,255), which is a 1.8% increase from the previous year. In the second most expensive region, Algarve, home prices average €634,800 ($705,263), equivalent to €3,174 ($3,526) per square meter, showcasing a significant 13.8% annual change.
For those seeking more affordable options, the Azores region of Portugal offers the most budget-friendly homes, with an average price of €271,600 ($301,748), equivalent to €1,358 ($1,509) per square meter. Real estate values have seen a substantial 16.1% increase in just one year.
Based on data from the Instituto Nacional de Estatistica (INE), here are the property prices in each region of Portugal:
- In the North, the median property price witnessed a robust year-on-year increase of 11.7% in November 2022 (1.6% in real terms), reaching €1,223 ($1,359) per square meter.
- In the Center, property prices surged by 14.1% year-on-year in November 2022 (3.8% in real terms), reaching €1,026 ($1,140) per square meter.
- In Alentejo, property prices rose by 14.1% (3.8% in real terms) year-on-year to €996 ($1,107) per square meter.
- Algarve experienced a year-on-year increase of 17.6% in property prices (7% in real terms), reaching €2,009 ($2,232) per square meter.
- Property prices in the Azores Islands increased by 13.3% (3.1% in real terms) year-on-year, reaching €1,079 ($1,199) per square meter.
- In Madeira, the median property price grew significantly, rising by 13.8% (3.5% in real terms) year-on-year to €1,463 ($1,625) per square meter in November 2022.
Different property types in Portugal
The choices are vast and varied regarding the type of property options available in Portugal. While it’s challenging to encompass every type, let’s simplify and categorize them into five distinct segments to understand what’s on offer when considering a property purchase in Portugal.
1. Expensive villas
Villas, a popular choice for those looking to buy property in Portugal, often epitomize the ultimate in leisure and comfortable living. These properties typically feature luxurious amenities such as swimming pools and extensive gardens. You can find villas in various regions across the country. However, they are commonly situated on the outskirts of towns and cities, providing a serene and private lifestyle.
2. Cozy townhouses
A stylish townhouse might be the perfect fit if your preference leans towards city living near urban amenities. Townhouses offer the advantage of terraces and balconies, along with an ample number of rooms. Living in a townhouse often fosters a sense of community, as you’ll have neighbors in close proximity. While this can appeal to social individuals, those seeking greater privacy might have reservations about the communal atmosphere.
3. Picturesque coastal apartments
Coastal apartments provide breathtaking ocean views and often share access to communal amenities such as gardens and swimming pools. These properties are budget-friendly and ideal if you don’t plan to use them year-round. Some coastal apartments offer additional perks like on-site gyms and children’s play areas.
4. Relaxing resort properties
properties come with their own advantages and considerations. These accommodations offer access to shared facilities like pools, gyms, and gardens. Resort properties can vary from villas to apartment-style units. Remember that during peak tourist seasons, you’ll share these amenities with fellow vacationers, which may reduce privacy. However, during off-peak periods, you can enjoy all the luxuries without additional charges.
5. Traditional Portuguese homes
If you’re inclined to immerse yourself in local culture and adhere to the proverbial “When in Rome, do as the Romans do,” then a traditional Portuguese house may be your preference. These properties are often nestled among the locals and have significantly lower maintenance costs. Traditional Portuguese homes can range from regular apartments to sprawling hillside villas, offering many options for those looking to embrace the charm of Portuguese living.
Buying property in Portugal in 6 steps!
Here are the steps to guide you through the property purchasing process in Portugal and the related requirements:
Step 1: Choosing the right agent
When it comes to purchasing a property, we recommend finding an agent who:
- Assists you in defining your property preferences and presents listings that align with your needs. An agent who avoids the common ‘spray-and-pray’ method of showing properties is considerate of your time and the seller’s. Be cautious of agents who promise access to every property in the Algarve.
- Maintains clear and timely communication, providing you with transparent information about properties of interest.
- Do not pressure yourself to make hasty decisions you might regret later. Buying a home is a significant and often stress-inducing decision for most individuals.
- Supports you throughout the entire purchasing process. A reputable agent ensures all necessary steps are taken to secure your offer, recognizing that their job extends until you are comfortably settled in your new home.
Step 2: The buying process
After you’ve agreed on a purchase price for your new home, the following steps outline what happens next:
- Select a notary: If you haven’t already chosen a solicitor, it’s time to do so. Solicitors typically charge around 1% of the purchase price for their services. Many buyers opt to grant their solicitor a signed Power of Attorney (Procuração) with specific powers to handle the sale on their behalf. This can be easily arranged at a Notary’s office and is recommended if you cannot attend to the bureaucratic aspects of the process personally.
- Review of property documents: The buyer’s solicitor meticulously reviews all property-related documents and drafts a promissory contract (Contrato de Promessa de Compra e Venda). This contract specifies property details, identifies the parties involved (sellers and buyers), outlines purchase terms, and sets a completion timeframe, usually within 6 months.
- Contract agreement: The seller and their solicitor review the promissory contract and agree on its terms.
- Contract signing: The buyer and seller (or their legal representatives) sign the promissory contract, usually before a notary. At this time, the buyer makes a deposit payment to the seller, typically 10% of the purchase price. It’s important to note that under Portuguese law if the buyer withdraws from the purchase, they forfeit the entire deposit paid. Conversely, if the seller backs out, they must pay double the deposit amount to the buyer.
- Final sale: Once the conditions specified in the promissory contract are met, the buyer and seller (or their legal representatives) meet again, either in front of a notary or at a Casa Pronta office, for the Escritura Publica de Compra e Venda, which is the final sales act. During this stage, the buyer pays the remaining balance to the seller, who hands over the property keys. The property is then officially registered in the name of the new owner with the Land Registry, marking the completion of the process.
Step 3: Pay taxes and handle expenses
When looking to buy property in Portugal, buyers are responsible for various costs. These expenses can fluctuate depending on factors such as the property’s purchase price, type, and whether it will serve as your primary or secondary residence in Portugal.
1. IMT (Property Transfer Tax)
The IMT, or Property Transfer Tax, is determined based on either the property’s purchase price or its patrimonial value (assessed value), whichever is higher. The tax is calculated using specific rates and must be settled at the local tax office (Finanças) or Casa Pronta office just before the final sale transaction.
Permanent habitation
| Purchase price | Tax rate | Amount deducted |
|---|---|---|
| < €97,064 ($107,838) | 0% | 0.00 |
| €97,064 ($107,838) – €132,774 ($147,512) | 2% | €1,941.28 ($2,157) |
| €132,774 ($147,512)– €181,034 ($201,129) | 5% | €5,924.50 ($6,582) |
| €181,034 ($201,129) – €301,688 ($335,175) | 7% | €9,545.18 ($10,605) |
| €301,688 ($335,175)– €603,289 ($670,254) | 8% | €12,562.06 ($13,956) |
| €603,289 ($670,254) – €1.05 million ($1.17 million) | 6% | 0.00 |
| > €1.05 million ($1.17 million) | 7.5% | 0.00 |
Second home
| Purchase price | Tax rate | Amount deducted |
|---|---|---|
| < €97,064 ($107,838) | 1% | 0.00 |
| €97,064 ($107,838) – €132,774 ($147,512) | 2% | €970.64 ($1,078) |
| €132,774 ($147,512)– €181,034 ($201,129) | 5% | €4,953.86 ($5,504) |
| €181,034 ($201,129) – €301,688 ($335,175) | 7% | €8,574.54 ($9,526) |
| €301,688 ($335,175)– €578,598 ($642,822) | 8% | €11,591.42 ($12,878) |
| €578,598 ($642,822) – €1.05 million ($1.17 million) | 6% | 0.00 |
| > €1.05 million ($1.17 million) | 7.5% | 0.00 |
Rural land
A fixed rate of 5% is levied.
Other (e.g., commercial property or building plot)
A fixed rate of 6.5% is imposed.
2. Stamp Duty (Imposto de Selo):
This tax amounts to 0.8% of the purchase price and will be remitted at the local tax office (Finanças) or Casa Pronta just before the final sale transaction.
3. Notary fees and land registration fee:
These expenses typically total around €600 ($667).
Required documentation to buy property in Portugal
When purchasing a property in Portugal, whether you are a resident or non-resident, you will need several essential documents to ensure a smooth and legal transaction. These documents facilitate the purchase process and help you seamlessly settle into your new property. Here’s an overview of the key documentation you’ll require:
1. Portuguese Tax Number (Número de Identificação Fiscal/NIF)
Obtaining a Portuguese tax number or NIF is a crucial initial step. You can acquire it directly at the local tax office, known as Finanças, and the process is usually quite swift. To apply, you’ll need to provide proof of your identity and proof of your address. This tax number serves multiple purposes beyond property acquisition, such as opening a Portuguese bank account and connecting utilities like water, electricity, and telephone services.
Take the first step towards obtaining your Portuguese NIF by clicking the button below and completing the process online. For only $150, you can easily acquire your NIF and enjoy the benefits it offers.
2. Identification
As part of the process, you’ll be required to present one of the following forms of identification:
- Portuguese Citizen Card (Cartão de Cidadão): If you hold Portuguese citizenship, you can use this card as your primary identification.
- Passport and Portuguese Tax Number: A valid passport and Portuguese tax number will be your identification for non-Portuguese citizens.
3. Document verification
Your solicitor or lawyer will play a critical role in ensuring that all property-related documents are in order. They will thoroughly review these documents to verify their legality and authenticity. They advise you to proceed with the purchase only after their review and approval.
4. Updating property documents
Once the purchase is finalized, the property’s documents will be updated to reflect your ownership and personal information. This step ensures you are officially recognized as the property’s rightful owner.
You can refer to our seller’s guide for a comprehensive list and detailed descriptions of the specific property-related documents needed during a property purchase. These documents collectively ensure a secure and lawful property acquisition process in Portugal.
Can you acquire Portuguese residency through property purchase in Portugal?
Can buying a property in Portugal lead to residency? Well, it’s a possibility! However, it hinges on factors like your financial status, nationality, duration of stay in the country, and other prerequisites. If you aim to secure Portuguese residency through property investment, the Portugal Golden Visa program might be your avenue.
It’s worth noting that the government announced in February 2023 that this program is approaching its end. While official deadlines remain uncertain, the window of opportunity is closing for those seeking a Portugal Golden Visa. Financial and immigration firms assisting with Portugal Golden Visa applications advise potential applicants to act promptly.
The Portugal Golden Visa program allows non-EU citizens to qualify for a residency permit (and eventually citizenship) by making investments, such as buying property. Established in 2012 to encourage foreign investment, the Portugal Golden Visa is renowned as one of the world’s most appealing options. With this visa, you can reside in Portugal and travel freely to most European countries. Importantly, you don’t need to reside in Portugal full-time to be eligible for this visa. You must spend at least 7 days in the country in the first year and 14 days in subsequent years.
If you plan to buy property in Portugal, the minimum investment in a low-density area is €400,000 ($444,400), while in high-density areas, it’s €500,000 ($555,500). Another option is to purchase property over 30 years old in an urban rehabilitation area and invest at least €350,000 ($388,850) in its renovation. You are not limited to buying a single property; you can acquire multiple properties as long as you meet the minimum investment threshold.
Additionally, you can pool your investment with other applicants. For example, if you jointly purchase a €1 million ($1.11 million) house with a friend, both of you can apply for the Portugal Golden Visa, as each has invested a minimum of €500,000 ($555,500). If you choose not to rent out the property, you are exempt from property tax. However, if you do rent it out, your rental income is subject to a flat tax rate of 28%.
Where is the best place to buy a property in Portugal?
The Algarve
The Algarve is one of Portugal’s most sought-after regions for property investment. This area boasts numerous picturesque beaches and abundant opportunities for golfing and water sports enthusiasts. It is also renowned for its historic towns and cities, such as Lagos, Silves, and Sagres.
The Algarve is ideal for those interested in acquiring beachfront property in Portugal. Properties in this region are generally more affordable than other areas, offering a sound investment and breathtaking landscapes and historical landmarks. Let’s explore this in more detail, beginning with the main cities of the Algarve.
Porto
Porto, located 280 km north of Lisbon along the picturesque Douro River, presents a robust investment opportunity. It is one of our preferred cities in Portugal, celebrated for its exceptional quality of life. With 220 days of sunshine annually and a cost of living lower than that of Lisbon, Porto exerts a strong appeal. Over the years, it has drawn expatriates and cultivated a substantial international community. Porto boasts a commendably low crime rate and offers excellent infrastructure, including efficient transportation and well-maintained parks.
Lagos
Investors seeking to capitalize on the growing popularity of this coastal city may find property in Lagos appealing. Situated at the mouth of the Bensafrim River against a backdrop of stunning beaches, Lagos ranks as one of Portugal’s top tourist destinations, attracting many visitors annually.
With a thriving tourism industry, increasing international investments, and robust infrastructure, Lagos’ property market presents significant potential for buyers and renters alike. The city offers numerous advantages, including a stable economy and low crime rates.
One of the most convenient areas to purchase property in Lagos is the vicinity of Praia do Paraiso beach, a popular holiday destination with excellent amenities for tourists. Properties in this area are often attractively priced, and while beachfront properties tend to be more expensive, budget-friendly options within walking distance of the beach are also available.
Sagres
Sagres, located in the southwest of Portugal, offers an enchanting and peaceful environment that appeals to property investors. Its rugged coastline and breathtaking landscapes have made Sagres increasingly popular among Portuguese real estate investors.
Combining elements of modern and traditional lifestyles, Sagres ranks among the country’s top tourist destinations, with various attractions and landmarks. Notable sites include the 14th-century Sagres Castle and the 18th-century Cape of St Vincent lighthouse. Sagres is also celebrated for its rich and diverse marine life, making it a paradise for divers exploring its magnificent underwater world.
Lisbon
The Portuguese capital, Lisbon, has long been a coveted destination for property investors. Situated on the Atlantic coast, Lisbon is renowned for its vibrant culture and rich history. As both a tourist hotspot and a prime business location, it’s no surprise that Lisbon’s real estate market has seen significant growth in recent years.
Lisbon’s property market primarily comprises detached homes, accounting for over 50% of all property sales. The city also offers many apartments and penthouses, catering to tourists and families seeking rental income. As in other parts of Portugal, the cost of purchasing a home in Lisbon depends largely on its location. Premium areas like the Estrela and Chiado districts are home to some of the city’s most expensive properties.
As previously mentioned, most homes in Lisbon are currently rented rather than owned. The average rental yield in Lisbon is quite low, suggesting that investors may have a higher likelihood of capital depreciation than those aiming for capital growth.
In conclusion, Portugal presents a highly favorable environment for real estate investment, boasting numerous captivating locations that attract people worldwide. All that remains is for you to choose the place that captivates you the most. We are confident you will find the ideal investment opportunity in this vibrant country.
Buy property in Portugal with Own Property Abroad
Do you want to buy property in Portugal? Own Property Abroad can assist you and ensure a seamless and hassle-free property journey, whether selling or buying real estate in Portugal. Thanks to our knowledge and experience in the local market, we can help with legal requirements, finding suitable properties, negotiating the best deals, and conducting due diligence.
With our expert team, you won’t have to navigate the complexities of the Portuguese real estate market alone. For further information on how we can assist you, kindly drop your details below or email us at [email protected]. Let’s start working on your property success story today!
Frequently Asked Questions (FAQs)
What is the process for buying property in Portugal as a foreigner?
The process for buying property in Portugal typically involves several key steps. Firstly, you’ll need to find a property that meets your requirements and budget. Once you’ve identified a property, you’ll negotiate the price and terms with the seller. After reaching an agreement, you must hire a lawyer and open a bank account in Portugal for the transaction. You’ll also need to obtain a Portuguese fiscal number (NIF).
Are there any restrictions on the types of properties foreigners can buy in Portugal?
Portugal is generally open to foreign property buyers. However, there may be restrictions on acquiring properties in specific protected areas or near national borders. Additionally, some properties might have usage restrictions, such as agricultural land that can’t be converted for residential use.
What is the cost associated with purchasing property in Portugal, including taxes and fees?
The costs associated with buying property in Portugal include property transfer tax (IMT), stamp duty, notary fees, and registration fees. Additionally, if you’re using a real estate agent, there may be a commission fee. It’s vital to budget for these expenses when planning your property purchase.
Can I obtain a mortgage or financing as a foreigner to buy property in Portugal?
Yes, it’s possible for foreigners to secure a mortgage or financing in Portugal. However, the eligibility criteria and terms may vary for non-residents. Approaching Portuguese banks or financial institutions to explore your financing options and understand the requirements is advisable.
Are there any considerations for maintaining and managing the property from abroad?
Managing a property from abroad can be challenging but feasible. Consider hiring a local property management company to handle maintenance, tenant relations, and rental income collection tasks.
