Buying property in Madeira, Portugal, is appealing because of the island’s beautiful nature, stunning beaches, and vibrant culture. Even though Madeira isn’t as well-known as the Algarve, its unique charm draws many people who want to buy property there. However, it’s essential to think about the cost of buying property in Madeira and the potential pitfalls of buying property in Madeira. This guide will provide a comprehensive overview of buying a house in Madeira, Portugal, and the most important things to remember.
Finding properties for sale in Madeira, Portugal
The first step to buying property in Madeira, Portugal, is finding your dream property. This island offers diverse property types to suit all tastes. From simple apartments and big family homes to luxury villas and beach houses in Madeira for sale. These properties are scattered across the island, from bustling city centers to serene spots near Madeira’s beaches. You will even find repossessed houses for sale in Madeira.
Collaborating with a local real estate agent when buying property on Madeira Island is highly recommended. These professionals know local regulations and have in-depth real estate market knowledge. Real estate agents can help you navigate the process and find a property that meets all your requirements and desires, making your journey to buy a villa in Madeira smoother.
7 Steps foreigners can buy property in Madeira, Portugal
Step 1: Get the Número de Identificação Fiscal (NIF)
Buying a house in Madeira involves obtaining a Número de Identificação Fiscal (NIF), which is your Portuguese tax number. This can be obtained from the tax office in Madeira, either by email or through a local proxy.
Step 2: Open a bank account in Madeira, Portugal
Opening a bank account in Portugal is needed to facilitate buying property in Madeira. Many international buyers choose banks like Millennium BCP, Novo Banco, Banco Santander Totta, Banco BPI, or Caixa Geral de Depósitos.
Step 3: Work with a Madeira-based real estate agent and notary
Employing a real estate agent based in Madeira can offer valuable insights to buyers who are into buying property in Madeira. Such agents can assist in finding a house on a broader array of properties, including beach houses for sale in Madeira and even cheap Madeira properties for sale. They can also provide help with contract review and due diligence.
The legal transfer of property rights in Madeira requires the services of a lawyer or notary. Ensure that the notary office in Madeira possesses the necessary licenses and has experience working with foreign clients buying property on Madeira Island.
Step 4: Perform due diligence on Madeira’s properties
Before finalizing the purchase of property in Madeira, it’s vital to verify the ownership, conduct a thorough property inspection, ensure compliance with governmental rules, and review all contracts. Seasoned real estate agents or lawyers based in Madeira can support you in this due diligence process when buying a house in Madeira.
Step 5: Sign the initial purchase agreement and pay a deposit
After finding the right property in Madeira, a preliminary purchase agreement needs to be signed with the seller, followed by a deposit payment, generally 10% or more of the total cost. Signing the Deed of Purchase and Sale (Escritura de Compra e Venda) formally acknowledges you as the property owner in Madeira.
Step 6: Pay property taxes in Madeira
After buying property in Madeira, the IMT tax (Imposto Municipal sobre Transmissões Onerosas de Imóveis) must be settled within a month. The rate for this property purchase tax varies based on the property type. Be aware of potential additional taxes such as a wealth tax, stamp duty tax, annual property tax (IMI), and rent tax.
Step 7: Apply for a residency permit in Madeira
After buying a property in Madeira, non-EU citizens can apply for either a Golden Visa or a D7 Visa. The Golden Visa mandates a minimum real estate investment of €250.000 ($266.900), while the D7 Visa requires sufficient passive income.
Be mindful of the pitfalls of buying property in Madeira and factor in the cost of buying property in Madeira before proceeding.
How can non-EU citizens live in Madeira, Portugal?
While EU citizens have the freedom to live in Madeira without a visa, those from outside the EU need to obtain one. There are two types of Portuguese residency visas for those desiring to buy property in Madeira and live there.
1. Golden Visa
Launched in 2012, the Golden Visa Program offers a lucrative opportunity for non-EU citizens who want to buy a house in Madeira and live there. Foreigners and their families can obtain a residency permit in Portugal by investing a minimum of €250.000 ($266.900) in real estate, such as in a beach house in Madeira. This visa permits them to live, work, and study in Portugal for up to five years and provides easy travel within the Schengen Area.
2. D7 Visa
Alternatively, the D7 Visa, often called the ‘Passive Income Visa’ or ‘Retirement Visa,’ is helpful for non-EU individuals seeking to live in Madeira, particularly those considering retirement. This visa doesn’t necessitate buying property on Madeira Island; instead, it mandates having a passive annual income of at least €9.120 ($9.735).
For non-EU residents, seeking assistance from a Portuguese visa agent can simplify applying for these residency visas.
Real estate prices in Madeira, Portugal
The average price for apartments in Madeira is €3.332/m² ($3.646/m²), with a +22% variation over the last 12 months. The average house price in Madeira is €2.622/m² ($2.869/m²), with a +19% variation in the previous 12 months. The table below gives an overview of the cost of buying property in Madeira.
|Property type||Average price|
|Apartment studio||€261.667 ($286.352)|
|2-Room apartment||€319.946 ($350.129)|
|3-Room apartment||€385.000 ($421.320)|
|4-Room apartment||€473.333 ($517.987)|
|5-Room apartment||€670.833 ($734.119)|
|House with 4 rooms||€507.554 ($555.436)|
|House with 5 rooms||€611.667 ($669.371)|
|House with 6 rooms||€550.000 ($601.887)|
|House with 7 rooms||€733.333 ($802.515)|
|House with 8 rooms||€825.000 ($902.830)|
You can find several cheap Madeira properties for sale when searching for properties in Portugal. Compared to many other places, the cost of buying property in Madeira is relatively low.
Where should I buy property in Madeira, Portugal?
The Portuguese island of Madeira has a lot of options for people who want to buy property. Here are the top five places that people like to visit:
- Funchal: This is the capital city of Madeira. It is a lively mix of city life and beach life. It is the cultural, economic, and social heart of the island. There are many things to do there, like shopping, eating, and going to the beach. Funchal has many places to live, from flats in the city center to high-end villas with ocean views.
- Calheta: This town on the west coast of Madeira is known for its beautiful beaches and sunny weather. It’s a common place for people who want to live in peace. The area is known for its lovely townhouses and homes, which often have fantastic sea views.
- Santana: If you like traditional Madeiran buildings and a more country way of life, you might like Santana. This town in the north is known for its brightly colored, triangle straw houses and lush natural settings, which make it a unique place to buy real estate.
- Porto Santo: This small island northeast of Madeira has beautiful sandy beaches, clear water, and golf courses. It’s great for people who want to take it easy. There are different kinds of homes here, from houses on the beach to bigger villas.
- Machico: This is the second biggest city on the island of Madeira. It has all the amenities of a city and a quiet island lifestyle. The area has many homes, from modern apartments to old-fashioned houses. Mountains surround Machico, and the city has a beautiful bay, so it’s a great place for people who love both nature and cities.
Buying property in Madeira can be done in several different cities and areas, from beach houses in Calheta to property for sale in Madeira, Funchal.
7 Pitfalls of buying property in Madeira
Buying property in Madeira can be a dream come true for many, but it is essential to consider potential challenges before proceeding. Here are vital pitfalls you might face when purchasing property in Madeira:
Due to its unusual geography on top of a large shield volcano, Madeira has several microclimates. Higher altitudes may change the island’s mild, pleasant climate. Dampness and mildew may harm high-altitude structures, while east coast places are prone to strong winds. Locals advise buying property in Madeira below the “banana line,” 200–300 meters above sea level.
Madeira’s rugged hills can make everyday activities challenging. Some locations are too hilly to hike, making car dependency inevitable. If walkability is important, look for houses near the sea or in convenient areas like downtown Funchal, the Lido, Praia Formosa, Câmara do Lobos, Canico, and Ponta do Sol.
3. Structural quality
Before the 1980s, many buildings in Madeira were made with low-quality materials, which could have caused significant problems. If you buy a house over five years old, you won’t get a guarantee for any structural issues. When buying a newer home, you should look into the builder’s name and consider getting a structural survey for separate residences.
4. Legal issues
Buying a home in Madeira can involve a lot of complicated legal matters. There are often problems with title transfer, especially in older homes and in rural areas. Because of Portugal’s subrogation rule, you might have to pay the bills of the past owners. Also, Portuguese law about who owns what can complicate the process because any family member can have a part in an acquired property. To deal with these problems, it’s best to hire a real estate lawyer who knows what they’re doing.
5. Tax liabilities
Before you buy something, you should know what your tax obligations might be. Living full-time in Madeira makes you a tax resident of Portugal, which means you have to pay taxes on all of your income, no matter where it comes from. Non-Habitual Resident (NHR) tax status gives better tax treatment, but it is highly advised to talk to a local tax expert. Consider ongoing costs like the yearly municipal property tax (IMI) and the possible Municipal Property Transfer Tax (IMT) when buying a house.
6. Don’t rush
Real estate investment is a significant undertaking. Take your time to learn about the property, the area around it, and the market. Making choices based on how you feel could lead to doubts and financial stress in the future. Shop around, compare prices, and consider what you want in the long run.
Buying property in Madeira requires careful planning, local knowledge, expert advice, and a good understanding of Portuguese property rules and taxes to overcome the problems.
6 Reasons why Madeira is good for property investment
These are the six key reasons why buying property in Madeira is a good investment:
- Year-round warm climate: Madeira offers a warm and inviting environment throughout the year, making it an excellent choice for those who appreciate comfortable weather, regardless of the season.
- Safety: Recognized as one of the safest islands globally, Madeira boasts an incredibly low crime rate and 15 local police stations, making it an ideal location for investors looking for a safe and secure environment.
- Favorable tax climate: Thanks to Portugal’s non-habitual resident (NHR) tax regime, eligible individuals can significantly reduce or even eliminate their taxes on most foreign-source income. This advantage makes Madeira a cost-effective location for investment.
- Increasing demand: With more tourists discovering its charm each year, the demand for Madeira properties is rising. This steady increase in demand points to the potential for property value appreciation.
- Affordable cost of living: Compared to many European countries, the cost of living in Madeira is relatively low. This affordability extends to healthcare costs, which are cheaper than in many other European countries.
- Strong reputation: Madeira has a solid reputation among those who live or visit and is known as Europe’s leading island resort destination, further underlining its attractiveness as a property investment destination.
Property management in Madeira, Portugal
When finding a property management company in Madeira, it’s essential to keep several points in mind to ensure the competent handling of your property. Go for a local Madeira-based company with a solid reputation on the island and a host of satisfied clients. Verify their ability to manage your specific type of property by asking about their current clients, operational scale, and longevity in the Madeira property market. Asking for recommendations from friends or fellow expats living in Madeira can also help you find a trustworthy property management company.
Work with a real estate agent in Madeira, Portugal
Finding and buying property in Madeira Island, particularly cheap Madeira properties for sale, can be time-consuming. This, together with the complexities of real estate transactions, makes partnering with a real estate agent a wise move. These agents, with their understanding of the local market, extensive networks, and knowledge of Portuguese laws, can significantly expedite your journey to buying a house in Madeira.
Frequently Asked Questions (FAQs)
Can foreigners buy property in Madeira?
Yes, foreigners can buy property in Madeira. No specific restrictions exist on non-Portuguese residents or citizens owning property in Madeira. Buying property in Madeira involves obtaining a Portuguese tax number (NIF), opening a Portuguese bank account, and following the local real estate purchasing process.
Is Madeira a good property investment?
Madeira is often considered a good property investment. With its attractive climate, stunning natural beauty, and robust infrastructure, the island offers a high quality of life. Property prices are relatively stable, and the rental market is strong, thanks to the year-round influx of tourists.
Is property in Madeira expensive?
Property prices in Madeira can vary significantly depending on the location, size, and property type. While luxury villas with ocean views can be pretty pricey, there are more affordable options, such as apartments and smaller houses, particularly in less tourist-centric areas.
Is Madeira a tax haven?
Madeira is not a tax haven, but it does offer some tax benefits under the Madeira Free Trade Zone legislation, attracting some businesses and individuals. It’s designed to promote economic development on the island by providing competitive corporate tax rates.
Can I immigrate to Madeira?
Yes, you can immigrate to Madeira. Immigration usually involves securing a residence permit, which can be obtained through various means such as investment, employment, or demonstrating sufficient funds for self-sufficiency.
How do I become a resident of Madeira?
Becoming a resident of Madeira involves applying for a Portuguese residence permit. For non-EU citizens, this could be through the Golden Visa program (requiring investment in real estate or business) or the D7 Visa (requiring proof of regular income). Upon arrival in Madeira, you must register your address with the local authorities. You can then apply for a residence certificate, a requirement if you plan to stay longer than three months.