Buying property in Portugal

apartment in Portugal
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Updated 2021-09-24 14:23

If you've lived in Portugal for a while and plan to build a future in this country, you may want to explore options beyond rent and look into buying property. You may also be pleased to learn that buying property in Portugal can be a great investment opportunity and come with residential, tax and other benefits. This article looks into the process of buying property in Portugal, real estate investment opportunities, peppery prices and other associated costs and more.

Portugal has a dynamic real estate market. Even following the COVID pandemic, real estate prices continue to rise and properties in popular regions are selling like hotcakes.

There are several reasons for Portugal's popularity in the real estate world.

First, it offers some of the most affordable real estate in Europe. Even large cities like Lisbon and Porto are quite affordable by European standards when it comes to buying property. With that, property prices continue to rise: property prices in Lisbon's metropolitan area went up by close to 6% in the autumn of 2020.

Second, Portugal is a popular tourist destination: it welcomed close to 28 million visitors in 2019 alone. Thus, renting out the property you own during the high season can be quite profitable. Keep in mind that the rental income tax rate in Portugal currently stands at 28% -- with repair and maintenance costs being deductible. This adds up to a rather high yield on renting out property.

Another benefit of buying property in Portugal is that, in some cases, it facilitates becoming a resident in the country. This is possible under the Golden Visa Scheme, which allows non-EU residents to become residents in Portugal through buying property in the country. To be eligible for the Golden Visa, you will need to acquire real estate valued at at least 500,000 EUR. You may also purchase real estate valued at 350,000 EUR or above located in an urban regeneration zone and earmarked for refurbishing.

Portugal also offers a very friendly tax scheme for foreign investors. Acquiring residency via the purchase of a property will also qualify you for the Non-Habitual Resident (NHR) tax regime. The program is designed to offer foreign investors reduced tax rates -- as well as dull tax exemptions. This makes Portugal one of the very few countries in Europe where you have a chance of a 0% income tax rate with second citizenship.

Important:

The Portuguese government has recently signed a clause that excludes investments in Lisbon and Porto from the Golden Visa Scheme. When the clause comes into effect, purchasing property in Lisbon, Porto and the Algarve region will no longer allow you to apply for the Golden Visa. The deadline to exclude the above regions from the Golden Visa Scheme has recently been extended to January 22.

With that, property purchase in Portugal is not all sunshine and rainbows. Expats may have to deal with complicated purchase procedures (especially when taking out a mortgage), high taxes and expensive legal fees, deceitful real estate agents -- and more.

This is why it is absolutely essential that you do proper research before committing to a property purchase. In this article, we offer a quick overview of the real estate market in Portugal and the main steps of the buying process.

Buying property in Portugal: process and prices

The majority of Portuguese residents own the properties they live in. Renting is, of course, also popular; however, owning a home is significantly more prevalent.

Generally, there are no restrictions or complications for foreigners who want to purchase property in Portugal. Quite the opposite -- as we've mentioned above, under certain conditions, purchasing property in Portugal may even help you become a resident in the country.

To purchase property in Portugal, you will need to go through several steps:

First, you will need to apply for a Personal Fiscal Number (Numero Fiscal de Contribuinte). The process for this is quite straightforward and you will easily get the needed papers from your local tax office. To make things even easier, you can start by opening a bank account in Portugal (you will need one to purchase property) -- you will get a Personal Fiscal Number automatically.

Now, you can dive into your property search. If you are new to Portugal and are not familiar with the real estate market, it's best to work with an experienced local estate agent.

Important:

Real estate agents in Portugal need to be government-registered and in possession of a license number (Associacao de Mediadores Imobiliarios). To find out if the agent you are planning to work with is officially registered, you can contact the Instituto da Construcao e do Imobiliario.

Another important thing to keep in mind when working with a real estate agency is that real estate agents in Portugal work in the interests of the seller as the seller will be the one paying their commission. The good thing about this is that you won't have to pay agent fees when purchasing a property. On the other hand, the real estate agent will look out for the seller's interest before yours. This is why it is good practice to also take independent advice before signing any contracts.

Some of the biggest real estate agencies in Portugal are:

  • RE/MAX
  • Era
  • Century 21
  • IMO
  • Sapo
  • And others.

Once you have found the property you are interested in, it's time to make an offer. This is the key part of the buying process and it's highly recommended to have an independent solicitor by your side to guide you through this stage. You will also need to employ a notary to oversee the transaction -- you can search for one locally or through a large directory like the European Directory of Notaries.

If your offer is accepted, your notary will review the transaction and check the property you are about to buy. They will typically do so via the Land Registry and Inland Revenue to make sure there are no outstanding issues with the property you are about to buy.

The next step is signing the contract. Once you do, both you and the seller will be legally obligated to complete the transaction.

Once the contract is signed, you will need to pay a deposit and set a completion date for the transaction. At this stage, you will also need to pay IMT, the property transfer tax. Learn more about taxes in Portugal.

Finally, you will need to sign the Deed of Purchase and Sale (Escritura Publica de Compra e Venda) -- after which you can register the property in your name.

Property prices in Portugal depend on a number of factors, with location probably being the number one price maker. With that, you should be able to find accommodation in Portugal within a varied price range. The median price per square meter across the country was around 1,117 EUR in 2020. Taxes vary according to property value and are set by local authorities.

Mortgages are available through most banks, and mortgage conditions vary depending on the bank itself as well as the property and its location.

Useful links:

European Directory of Notaries

Accommodation in Portugal

Buying property in Porto

Buying property in Lisbon

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