Buying property in Lisbon

Buying property in Lisbon
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Updated 2021-09-23 08:07

So, you are finally in Lisbon! You have a flat, a job, and your life is moving forward quickly. Well done! If you plan to settle in the city for long — you might be looking into buying property here. And this is where this post comes in — below, we've summed up some tips to help you plan your property purchase in Lisbon.

A hot destination for expats all over the world, Lisbon has seen the housing market consistently blossom for the past six years. As a result of that demand, along with other government incentives such as the Golden Visa, home prices are the highest ever: a 25% rise since 2013. In central Lisbon -- we are talking neighbourhoods like Baixa, Bairro Alto, Chiado and Rossio -- property prices have risen 30% between 2016 and 2018 only!

That said, the prices per square meter in the Portuguese capital are still not amongst the highest compared to other capitals in Europe: around 1,500 EUR in Lisbon compared to over 16,000 EUR in London, the most expensive city in Europe. This make buying property in Lisbon an excellent investment for expats who decide to stay in the city for longer, calling it permanently home.

Investing in property in Lisbon

The housing market in Lisbon (and Portugal on the whole) is doing quite well — even in the aftermath of the COVID-19 pandemic. This makes it a very viable place for investment — even if you are not considering a long-term stay in the country.

Lisbon is a very popular tourist destination. And having real estate here, especially in popular central neighborhoods, can be a great way to make extra income as you will have great options for renting out your property during the high season.

There are several factors that make Lisbon a great place to invest. First, it's a capital city with some of the best-priced properties in Europe. Sure, it's definitely pricier than Portuguese countryside — but it also offers a better return on your investment.

Another advantage of investing in buying property in Lisbon is that real estate prices in the city continue to rise. In fact, property prices in metropolitan areas of Lisbon went up 5.83% by November 2020.

However, even as prices continue to rise, Lisbon remains to be quite affordable by European standards — especially as a capital city. What's more, transaction costs associated with purchasing and selling property in Lisbon remain quite low. You should expect to pay real estate agent fees, value-added tax (VAT), transfer taxes and other related legal fees — but all of these are in the low to average range.

A fixed net rental income tax in Portugal stands at 28%. However, repairs, maintenance expenses and other local taxes are all deductible from your gross rental income. This makes rental income in Lisbon quite a high yield — especially when compared to other European cities.

What's more, Portugal makes it possible for foreigners to acquire residency via the purchase of property. Getting residency through a purchase of 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 full 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.

What to expect when buying property in Lisbon

If houses and gardens are what you look for, it is worth looking at properties outside the Lisbon metropolitan area because the Portuguese capital city, due to its history and geography, it's mostly composed of flats. Refurbished old buildings with traditional Portuguese tiles are common in the city, as the ubiquitous balcony with the picturesque drying line -- however, half of the buildings are old enough to not have a lift, so be prepared to get a daily workout with the stairs. New buildings are not as common in the area surrounding the city centre, being reserved for suburbs and upcoming developing neighbourhoods such as Sete Rios and Benfica.

The sight of an old, collapsing building abandoned between financial crises is quite common in different neighbourhoods in Lisbon. Not surprisingly, many foreign constructors are buying and renovating those places, which provides another stellar opportunity for expats who are looking to customise and buy a piece of brand new property -- not the majority of places available in the city. It is quite usual to find flats in a less than pristine condition, on offer for a smaller price, intended for the buyer to be able to remodel it completely.

Older buildings in the historic neighbourhood often do not come with a garage or parking space, and those qualities are often considered premium by real estate agents.

Property prices in Lisbon

The median price for properties in Lisbon is 1,507 EUR per square meter. When looking for new or renovated properties around the city center, you should expect prices in the range of 200,000 to 500,000 EUR .

A T0 (studio flat) in Lisbon will start at around EUR 100.000 in upcoming neighbourhoods such as Marvila and Misericórdia. In the city centre, that price can triple. The average price for a T2 or T3 (two or three bedrooms) in areas like Anjos, Arroios and Intendente -- about 15 min from the city centre by public transport -- can go for around EUR 450.000, depending on the area of the flat. Premium apartments and restored villas are also available, with prices ranging from EUR 1.5 million to 11 million.

Real estate agencies

There are countless real estate agencies in Lisbon that can support expats when finding their new home: Remax, Era, and Idealista being a few of them. Facebook Marketplace is also a good place to find independent sellers as long as you're mindful.

Most real estate agencies will speak English and can assist you throughout the buying process as well.

Useful links:

HomeLovers

Idealista

Remax

Era

Golden Visa

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.