Natalie When people ask us if buying property in Portugal is a good idea, our answer is always a resounding yes. The real estate market performs excellently in European countries and foreign investment flocks. Even though the Golden visa underwent criteria changes, property buyers are still attracted by rental yields, purchase prices, beautiful beaches and the prospect of foreign property ownership.
Of course, though, given that we are real estate agents, one might accuse us of being biased. So, this article intends to explore specific reasons why the property market of Portugal is worth investing in, as well as places that stand out and strategic advice you need to know. Let’s look at Portugal in-depth, from property prices to permanent residence, the buying process, and more.
Why it is a Good Idea to Buy Property in Portugal
Brief Summary of Portugal
With captivating landscapes, pleasant climates, and warm hospitality, Portugal has emerged as a prime country for property investment. Portugal, situated on the Iberian Peninsula in Southern Europe, boasts a diverse and captivating geography that easily matches places in Western Europe, and the country is ideal for investors looking for solid housing markets and purchasing processes.
From the beautiful Algarve coastline to the historic cobblestone streets of Lisbon and Porto, Portugal’s pleasant climate, featuring over 300 days of sunshine annually, contributes to relaxed and outdoor-oriented lifestyles, and mild winter climates are an added bonus.
Portugal has also earned a reputation as a welcoming and expat-friendly nation with quality healthcare for permanent residents, and compared to other Western European countries, the low living costs and affordable property taxes attracts expatriates seeking affordable property purchase prices.
The Portuguese Economy
One primary reason to invest in Portuguese real estate is the country’s robust economic stability and consistent growth. With insightful expertise, Portugal underwent significant economic reforms recently, making it a resilient and attractive market for investors. The stability of Portugal’s economy is further highlighted by successful rebounds from global financial crises, and the government’s efforts to implement sound monetary policies have led to steady economic growth, creating positive environments for property investors.
Favourable Tax Incentives
Portugal boasts a favourable tax regime that is particularly appealing to foreign investors. The Non-Habitual Resident (NHR) program is one such initiative that attracts expatriates seeking tax-efficient destinations. Under the NHR program, qualifying individuals can benefit from an income tax rate of 20% on certain incomes, like pensions and foreign-source income, for ten years.
Diverse and Scenic Locations
Portugal’s diverse geography offers various landscapes, from stunning Algarve beaches to historic city centres like Lisbon and Porto, hence the country’s real estate market caters to different preferences, whether one desires a seaside retreat, a tranquil rural setting, or vibrant urban lifestyles. The Algarve, in particular, is renowned for picturesque coastlines, beach houses, golf resorts, and Mediterranean climates. Many investors like the region for high-quality properties, luxury living and natural beauty.
Affordable Cost of Living
Compared to other Western European countries, Portugal offers relatively affordable living costs for expatriates looking to make their savings go further while maintaining good lifestyles. The reasonable cost of everyday expenses, including accommodation, food, and transportation, contributes to Portugal’s appeal for cost-effective property investment.
Quality of Life
Portugal consistently ranks high in global quality of life indices thanks to the relaxed pace of life, friendly locals, and a strong sense of community. The Mediterranean climate also enhances the quality of life. Top this off with the diverse cultural scene, historic landmarks, and culinary delights that contribute to a rich and fulfilling lifestyle and Portugal is an ideal place to set up home.
Growing Tourism Sector
Portugal experienced a significant surge in tourism in recent years, thanks to its reputation as one of Europe’s safest countries. This trend positively impacted housing markets, especially in destinations like Lisbon, Porto, and the Algarve. Investors capitalise on this trend by purchasing properties at excellent purchase costs for short-term rentals, commercial properties, or vacation homes.
The rise of online platforms for vacation rentals and peak tourism seasons also made it easier for owners to generate income. Growing tourism sectors and strong demand for short-term rentals make the European cities of Portugal attractive for property investors seeking yields during peak tourism season. (About tourism in Portugal.)
Quality Healthcare
Portugal stands out as an exceptional destination for expatriates seeking high-quality healthcare services. Expatriates with legal residency can access top-notch medical care through the National Health Service (SNS) or opt for private healthcare, which often boasts shorter waiting times and additional amenities. The country’s commitment to healthcare excellence, coupled with affordable living, makes Portugal an appealing choice for those prioritising their health and seeking a welcoming environment with world-class medical services.
Improving Infrastructure
Portugal made substantial investments in infrastructure development, enhancing connectivity and accessibility throughout the country. This commitment to infrastructure development benefits residents and adds value to real estate investments. Regions with well-developed infrastructure tend to experience higher property appreciation, making them particularly appealing to investors seeking long-term capital growth. Regions also prioritising renewable energy and sustainable practices experience increased property values as buyers seek eco-friendly living spaces.
Where to Buy Property in Portugal
Portugal’s allure as a prime investment destination is not confined to a single location; it extends across various regions, each offering unique charm and investment potential that many places in Western Europe can’t match.
Lisbon: As one of the Great European Capitals, the historic city neighbourhoods, such as Alfama and Baixa, boast charming cobblestone streets, historic landmarks, and a lively atmosphere that make owning a city centre apartment delightful. Lisbon experienced a surge in demand, driven by the city’s cultural renaissance, economic growth, and popularity among digital nomads and expatriates even though the price per square meter is Portugal’s highest.
This also led to a surge in long-term rentals, especially in modern properties. The district of Chiado, known for upscale shops, excellent public transport, and cultural venues, is a hotspot for foreign ownership. Apartments with river views and easy access to Lisbon’s iconic trams are highly sought after. Additionally, emerging tech hubs in Parque das Nações attract young professionals, making this district appealing for buy-to-let investments and expensive properties.
Porto: Porto, Portugal’s second-largest city, is a UNESCO World Heritage site with historic architecture, scenic riverfront, and, of course, its namesake port wine. Real estate prices in Porto offer a mix of historic city apartments in Ribeira, overlooking the Douro River, and modern developments in the up-and-coming Foz do Douro district. They also provide decent rental yields alongside reasonable prices.
Foreign ownership Investors like Porto for authenticity, potential for long-term growth, and decent property prices for a city centre apartment. The city’s cultural scene, characterised by art galleries, music festivals, and a burgeoning culinary reputation, adds to the appeal. As Porto continues to establish itself, property values in key areas are expected to appreciate, making it promising for both lifestyle and affordable prices.
The Algarve for Modern Properties: The Algarve, Portugal’s southernmost region, is a favourite for European property buyers seeking sun-soaked beaches, championship golf courses, and excellent rental yields from their ideal property. Cities such as Faro, Lagos, and Albufeira offer several real estate options, from beachfront villas to countryside estates.
The Golden Triangle, encompassing the prestigious resorts of Vale do Lobo, Quinta do Lago, and Vilamoura, is a hotspot for luxury properties, albeit at top-notch prices. This region attracts affluent buyers looking for high-end residences with access to world-class golf courses, upscale amenities, and stunning coastal views. The Algarve’s popularity as a tourist destination also presents opportunities for investors interested in short-term rental income, particularly during the peak summer season.
Cascais: Cascais, a charming coastal town just west of Lisbon, is synonymous with elegance, picturesque landscapes, and laid-back lifestyles. Cascais caters to blended sophistication and tranquillity. The stunning coastline and nearby natural parks complement the town’s historic centre, with cobblestone streets and boutique shops.
Properties in Cascais range from historic mansions to modern apartments, often offering sea views and proximity to sandy beaches. The town’s reputation for affluent people and celebrities elevated the housing market, ensuring luxurious yet relaxed lifestyles within easy reach of Lisbon.
Sintra: Nestled amidst lush hills and dense forests, Sintra is a fairytale-like destination that captured the hearts of locals and visitors. Known for romantic palaces, colourful gardens, and mystical atmosphere, Sintra offers unique settings at average prices.
The housing market in Sintra includes historic villas, charming cottages, and modern homes surrounded by nature, and the UNESCO World Heritage-listed town attracts those desiring slower paces of life while still near Lisbon. With enchanting landscapes and cultural heritage, Sintra is distinctive for property investment, attracting individuals with extraordinary charm.
Évora: For those captivated by Portugal’s rich history and rustic charm, Évora in the Alentejo region also offers average prices. This UNESCO-listed city is celebrated for well-preserved medieval architecture, including the iconic Temple of Diana. Évora also features traditional townhouses, historic estates, and countryside properties surrounded by vineyards and olive groves. Buyers seeking more traditional experiences love Évora’s timeless appeal, and the Alentejo region’s serene landscapes, renowned wine production, and historic allure perfectly portray Portugal’s cultural heritage.
Types of Portuguese Property
Portugal’s diverse housing market offers several property types, catering to various preferences and lifestyles. Whether you’re seeking the vibrant energy of urban living or tranquillity of rural landscapes, you can find the perfect property that matches your criteria and budget.
Apartments: Apartments are a popular choice of Portuguese property for those who appreciate the convenience and vibrancy of urban living. In cities like Lisbon and Porto, historic buildings have been repurposed into one-bedroom apartments, blending contemporary design with traditional architecture and selling for average prices. Individual apartment units offer easy access to cultural attractions, restaurants, and public transportation. Additionally, the compact nature of apartments makes them low-maintenance, appealing to both locals and international buyers looking for pied-à-terre or a viable investment property for rental purposes.
Duplexes: Duplexes, with their multi-level layouts, offer space and elegance. These properties typically consist of two floors, separating living and sleeping areas. In cities and coastal regions, duplex apartments often boast contemporary designs and modern amenities. Duplex penthouses with panoramic sea views are particularly sought after in areas like Cascais and Estoril, catering to buyers with luxury and style.
Villas: Exclusive developments like Vale do Lobo and Quinta do Lago along the Algarve coastline feature opulent villas with direct access to golf courses and pristine beaches. These properties are designed to provide residents with the utmost privacy and resort-like lifestyles, and the profitable investments are peaceful retreats while still within reach of amenities and cultural attractions.
Countryside Homes: In regions like the Alentejo and Douro Valley, traditional farmhouses and cottages surrounded by vineyards and olive groves dot the landscapes. These properties exude rustic charm, often featuring exposed stone walls, wooden beams, and terracotta floors. Countryside homes provide more self-sufficient lifestyles, with the potential for small-scale farming or viticulture. Buyers seeking retreats from urban life find solace in the tranquillity of Portugal’s countryside.
Luxury Houses: Portugal’s luxury real estate market experienced significant growth, attracting high-net-worth individuals seeking exclusive properties for high-level financial investments. The allure of luxury housing is amplified by tax incentives, attracting international buyers seeking luxury and sophistication. Without a doubt, Portugal’s diverse real estate offerings provide broad choices for property buyers.
Can a Foreigner Get a Mortgage from a Portuguese Bank?
Yes, one borrowing option for financing is a mortgage loan from Portuguese banks for financial investment in property. The process for obtaining a foreigner’s mortgage is similar to that of Portuguese residents. Also factor in additional fees, like legal administration, document survey, appraisal and registration. The availability of mortgages will vary depending on your income. While it is not mandatory to be a Portuguese resident to secure bank loans, having residency may improve the terms and conditions the banks offer.
Foreigners must typically provide proof of address and income, such as pay stubs, bank statements, self-employment income paperwork, or tax returns, to demonstrate their ability to repay the mortgage. Lenders will assess the borrower’s financial situation to ensure they can afford the loan, and Portuguese banks usually require a down payment, which may vary based on financial profile and property type.
It’s common for banks to require a 20% to 30% deposit. Naturally, they want to be assured you can make mortgage payments, so they will only offer affordable options. Exchange rate fluctuations impact repayments, so borrowers should carefully consider this aspect. Foreigners should research and approach different banks to compare mortgage terms, interest rates, and conditions.
Can any Foreigner Buy Property?
Yes, Portugal has a relatively open policy for foreigners buying property. Generally, any foreigner, whether from within the European Union (EU) or outside it, can purchase property. The process for buying property is designed to be accessible to both residents and non-residents. EU Citizens are not subject to any special restrictions or requirements, and Portugal has reciprocal agreements with many countries, allowing citizens of those countries to buy property on similar terms as Portuguese citizens.
These agreements often facilitate straightforward purchasing processes. Non-EU citizens can also purchase property without significant obstacles, but additional administrative steps may be involved. There are restrictions on non-EU citizens purchasing agricultural or forestry land. Local lawyers or legal representatives can help navigate the process.
Property Taxes and Fees of the Buying Process
- Stamp Duty: 8%
- Legal Fees: 2%
- Estate Agent Fees – Varied
- Notary and Registration Fees: 1.2%
- Property transfer tax (Imposto Municipal sobre Transmissões – IMT) – Depends on the purchase price and is payable on property costing more than 92,000 Euros.
NOTE: The IMI (Municipal Property Tax) will also need to be paid yearly; the amount is determined by the municipality where you buy. The IMI (Municipal property tax) in Portuguese is called Imposto Municipal sobre Imóveis.
Don’t Forget the Personal Fisco Number
To take ownership of property, get a fisco number from the local tax office where you plan to buy. Alternatively, when opening a Portuguese bank account, you automatically receive one to make real estate purchases. We recommend opening a bank account for purchasing and handling bills after receiving the title deeds.
The Portugal Golden Visa and Residency by Investment Program
Unfortunately, changes to Portuguese national law mean that the Portuguese Golden Visa program no longer applies to real estate. Still, there are other options for individuals seeking residency and, eventually, European Union citizenship. Launched in 2012, this innovative program attracted foreign investment by offering combined residency benefits and straightforward application processes. As of 2023, the real estate option was removed from the program.
Temporary versus Permanent Portuguese Residency
The Portuguese nationality law also covers residency. Acquiring temporary Portuguese residency is open to individuals seeking legal residency in the country for over three months, provided they can demonstrate a monthly income of at least EUR 1,070. Dependents can be included in the application process and will also be granted temporary Portuguese residency. This status has various advantages, including a 10-year tax exemption on royalties, dividends, and foreign-source pensions.
- Temporary Portuguese residency is valid for one year, with the option for renewal.
- After holding a temporary permit for 5 years, individuals can apply for permanent residence
- Renewal of temporary residence permits is possible for two-year intervals.
- EU and non-EU citizens can apply for and obtain temporary residence permits.
Capital Gains Rules
Portuguese capital gains tax rules are subject to several factors, including type of asset, holding period, and residency status. Residents are generally subject to tax on their worldwide income. Non-residents are typically subject to gains arising from Portuguese-situated assets. Tax rates vary depending on the asset type and holding period. The general tax rate for individuals was 28%. Given the potential changes in tax laws at any time, consult with tax professionals or legal advisors who are up-to-date on the current Portuguese tax regulations.
See Property for sale in Portugal
Discover your dream home in Portugal with our curated selection of exquisite properties awaiting your exploration. Whether you envision retirement property, beachfront properties, or somewhere in the capital city, our diverse portfolio, with various property prices, offers options to suit every taste. Whether you want a city centre apartment buy-to-let property, our expertly chosen listings showcase the unique charm and lifestyle opportunities the beautiful country offers. Start your property search and let the beauty of Portugal captivate you. Each listing includes property prices, property types, and more information on how to arrange viewings.
Use Our Real Estate Agency Services
Embark on a seamless and rewarding buying journey through the Portuguese property market with our dedicated real estate agency services. Navigating real estate markets can be complex, but with our expert guidance, you can turn your dream of owning Portugues property into reality. From personalised consultations to buying rental property, rural property or more information about Portuguese mortgages and average yields, our experienced team is committed to understanding your unique preferences. Call us today.
Also About Portugal
Seven Regions: Altogether, Portugal makes up a delightful country brimming with culture and traditions. These seven regions are further broken down into 18 districts, some of which stand out for travel and overseas living. From the smaller areas of Madeira to larger ones, many foreigners love and adore their landscapes, local communities, landmark buildings, and day-to-day ambience. This article is one step closer to understanding why it is a good idea to buy property in Portugal.
