Buying Property in Portugal The Complete Guide
Buying property in Portugal means – feasting your eyes on scenic views of the Atlantic while basking in the glory of the sun!!!
But it’s not just the sun that’s warm and welcoming here. Portugal offers several benefits and incentives to attract more and more expats to settle in. The friendly culture and hospitable community is another reason that many foreigners choose to relocate here. So from its Golden Visa to taxes exemption and excellent quality of living, it has a tinge of all the right things.
It also has quite a variety of affordable houses, amidst both cobbled streets of the countryside and the city centers’ metropolitan lanes. It is one of the most family-friendly countries in Europe, with high safety scores.
But moving into another country is easier said than done. So here’s a comprehensive guide to help you know how to find your dream home in Portugal. Let’s walk you through all the essential details.
Pros and Cons of Buying Property in Portugal
Portugal is a warm and welcoming country with a hospitable culture. But that’s just the tip of the iceberg. So here are more reasons to consider before you decide to invest in the country’s real estate.
Pros: Advantages of Owning Real Estate in Portugal
First, let’s look at the advantages of purchasing a property in this southwest European country.
❖ Affordable Prices
Buying property in Portugal is a hot investment thanks to the property prices being on the lower end of the spectrum. A significant reason for this is the sharp drop that occurred during the 2011 and 2012 financial crisis of the country. However, since 2015, the economy has been recovering steadily and promises good returns for current investments.
Nevertheless, it’s not just the affordable property prices as the cost of living is also much easier on the pocket. When compared to the other Western countries, Portugal stands out with low costs of living.
❖ Advantageous Geographic Location
Portugal is blessed with a mild climate all through the year. Summers here are hot and sunny, while winter temperatures hardly drop below 5 °C. That said, it has stunning landscapes along the western coastline as well as the hinterland.
There are many national parks and nature reserves. Plus, it has both sandy beaches to let for some leisure time and volcanic islands for adventure junkies. So there are ample opportunities to plan weekends and vacations with friends, family, or even solo.
❖ Low Taxes
Portugal is one of the few European nations that incentivizes foreigners to become residents. One such incentive is its non-habitual resident (NHR) scheme that renders special tax benefits for new residents for up to a decade.
Thanks to this scheme, your personal income tax will be capped at 20 percent for 10 years, with no minimum stay requirements. There’ll also be no double taxation for employment income abroad, and one may also inherit property without incurring any gift or wealth tax.
While Portugal is still the country where farmers use donkeys for conveyance, it is also home to corporate metropolitan cities like Lisbon. Such is the diversity here! So you’ll have plenty of lifestyles to choose from, ranging from the humbly beautiful countryside to buzzing business centers.
Portugal also enjoys one of the best quality of life in the world, with an above-average score of 162.46. It especially ranks high on work-life balance and environmental quality parameters. And as per the latest Global Peace Index, it is the fourth safest country in the world and the third in Europe.
It is also one of the most sparsely populated countries in Europe, with 111 people per square kilometer. This is much lower than other European countries like France, Italy, Germany, Switzerland, and even the UK.
❖ Friendly to Foreigners
The 2022 Expat Insider Survey ranked Portugal as one of the most expat-friendly countries globally across its various indices. So, the warmest country in Europe is also the warmest when it comes to hosting foreigners. The people are usually very friendly and are known to care for each other.
Also, you’ll face little to no language barrier as most Portuguese people can speak English well. Besides, almost half the Portuguese master at least one foreign language.
Cons: Disadvantages of Owning Real Estate in Portugal
While planning to live in Portugal, here are a few reasons that might make you rethink your decision.
❖ Low Wages
If one is planning to earn locally, the paychecks might not be all that worthy in many sectors. In Portugal the average monthly wage is €1,270.
However, for entrepreneurs and foreign employment holders, this might not be the case.
❖ Expensive Consumer Goods
While the overall cost of living is one of the lowest in Portugal, purchasing consumer goods is a pricy affair. Electronics and apparels come with much higher price tags and surprise most foreign visitors.
Things To Consider Before Buying Real Estate in Portugal
Like any other investment, here are some of the most important things that you must consider before buying a property in Portugal.
The Purpose and Must-Haves
Like any other investment, you must be very clear about the reason behind a property purchase. It could be for a holiday home; it could be for rental income. Perhaps it is for a single person or an entire family.
Here are a few more questions you need to ask yourself:
❖ Do you prefer cosmopolitan living or the countryside?
❖ A house by the beach or in the hinterland?
❖ Would you be hosting guests, staying with family, or living solo?
❖ Do you wish to rent it out when not in use?
❖ Should the property be close to weekend getaways or adventure sports?
❖ Do you need a garden, a balcony, or a swimming pool?
❖ Do you need a pet-friendly house?
Once you have a clear understanding of what you seek from the property, you’ll have a better idea of what to look for!!!
Next comes your budget! And it’s always wise to search property within your budget rather than choosing one first and then working on your budget. Besides, there are some essential points to account for in your budget, like the currency exchange rates, deed costs, etc.
Once you are clear about both your expectations and budget, you must decide the type of property that checks all the boxes.
Types of Properties
If you ask what types of properties are available in Portugal, there’s quite a variety! Though it’s a bit hard to summarise all kinds, let’s simplify and divide them into the following five categories when buying a property in Portugal.
❖ A Sprawling Villa
Villas are usually the type of houses that check most of the leisure and comfort living boxes. These come laden with swimming pools and sprawling gardens and are available in most parts of the country. However, such villas are generally built on the outskirts of towns and cities.
❖ A Comfy Townhouse
If you wish to stay near the heart of a city and be close to everything, a fancy townhouse may do the trick. A typical highlight of townhouses is the luxury of having terraces and balconies, apart from an ample number of rooms. Townhouses also ensure interaction with neighbors, though privacy seekers may not like the community culture.
❖ Scenic Coastal Apartment
Coastal apartments offer scenic views of the ocean, along with shared access to the garden and swimming pool. These are more budget-friendly and great if you do not use them frequently. Apart from these, you could be lucky to get access to gyms, children’s play areas, and more.
❖ Relaxing Resort Property
A resort property has its own share of pros and cons. You will get access to shared facilities like pools, gyms, gardens, and more, while it could be anything from a villa to an apartment-like accommodation. Moreover, there will be a lot more tourists sharing these with you instead of regular neighbors.
However, you will have all the luxuries to yourself during the off-seasons, with no additional charges.
❖ Traditional Portuguese House
If you believe in ‘When in Rome, do what the Romans do,’ this is for you! Purchasing a traditional Portuguese house among the locals and having considerably lower maintenance costs attracts many foreign residents. Again, this could be a regular apartment or a sprawling villa in the hills; there are plenty of such properties to explore.
How To Buy a Property in Portugal
There are almost no restrictions on foreigners owning property in Portugal. And if you are a non-EU resident and eligible for the country’s Golden Visa, you’ll get five years of residency as well. So if you have already made up your mind about buying a property in Portugal, here’s a quick step-by-step guide to help you buy your dream property in this beautiful country.
❖ Establish Your Search Criteria
By now, we assume that you are clear about the kind of property you are looking for. If not, please refer back to the ‘Things to Consider Before Buying Real Estate in Portugal’ discussed earlier. Nevertheless, this step is essential as it will help you make quick and better decisions.
Once that’s done, choose how you wish to go about house hunting. You could hire an experienced local REALTOR® or real estate agent that will help you find the best properties at reasonable prices (I explain the difference between them at bottom of post).
❖ Go on a House Viewing Trip to Portugal
After viewing properties online, it’s wise to visit in person before making any sort of payment. It will help you cross-check the offerings and get a real feel of the property, inside out. And trust me, it’s a potential deal maker or breaker for many expats.
While on the trip, talk to locals and neighbors, absorb the surroundings, visit essential commodity shops, and more. This short trip could also get you a sneak peek into what living, in particular, will be like, before any real commitments.
It is also advisable to get in touch with the agents before actually charting your trip. Get feedback on areas and properties that you have shortlisted so as not to get stuck on any sort of dead ends. For instance, they’ll be able to advise you to avoid public holidays or local festivals that might impact your itinerary.
You may also choose to arrange the entire trip without the help of any agents. However, be sure that you consider everything and plan adequate time for each property or region.
Now, it’s also crucial as to where you choose to reside during your trip. To your surprise it’d be best to stay in rented accommodation, instead of a hotel, to have a real-life experience of staying in an area. You’ll learn where to get the groceries, how to reach a gym, or where to go for your morning walks. Conduct a cost-benefit analysis as well.
Another tip for you is to take notes and pictures of each property. You might have a good memory, but this additional activity will help you compare and contrast your choices in a better manner. Moreover, feel free to plan more than one trip so as to make the most of your property purchase.
❖ Selecting the Property
This step is pretty simple – just review the properties that you visit and narrow down your list to one or perhaps two. Besides, it’s always OK to plan another visit before reaching a final decision.
❖ Making an Offer
Once you narrow down your search to one or two properties, it’s time to make an offer. You must already be aware of the property’s listed price, but what you offer will dictate further negotiations before reaching the final price. While making an offer, also consider currency exchange rates, mortgage availability, etc.
It’s advisable to stay neutral on your interest in the property. Let the agent and the seller know that you are keen, yet never portray that you are already in love with the property.
❖ Settling on a Purchase Price
The process of negotiation is inevitable at this stage. The seller will try to maximize the price at all points. So consult your agent for advice on the price you’ve offered for the property.
Moreover, it is necessary to check what are the various price elements like VAT (Value Added Tax). It needs to be done to make sure that the price is not inflated with any invalid element.
❖ Reserving the Property
After an amount has been settled, you will be required to reserve the property so that it is taken off the market. You will have to make a small deposit for the reservation, and the seller gets an assurance that you will eventually complete the purchase. The reservation amount is usually a small percent of the settlement price.
It is also the time for your lawyer to check the legal side of things before any further exchange of money takes place.
Also, note that this step also requires signing legal documents to certify that a reservation has been made in your name.
❖ Signing the Promissory Contract
Next comes the Contrato de promessa de Compra e Venda (promissory contract). Once everything is verified by your lawyer’s end, a promissory contract will be prepared. You will have to make a second payment, a 10-30 percent official deposit to the seller, though this rate may vary. The reservation amount already paid shall be included in this deposit.
This contract will also include all the details of the property, along with steps that shall be taken in case of any alterations to this contract. For instance, if you decide to pull back from this contract, you might receive a refund of a certain amount. Similarly, if the seller decides to pull back, he will be obliged to refund double of this amount to you, as per Portuguese laws.
A date will also be fixed for the final deposit, which usually spans a couple of months to around six months.
The following post to learn more about the CPCV - Exchange of Contract https://www.infinite-solutions.pt/post/cpcv-promissory-contract-what-is-it
❖ Final Deed
As the name suggests, this step involves making the final payment. At this point, you have all the clearances, and the property is debt-free and legal. You’ll make the balance payment, and the freehold of the property is transferred in your name. Later you will also have to get it registered in your name at a local tax office.
The final deed is usually signed in the presence of a notary. In case you have sufficient funds and are keen on buying a property right away, you may choose to skip the Promissory Contract. Yet, signing Promissory Contracts before the final deed is advisable to weed out potential loopholes.
Best Places to Live in Portugal
Most regions of Portugal have good transportation options, including several national and international airports. Moreover, each has its own set of geographical and economic aspects that impact the life of the residents. So get a quick review of the best cities to live in Portugal for expats.
The capital city of Lisbon is undoubtedly the heart of the country. It’s got everything from bustling nightlife to calming coastal abodes. The city offers explicit social life with several restaurants, has connectivity, and also attracts global tourists.
The cobbled streets and rustic architecture are soothing for expats looking for a retirement home in Lisbon. This coastal city is also home to the Tower of Belém, a UNESCO World Heritage site.
The scenic city of Porto is located beside the Douro River estuary. It’s the second-largest city in the country, has its own airport, and is an excellent center of fun and entertainment. Its historical center is, in fact, listed as a cultural heritage site by UNESCO.
Naturally, it has a fantastic footfall of tourists, and to avoid that, purchasing properties on its outskirts is much preferable. You’ll also find many seafront properties in Porto. You’ll specifically love the wine cellars along the river that are open for tasting every single day.
For golf lovers, there is no better region than the Algarve to make a retirement or holiday home. It is especially famous among foreign property buyers, and prices are usually on the higher end. Yet, you will get more property options here than in other parts of Portugal. For instance, modern and traditional houses are located in the center. While Faro, located in the southern Algarve, offers more affordable houses.
The Silver Coast
The Silver Coast is merely half an hour from Lisbon yet is increasingly trending among foreign property buyers. It’s medieval towns and small Cities, with a slow-paced life, which is a boon for middle-aged people. But it is also a haven for water sport enthusiasts, as the temperature also stays moderate all through the year.
Northern Minho Region
Portugal has something to offer any expat looking for a new life – whether that is a quiet rural retreat or a vibrant city living. While its sunny south side is unimaginably beautiful, its northern Minho Region is also worth a look. There is a diverse landscape waiting for you to be explored. Whether you prefer country escapes, beachside villas, or even city center apartments, Northern Portugal’s Minho Region real estate market has plenty of options to suit every lifestyle.
The Costs of Buying Real Estate in Portugal
When setting a budget for purchasing real estate property in Portugal, you must have additional funds of about 8–10% of the purchase price. These will be charged in the form of taxes and ad other costs, but you must be prepared for these in advance.
As a first step, you will have to apply for a Fiscal Number (NIF - Número de Identificação Fiscal). This will act as your tax ID in Portugal and will be referred to in all your agreements.
Portuguese Real Estate Taxes
❖ Property Transfer Tax – IMT (Imposto Municipal sobre Transmissões)
IMT is a property transfer tax that is chargeable on all properties depending on the location, purchase price, and kind of house. It could be as high as 10% for high-end city villas, to almost nothing for a cozy countryside house.
❖ Stamp Duty (Imposto do Selo)
Stamp Duty is usually a flat payment of 0.8% of the property price. It could also be charged at 0.5 to 0.6% if the property is financed by a mortgage, subject to a few more conditions.
❖ VAT (IVA)
VAT is applicable on all newly constructed properties and is included in the purchase price.
❖ Notary and Land Registry Fees
These are mandatory fees that generally cost between 1.5 to 2% of the property purchase price.
❖ Deed Registration
Also, include around 1% as the deed registration fee.
Other Fees and Taxes
Additional fees and taxes may include one or more of the following.
❖ Estate Agent’s Commission
Estate agents are usually compensated with a fee from the seller and split with listing agent.
❖ Lawyer’s Fee
Lawyers usually charge around 1% of the purchase price, but their fee may vary mainly on the one you hire. We can recommend our trusted lawyer if you do not have one.
❖ Overseas Money Transfers
Often unaccounted for, transferring money across borders comes with its own share of costs. You might also need a specialist’s services to seek the most economical and legal route. We can recommend our trusted currency exchange broker if you do not have one.
❖ Post-purchase Expenditure
Once all the formalities are complete, and you are all set to move into your new home in Portugal, brace for a little more expenditure. It may include your travel costs, costs on furniture, utilities, removal, and more.
Getting a Mortgage in Portugal
Some buyers prefer mortgaging over buying a property in Portugal with cash. Securing a mortgage in Portugal is not very complicated and has minimal requirements. Most foreign expats can expect a mortgage at 70% loan-to-value (LTV).
You might have to open a bank account in one of the national or international banks having a branch in Portugal. And then make a deposit of at least 25% of the loan amount. Caixa Geral de Depósitos, Novo Banco, Santander, Bankinter, and BBVA are some of the leading banks in the country.
For being eligible for a mortgage, the banks basically need assurance that you have clear proof of suitable income. Loans are offered on both fixed and variable rates of interest. So we suggest you take advice from an overseas mortgage broker to seek the best options at the time. We can recommend our trusted loan broker if you do not have one.
First, you’ll need to apply for a permanent Portuguese fiscal number. Our trusted lawyer can secure one for you.
Once you have that, you will have to furnish the following documents when applying for a mortgage:
❖ Copy of Portuguese tax/fiscal number
❖ Past six months of income proof
❖ Past year bank statements
❖ Past two years’ income tax return
❖ Current mortgage details (if any)
❖ Copy of your passport
❖ Proof of address (copy of recent utility bill)
Selecting the Right Team
It’s always a good idea to get help when buying a property in Portugal, even if you think that you got it all. A good reason for this is that your knowledge shall be limited to what you find online, and ground reality can always be different. Yet, it also becomes important to choose the right team that will work in your best interests.
By team, I mean – your REALTOR®, lawyer, overseas currency specialist, and perhaps a mortgage or financial advisor.
Selecting the Right REALTOR® in Portugal
The right REALTOR® will shortlist the best properties that match your checklist, will make your experience stressful free, and offer the best advice. Now that might depend on your luck, but at least you must ensure that your BROKER is licensed and trustworthy.
Real estate professionals are not licensed in Portugal and only BROKERS are required by law to be licensed!!!
Make sure to ask your BROKER for his / her registration number (AMI N°) and verify it at Instituto da Construção e do Imobiliário to avoid fraud or overcharging. Alternatively, you may choose a REALTOR® from FIABCI - The International Real Estate Federation.
Also, ensure that your agent is:
❖ Passionate to help you find your dream house
❖ Quick and eager to respond to your queries
❖ Aware of the current political and financial situation of the country
❖ Knowledgeable about various local amenities, or at least willing to help to locate them.
❖ Able to function as an interpreter or arrange one.
Selecting a Lawyer in Portugal
While selecting your legal help, look for an independent practicing lawyer who can communicate with you in English while being aware of all the local laws and procedures. Your lawyer might also function as your financial advisor, subject to their expertise and experience. We can recommend our trusted lawyer if you do not have one.
So this sums up almost everything you need to know before buying property in Portugal. I look forward to helping you find the best one and enjoy your new property in Portugal!!!
Is Your Agent a REALTOR®???
In the following post I share with you a few misconceptions about what it means to be a REALTOR® https://www.infinite-solutions.pt/post/is-your-agent-a-realtor-1
Why You Should Work With a Buyer's Agent
Property search in Portugal can be challenging and stressful, especially if you’re a first-time buyer. It might make a world of difference to have an independent advisor on your side.
The following post will explain how it will make a difference to have an independent advisor on your side. https://www.infinite-solutions.pt/post/what-is-a-buyer-agent-and-why-do-you-need-one
Feel free to schedule a call at your convenience on our calendar through Calendly, and let’s see where we can add value to your move or additionally investing in Portugal, as our trusted lawyer; loan broker and currency exchange broker will be able to add value to your buying process!!!
Link to schedule call on Calendly
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