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How to Renovate a House in Portugal

Nowadays, many people prefer to buy a house to renovate in Portugal rather than build from scratch or buy new. What’s more, remodelling houses so that they can be used as Alojamento Local is especially trendy right now. There’s no denying that a (well!) restored house has a unique charm and appeal. But it can definitely seem like a daunting project at first. There are all sorts of things to think about: legal constraints, budget, comfortability, timeframe, assessment of different contractors for different parts of the project, state aid, etc. That’s why we, at Pearls of Portugal, have assembled this article to guide you through the process!

Is renovating a house in Portugal worth it?

Restoring a house in Portugal brings a whole host of advantages, such as exemptions, benefits and discounts. If the house is in an urban rehabilitation area (ARU), there are even more incentives, since restoring a house is an excellent way of preserving heritage, giving a building a second chance and avoiding building anew, which is difficult in city centres.

renovate a house portugal

Why you Should Work with Pearls of Portugal

The overwhelming amount of information on the Internet regarding the acquisition and renovation of an old house in Portugal can definitely make the process look a little confusing and difficult. And, of course, buying a house and potentially moving to a new country is always a somewhat stressful experience. But worry not – that’s why we are here!

When you partner up with Pearls of Portugal, we accompany you throughout every step of your journey. Right after you choose to work with us, a dedicated team of experienced buyer’s agents will take note of all of your property preferences and search through the markets to present you with options that align with your needs

After we visit your chosen properties together and find the perfect one for you to renovate, we take care of arranging the documentation and the dates for the signing of the CPCV (promissory contract) and the deed. But it doesn’t end there! We also build the bridge between you and our various trusted construction partners – such as contractors, architects, electricians, etc. After the restoration is done, you can entrust the after-sales services (insurances, utilities, …) to us as well.

Pearls of Portugal is your Portuguese partner for life! Come find out more benefits to renovating an old house in this beautiful country.

renovate a house portugal
A restored old house in central Portugal © Casa Velha
Urban Rehabilitation Areas (ARU) in Portugal

As defined by Portal da Habitação, an urban rehabilitation area is a ”territorially delimited area that, due to the insufficiency, degradation or obsolescence of buildings, infrastructures, equipment and urban and green spaces for collective use (…) justifies an integrated intervention, through an urban rehabilitation operation approved in a specific instrument or in a detailed urban rehabilitation plan.” Here you can consult the urban rehabilitation areas.

Incentives for renovating in Portugal

One of the important aspects before starting a project of this nature is to be aware of the incentives that exist. With the most important being the IFRRU – a credit line that supports urban rehabilitation and covers:

  • The total rehabilitation of buildings that are 30 years old or more
  • The rehabilitation of abandoned industrial spaces and units;
  • Intervention in social housing buildings and public spaces.

The expenses financed are all those relating to urban rehabilitation works, as well as those associated with energy efficiency measures.

Tax Benefits of Rehabilitating an Old House in Portugal

  • VAT: urban rehabilitation contracts are taxed at a reduced rate of 6%;
  • IMT (Property Transfer Tax):
    • Exemption on the 1st onerous transfer following rehabilitation;
    • Exemption on the acquisition of properties for rehabilitation
  • IMI (Property Tax): exemption for a period of three years, which can be renewed, at the owner’s request, for a further five years when the property is being used as a main residence or rented out;
  • IRS: deduction from the taxable amount of 30% of the costs borne by the owner, up to a limit of €500;
  • Property income: taxation at a reduced rate of 5% after renovation work has been carried out;
  • Capital gains: autonomous taxation of 5% on capital gains when they result from the sale of rehabilitated properties.

The process of renovating a house in Portugal

  • Confirm the location of the property in the ARU.
  • Apply for a license for the urban development operation (at your Local Municipality or Câmara Municipal)
  • Ask for an initial inspection to determine the state of conservation of the property before the work begins
  • Start the renovation work
  • Request a final inspection to confirm that the property has been upgraded two levels
  • After confirmation, apply for the issuance of the urban rehabilitation certificate for the purposes of tax benefits
  • Notify the Tax Office (Finanças) of the recognition of the urban rehabilitation intervention for the granting of incentives.

As the benefits for properties within the ARU vary depending on the locality, you should always check with the Câmara Municipal of the municipality where the work is to be carried out.

Importance of the initial inspection

Inspecting the property before you buy and before you start renovating is very important. Since you must be able to assess less obvious points, such as anomalies, whether they are structural or not, in order to find out the necessary level of intervention. Below are some important points to bear in mind when you visit the property:

  • Signs of water infiltration: look for damage in places such as ceilings, floors and near windows;
  • Floor deformations, cracks and/or crevices in walls and ceilings;
  • Water leaks in supply networks or in domestic sewage and rainwater networks;
  • Leaks on terraces, balconies or marquees;
  • Cracks or gaps in the exterior walls.

These factors will influence the interventions and could certainly increase the cost of the work. You may even be able to reduce the purchase price of the property by admitting that you will be spending more money on repairing some of these problems.

Remember that rehabilitating is more delicate than building anew, because each old house has its own specific characteristics. Demolishing interior walls or changing the location of bathrooms is oftentimes difficult, due to pumping systems, for example.

Frederik Pohl
Frederik Pohl, CEO
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