Buying a Property in Portugal
Buying property in Portugal is more popular than ever. From its stable economy to a favorable tax regime, growing tourism industry, skilled workforce and high quality of life, Portugal offers people from around the world numerous incentives to invest in the country. So whether you are an EU or non-EU foreigner, buying property in Portugal is an excellent opportunity to take advantage of these benefits, enjoy a charming way of life and grow your wealth in a secure and dynamic investment environment.
Want to know how to buy property in Portugal? Then check out this comprehensive guide.
Let's Find The perfect investment for you in Portugal
Why Portugal
Both EU and non-EU foreigners are welcome to invest in Portuguese real estate. In fact, there are no restrictions on foreign investments, and the country makes buying property in Portugal as an American, Australian, European, or another foreigner easy by providing a transparent and straightforward process.
If you’re thinking about real estate investing in Portugal, here are a few reasons that may help you take the leap:
- Stable Economy: Portugal’s economy is very stable, and it has recovered well from the 2008 financial crisis. Moreover, it’s a member of the European Union (EU) and the eurozone, providing a secure investment environment.
- Favorable Taxes: The country offers investors fair taxes, including a reduced corporate tax rate and tax exemptions for certain investments. Additionally, it has a non-habitual residency program, which means foreign investors can enjoy tax benefits when they become tax residents.
- Growing Tourism Industry: With over 20 million tourists visiting the country each year, Portugal is a top travel destination. This creates opportunities to invest in the tourism industry, including in hotel and rental property developments.
- Skilled Workforce: Thanks to Portugal’s long history of innovation and entrepreneurship, it offers investors a vibrant and dynamic business environment. In addition, the country’s workforce is both skilled and educated, which makes it an attractive location for foreign investment.
- High Quality of Life: Portugal’s relaxed and affordable lifestyle is a significant draw for many foreign investors. The country not only features a warm climate, a stunning coastline, and a rich cultural heritage, but is also home to friendly people who welcome foreigners with open arms.
What Is the Process of Buying a Property in Portugal?
When buying real estate in Portugal, it is advisable to have a lawyer accompany the purchase process in case there are any ambiguities. We cooperate with several trustworthy lawyers that check the legal situation of the property. The focus is on the legitimacy of the seller, the existence of encumbrances and the completeness of the documents. In addition, it is checked whether the property in the inspected form even officially exists.
The Portuguese land register (Registo Predial) contains the legal registration of the property and provides information on how the property is structured. However, you can also get information about the legitimacy of the seller and the financial encumbrances of the property. The Caderneta Predial is the extract from the tax register with information about the tax situation and the tax obligations related to the real estate in Portugal.
CPCV
The audits are part of the Preliminary Purchase Contract (Contrato de Promessa de Compra e Venda – CPCV), which is common for the purchase of a property in Portugal. The preliminary contract is legally valid even without the participation of a notary. It is also possible to register the preliminary contract at the land registry in Portugal, but this is not common. If one decides to do so, the real estate transfer tax (IMT) omust already be paid on the preliminary contract. If the purchase does not materialize, the tax is refunded within 30 days.
It is common to pay a deposit of about 10% of the total amount. Already in the preliminary contract, the seller must provide the necessary energy certificate of the property. The same applies to an extract from the land register entry. For houses built after 1951, there should also be an official utilization permit (Licença de Utilização) that corresponds to the current structural conditions. The same applies to additions, outbuildings or garages.
The CPCV usually contains a time clause that obliges the buyer to conclude the notarized purchase agreement within a time limit. Normally, the deadline for agreeing the notary appointment is 2-3 months. However, this period is negotiable and does not have to be fully exhausted. Important clauses or conditions for the purchase are also included in the preliminary contract.
The buyer is liable with his down payment of approx. 10% of the purchase price if he withdraws from the purchase without justification. Sellers are legally obligated to repay the prospective buyer twice the down payment (i.e. the down payment plus the same amount as a contractual penalty) if the preliminary contract is not fulfilled. In the preliminary contract, the seller must also specify or list the existing tenants.
Purchase contract
The subsequent purchase contract requires a notarial form, drafted by a lawyer or notary. In contrast to other countries, the buyer’s customary registration in the land register is not required for the actual change of ownership, so that the buyer becomes the owner of the property in Portugal upon conclusion of the notarized purchase contract. However, the registration must be made by a lawyer or notary public no later than two months after the purchase. The registration costs about 250 EUR.
The payment for the real estate in Portugal is always made with a Portuguese bank check (cheque bancário). For this check you have to open an account in Portugal. Prerequisite is the possession of a Portuguese tax number (NIF), which can be applied for in Portugal at the tax office or the Portuguese embassy for a small fee. The tax number will be issued on the day of application.
How Much Do Properties in Portugal Cost?
Compared to its European neighbors, Portugal is incredibly affordable. According to statistics by Global Property Guide, the country’s average per sqm price of EUR 1449 places 19th after countries like Switzerland, France and Italy. Investment prices for properties in Portugal vary by region. From most expensive to most affordable, here are the latest per-sqm rates for January 2023 (Source: Idealista)
| Location | Housing/ Sqm in January 2023 |
| Lisbon | 3805 €/m2 |
| Metropolitan Area of Lisbon | 3454 €/m2 |
| Algarve | 3064 €/m2 |
| Faro | 3064 €/m2 |
| Madeira (Ilha) | 2424 €/m2 |
| Porto | 2414 €/m2 |
| Setúbal | 2313 €/m2 |
| Porto Santo (Ilha) | 1814 €/m2 |
| Évora | 1779 €/m2 |
| Aveiro | 1695 €/m2 |
| São Miguel (ilha) | 1509 €/m2 |
| Alentejo | 1479 €/m2 |
| Leiria | 1454 €/m2 |
| Braga | 1428 €/m2 |
| Coimbra | 1289 €/m2 |
| Viana do Castelo | 1239 €/m2 |
| Faial (Ilha) | 1177 €/m2 |
| Pico (Ilha) | 1164 €/m2 |
| São Jorge (Ilha) | 1153 €/m2 |
| Terceira (Ilha) | 1080 €/m2 |
| Santarém | 1016 €/m2 |
| Vila Real | 973 €/m2 |
| Beja | 953 €/m2 |
| Viseu | 926 €/m2 |
| Bragança | 874 €/m2 |
| Castelo Branco | 737 €/m2 |
| Guarda | 670 €/m2 |
| Portalegre | 619 €/m2 |
Which factors influence the cost of property in Portugal?
- Location: If you prefer to buy a property in Portugal in a popular tourist destination like Lisbon or the Algarve, you’ll need to spend more too. Property prices in up-and-coming areas and those with good public transportation and local amenities are also rising.
- Size and Condition: The larger a property is, and the better its condition, the more expensive it will be. If you’re on a budget or looking for a deal, try to find smaller properties or fixer-uppers.
- Type of Property: Holiday apartments or villas generally have high demand and are thus more expensive. Especially those with unique or unusual features, such as a swimming pool or sea view, come at a higher price tag
- Demand: Demand for certain areas also affects the price. Simply put, the higher the demand for properties in an area, the higher the prices will be.
Other specific costs when buying a property in Portugal
- Legal Fees: Legal fees typically range from 2%–3% of the purchase price. They cover drafting the purchase contract, conducting due diligence on the property, and registering the property with Portuguese authorities.
- Notary Fees: Notary fees in Portugal are usually around 2%–3% of the purchase price and cover the cost of services such as witnessing the signature of the purchase contract and registering the property with the Portuguese authorities.
- Property Insurance: All properties in Portugal must have property insurance, which usually costs up to 0.5% of the purchase price. This insurance covers the cost of repairs and maintenance, as well as liability for any damage caused to third parties.
- Real Estate Agent Fees: A real estate agent can save you time and will usually require a commission fee of around 5%–6% of the property’s purchase price.
- Land Registry Entry: This costs about 250 EUR.
- VAT (Value Added Tax) for new constructions
What Taxes Have to Be Paid When Buying a Property in Portugal?
Nobody likes dealing with taxes, but fortunately, the tax system in Portugal is straightforward and user-friendly. Here’s what you need to know:
Get Your NIF
First things first: You’ll need a NIF to own property, a car, or any other economic interest in Portugal. This will cost around 15 EUR, and you don’t need to be a resident to get one. This number is used to identify you with the Portuguese tax office and any other branch of the government, national and local.
You can obtain your NIF by applying to the local tax department Finanças through your lawyer or a Portuguese tax accountant. It’s much easier if you appoint a fiscal representative who will receive all correspondence from the tax office on your behalf. At Pearls of Portugal, we take of this for you!
IMT: The One-Time Purchase Tax
This is a tax levied on the property transfer and is calculated based on the property’s purchase price. IMT tax has a sliding scale from 2%–8%, depending on whether the property is a holiday or investment home or your primary tax residence in Portugal. For both, the purchase tax is calculated by purchase value, with a flat rate of 6.5% for land and building.
For real estate under 97,064 EUR, there is no transfer tax. The purchase tax must be paid 24 hours before the notary deed, and your lawyers will assist you with the application and payment process.
Imposto de Selo (Stamp Duty): A One-Time Flat Fee
Stamp Duty, or Imposto de Selo, is a tax on real estate transactions that affects property buyers and must be paid prior to the notary deed. It is applied to all real estate-related documents, such as deeds, contracts, and mortgages, and is paid by the buyer at a fixed rate of 0.8% of the property’s officially registered fiscal value.
Rates or Council Taxes (IMI)
Every year, Portuguese property owners have to pay council taxes (IMI) based on the rateable value of their property. This value is set by the local revenue office and is typically lower than the purchase value. It doesn’t matter whether you’re a foreigner or Portuguese, the tax rate applies equally. The rate of the IMI tax can range from 0.3%–0.8% depending on the assessed value of the property and can be paid in 2 or 3 instalments.
What Documents Are Needed From the Buyer and Seller when purchasing a property in Portugal?
- ID or Passport
- Proof of Residence
- NIF
- Contrato-Promessa de Compra e Venda (CPCV)
- Caderneta Predial (Title Certificate)
- Certidão Permanente de Registo Predial (Land Registry Certificate)
- Licença de Habitação (Habitation License)
- Issued by the Municipal Council Office – verifies that a property has undergone an inspection and meets all legal requirements for occupancy
- Certificado Energético (Energy Certification)
- Escritura (Title Deed)
- This document proves the legal ownership of the property and will be provided by the seller to the buyer
- “Plantas”: These are the floor plans that are available to the architect or the construction company. In most cases, you can also obtain them from the city.
- Ficha Técnica da Habitação (FTH)
- “Condomínio”: Since April 2022, all apartments have to provide confirmation that their property taxes and fees have been paid to the building management
Tips on Finding the Right Location for your property in Portugal
- Research the local market: Before deciding where to buy property in Portugal, you need to know how much demand for rental properties an area has.
- Consider the local economy: The local economy and job market can give you insight into the area’s stability. A strong economy and job market are more likely to attract tenants.
- Look at the local amenities: The best place to buy property in Portugal is one with good access to public transportation, shops, schools, and other amenities.
- Consider the tourist market: Check which areas are popular amongst tourists, such as those near beaches, historic sites, or cultural attractions.
- Explore the area: Check for any potential issues, such as high crime levels, noise pollution, or environmental hazards.
- Check the local climate: While Portugal’s Mediterranean climate is generally warm and dry in the summer and mild and wet in the winter, it varies depending on the area.
- Consider the future potential of the area: An area’s potential for future development (with new shops, restaurants, or tourist attractions) will indicate the likelihood of higher rental returns in the future.
- Get professional advice: One of the best steps you can take in the process of buying property in Portugal is to consult with professionals. Get in touch with Pearls of Portugal to learn how we can make investing in Portugal an easy, safe, and enjoyable process for you.
Tips on Finding the Right Property
Once you know where you want to buy property in Portugal, you can narrow your search and look for a property that meets your requirements. To ensure you make the right investments in Portugal, check out these tips:
- Determine your investment goals: Do you want a short-term investment for rental income or a long-term investment for capital growth? Once you’re clear on your goals, you can narrow down your search.
- Consider the type of property: From apartments to villas, townhouses, and rural homes, you have a lot of property type choices. Make sure your property is in demand in the local market and meets your investment goals.
Types of properties you can choose from
- New Build: This refers to a newly constructed property that has yet to be lived in or owned.
- Off-Plan: An off-plan property is one where construction has yet to begin or is currently in progress.
- Previously Owned: An established property with at least one prior owner.
- Fixer-Upper: A fixer-upper will require repair or a complete renovation but will usually be cheaper.
- Design & Build: You can opt to buy a plot of land with planning permission, meaning you have a say in the design process.
- Country House: Also known as a Quinta, this rural home is usually a farmhouse that cannot be used for agricultural purposes.
- Townhouse: Just like in other countries and cities, a townhouse is a complete building attached to neighboring buildings in a town or city.
- Apartment: Also referred to as a condo, this is a unit in a larger building, usually located in an urban environment.
- Urbanization: A community or development consisting of multiple homes (often apartments) with shared grounds and facilities for residents only.
- Take into account the condition of the property: Consider the age of the property, as well as its overall condition, and seek professional advice if necessary.
- Assess the rental potential: If you are set on buying a rental property, take its potential rental income into account. Check the rental prices in the area to ensure that the property will generate enough revenue to not only cover your costs but also provide a return on your investment.
- Look for properties with potential for growth: Properties in up-and-coming areas offer lots of growth potential—so do properties that can be renovated or developed.
- Consider the cost of ownership: Owning an investment property in Portugal includes property taxes, maintenance and repair fees, and insurance costs.
Advice for Viewings
While a few foreigners buy properties in Portugal without viewing them, you should not skip this step. Checking the area and property in person will ensure you’re buying the right place for your needs. Here are some tips for making the most of your viewings:
- Be prepared: Have a clear idea of what you are looking for, including your budget, the type of property you desire, and the location of interest to you. This will narrow your search and save time.
- Take your time: Don’t feel pressured to make quick decisions, especially during your first viewing. Take all the time you need to view several properties and compare them to guarantee you make the best investment decision.
- Make a checklist: A checklist of the different features each property offers, such as the number of bedrooms, bathrooms, and living spaces, as well as the unit’s condition, can help you keep track of the places you have viewed.
- Take detailed notes: You can also give each property a rating based on your first impression, making comparing and ranking the properties easier once you finish your viewings.
- Inspect the property thoroughly: Pay attention to the condition, such as walls, ceilings, and floors, and look for any signs of dampness or structural damage. Once you have your search down to one or two properties, do a walk-through with a professional who can spot potential issues.
- Consider the local area: Always take the time to walk around the local area and check the amenities like shops, restaurants, and public transportation. This will ensure you and future tenants will find the property’s location convenient.
- Check the local market: The local property market can give you insight into current prices and demand for properties in the area. These insights indicate the property’s value and confirm you are paying a fair price.
- Take a second viewing: If you like a property, view it a second time with a trusted friend or family member. They will give you a fresh perspective and help you make the best investment decision.
Can Foreigners Get a Mortgage in Portugal?
Yes, foreigners can get a mortgage in Portugal. However, you need to be aware of certain restrictions and requirements you need to meet first.
In Portugal, mortgage lending is primarily regulated by the Banco de Portugal, the central bank of Portugal. Foreign nationals are required to demonstrate proof of residency, usually in the form of a valid visa or residency permit. Additionally, banks may require that you have a good credit history and score and provide documentation to prove your financial stability.
Keep in mind that Portuguese banks don’t usually offer mortgages that cover more than 70% of the value of a property. That means you’ll need to provide a deposit of at least 20%–30% of the total property value. This deposit also demonstrates your financial stability and commitment to the loan.
In terms of language, it would be helpful if you spoke Portuguese, but many banks also offer their services in English. Of course, mortgages here are in euros, and if your investment property in Portugal is a second or holiday home while you remain a resident in your home country, then your income may be in a different currency. This could work in your favor depending on the currency markets.
Most mortgages in Portugal track the eurozone’s Euribor and offer the Euro Interbank Offered Rate. It’s not uncommon for banks to offer their mortgages at a set margin above the Euribor. Fixed-rate mortgages aren’t very popular in Portugal, which shouldn’t worry you since interest rates have been relatively low recently.
Lastly, it’s important to note that the mortgage process in Portugal can be lengthy and require significant documentation and paperwork. That’s why you should seek the assistance of a financial advisor or lawyer knowledgeable about the Portuguese mortgage market.
What Are the Best Places in Portugal to Buy Property?
Portugal hasn’t just become an increasingly popular destination for tourists but also for real estate investments. Its stable economy, mild climate, and attractive cost of living make it a favorite for foreigners to retire or safeguard their money. Check out some of the best places to live in Portugal and buy investment property:
Lisbon
Many people view the capital as the best city to live in Portugal. Lisbon may be more expensive than rural areas in terms of buying property, however, it offers a lot in return. With a mix of historical and modern architecture, a thriving cultural scene, and a growing startup ecosystem, it continually attracts talent and investments from all around the world. If you’re thinking of investing in Lisbon, you can choose between charming old-town apartments and spacious modern homes in the suburbs.
Algarve
The Algarve region on Portugal’s southern coast is known for its sunny beaches, golf courses, and luxury resorts, making it one of the country’s most popular tourist destinations and one of the best places to live in Portugal as an expat. Here, you can buy a holiday home such as a traditional Portuguese villa or a modern apartment.
Porto
After Lisbon, Porto is the country’s second-largest city. This up-and-coming destination for property investment features a charming old town, rich cultural heritage, and a growing tech scene. Properties in Porto range from historic townhouses to modern apartments, and there is a growing demand for rental properties as more people move to the city to enjoy its lower cost of living.
The Silver Coast
This stretch of coastline is located north of Lisbon and features beautiful beaches, historic villages, and lush countryside. Silver Coast has a strong rental market for holiday rentals and long-term rentals and is also one of the best places for expats to live in Portugal. The area’s properties include traditional villas and modern apartments.
Gerês
The Peneda-Gerês National Park, simply known as Gerês, is a protected area in northern Portugal. As Portugal’s oldest and only national park, it boasts stunning natural scenery, making it a popular destination for nature lovers. If you prefer a property surrounded by mountains, with a warm Mediterranean climate and growing tourism, Gerês is where to live in Portugal.
Douro Valley
The Douro region, also known as the ‘Enchanted Valley’, offers breathtaking landscapes, beautiful vineyards, and charming “quintas”, which are rural properties like historic manors and palaces, as well as agricultural estates like wineries and olive groves.
Comporta
The Comporta coast is just an hour drive south of Lisbon and part of the Alentejo region. It features small villages along the coastline including its namesake, which was named ‘Portugal’s best secret beach spot’ by CN Traveler in December 2022. The region is full of farms, pine trees, rice fields, sand dunes, and stunning stretches of white sand beach that never feel overcrowded.
Pearls of Portugal Is Here to Help
Investing in Portugal real estate offers excellent opportunities for growing your wealth and if you want to live and invest in Portugal, we can help. From answering questions like ‘What is it like to live in Portugal?’ to ‘What is the best place to live in Portugal for expats?’ and ‘How much does it cost to live in Portugal?’, we provide you valuable insights and guide you through each step of the process.
Learn more about our beautiful country and how we can assist you on your journey to buying property in Portugal by getting in touch with us today!
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