HOW TO B U Y P R OP E R T Y IN P OR TUGA L

Property buying guide for foreigners

1
CON T ENT

Introduction to Portugal 3 Bem vindo a Portugal – a country of breathtaking sea views and white
block houses, pastel de nata and vinho verde. If you had a chance to come
Culture shock in Portugal 7 to Portugal, we bet that it wouldn’t have left you untouched. And buying
property in Portugal is one of the ways to enjoy it longer.
Cost of living in Portugal 10
Real estate is finally booming in Portugal! More and more houses on
House prices in Portugal 13 the Iberian Peninsula are sought for and the numbers should rise next
year. You can think there are less cheap houses available, however you
How to find property in Portugal 17 can still find a bargain and pay less.

How to buy property in Portugal as a foreigner 20 To help you in the process we’ve decided to gather our vast experi-
ence in Portuguese property selling and make up this property guide. It
Portuguese Mortgages 24 includes cultural experiences, cost of living and property prices as well as
buying process details, mortgage options and taxes. We hope you’ll enjoy
Portuguese property taxes 27 it and get your home under the sun with help of our guide.

Pitfalls of buying property in Portugal 31

For any questions about buying in Portugal or the

guide please drop us a line at [email protected].
Our experts in Portugal Real Estate will answer your
questions. And of course, enjoy the read. Théo Plantier
Country manager –
Portugal and Italy
2
INT RO DUC T I O N TO P OR T U G A L

Feel the spirit of Portugal

Portugal occupies the western strip of the Iberi- tuguese a long history of exploration and maritime
an peninsula and in many ways is similar to its larger trade; and even if you speak Spanish, you’ll probably
neighbour, Spain; its climates range from misty north find Portuguese - at least spoken Portuguese - bewil-
to sunburned south, its culture includes a big dose of deringly different.
Moorish influence, and its people speak a language
that derives, like Spanish, from Latin. Portugal only has two really major cities; Porto, in
the north, and Lisbon, the capital, further south. Por-
But Portugal is decidedly different from Spain. to has always been an industrial city as well as a port,
Just listen to fado (that means fate, or the inexora- while Lisbon is the centre of finance as well as gov-
ble destiny), Portugal’s traditional songs, and you’ll ernment. Smaller cities such as Braga, Coimbra - a
hear a melancholy nostalgia that’s miles away from major university centre - and Evora offer a more re-
Spanish flamenco. The Atlantic keeps the climate laxed environment while still providing the infrastruc-
cooler and wetter than Spain, and also gives the Por- ture and buzz you’d expect from an urban centre.

3
P ORT UG UE S E RE AL E STAT E MA R KE TS

Many property buyers are most interested in is the including the rugged hills and wine country of the
coast - from the Silver Coast north of Lisbon to the north, and gentler hills in the south scattered with olive
popular Algarve. While the Algarve has been quite groves and fig trees.
Choose the right destina-
highly developed with a number of exclusive resorts, tion for you
gold courses, and major hotels, other areas of the Portugal also includes two island enclaves, Madei-
coasts are less built-up and in some cases still quite ra and the Azores, with their own microclimates and
wild. Inland, Portugal has some marvellous landscapes quite distinct property markets.

Algarve

Madeira

Azores

4
WHAT AREA OF PORTUGAL WOULD YOU CHOOSE FOR
PROPERTY BUYING?

Different nationalities tend to have access to the EU; Portugal is the fifth
slightly different preferences when it biggest destination for Chinese real es-
comes to property. A lot of Brits buy on tate purchasers. Making up 80% of pur-
the Algarve, though there’s a big minori- chasers under this scheme, they have
ty buying rustic properties. The French typically bought managed apartments
tend to head for Porto, while German in Lisbon as pure investments. Russian
buyers are well represented in Faro and buyers, on the other hand, have tended
Lisbon. to look to Cascais and Estoril.

Chinese buyers have been particu- Lots of millennials are also moving
larly interested in the ‘golden visa’ op- to Lisbon, which has a thriving start-up
portunity that Portugal offers, giving scene.

Search for a property in the right community

Porto Lisbon Cascais Estoril

5
SO WHY WOULD YOU MOV E TO P OR T U G A L?

First of all, Portugal offers two great fully, and more in Cascais, while apart-
schemes for foreign purchasers - the ments in both central Lisbon and Porto
‘golden visa’ and the non-habitual res- can make excellent returns for short
ident (NHR) scheme giving a ten year term rentals.
tax break to those who become Portu-
guese resident. Secondly, Portugal nev- So property is a reasonable invest-
er quite had the property boom and bust ment - but what about the appeal of
that Spain did - as a result it is a steadier, the country to holiday home buyers?
and still relatively cheap, property mar-
ket. There’s a good resale market, too; The climate is one big attraction -
even the famous ‘casa de campo’ rural though remember the north is mistier,
properties are as much sought after by and the Atlantic guarantees Portugal
Portuguese families wanting a weekend gets a fair amount of rain - but so is
or summer holiday bolthole as they are the country’s distinctive culture. White
by foreign buyers. Buy within two or washed villages, baroque churches,
three hours’ drive of Lisbon or Porto for and tile-covered facades, make Portu-
the most marketable such properties. guese life a visual delight, while pasteis
de nata (custard cake), vinho verde
(green wine), great seafood and hearty
stews will make any foodie happy. Add
There are 2 schemes
to this the fact that the Portuguese re-
for foreign purchasers – ally know how to throw a party - every
‘golden visa’ and NHR town has at least one festival - and an
unexpectedly impressive internet infras-
tucture with free Wifi everywhere, and if
Investment yields remain high - you Portugal isn’t on your list of top Europe-
can get 5-6% in Lisbon if you buy care- an destinations, it definitely should be!

6
CULTUR E S HO CK I N P OR T U G A L

Moving to Portugal should be an unalloyed delight. fast, that can make it even harder to understand. Also
But home buyers coming from other cultures can find she found out that if you speak Spanish to the Portu-
Portugal a bit of a culture shock - and that’s true of guese, they can get quite offended; it’s a bit like calling
moving to Lisbon just as much as it is moving to the a Scot ‘English’ or talking German to a Dutchman.
remote countryside.
There’s some good news in store though - many
towns have free or low cost Portuguese classes at lev-
Never late to learn Portuguese els from total beginner to more advanced. Ask at the
language library, cultural centre or tourist office to see what’s
available.

Probably the first difficulty you face will be the Por- Portuguese is a language that’s often spoken at
tuguese language. It’s not one of the commonest lan- quite a high volume. That’s just the way it is - raised
guages taught in schools, so few new arrivals already voices don’t mean that there’s an argument going on.
know the language; and although younger Portuguese The Portuguese can also be quite direct - they don’t
often speak good English, many older people, partic- tend to use euphemisms and they will call a digging
ularly outside the capital and the main tourist areas, implement a shovel.
have very little.
If you’re renovating a house, you’ll soon realise that
though Portuguese builders work hard, they’re not
Avoid speaking Spanish to always completely predictable in their hours. In busi-
Portuguese people, it may offend! ness, though, time keeping is precise - this is not the
land of mañana and siestas, for which you’ll have to go
over the Spanish border.
Worse, as one new arrival found out, though she
spoke fluent Spanish - and could read Portuguese
newspapers - she simply couldn’t understand people Portugal is family oriented
when they spoke to her. “It doesn’t sound anything like
it looks!” she said. Moreover, Portuguese people speak

7
CULTUR E S HO CK I N P OR T U G A L

People tend to eat their evening meal compara-

tively late compared to northern European countries
or the US. And when there’s an all-night festival, you’ll Find your way around
see babies and great-grandpa enjoying themselves Lisbon – Portugal’s most
with the family. international spot

You’ll need to get used to handshaking (for men)

and 2 cheek-kissing (for women) - missing people
out is actually quite rude, just like not saying ‘hi’ to a
colleague. There’s a certain formality observed in Por-
tuguese life - people will address many colleagues
as Senhor or Senhora (‘sir’ or ‘madam’) - and even if
someone gets into a lift in an office building they’ll be Flats
expected to greet whoever is already there and say
goodbye when they get out.

Get used to hand-shaking and

cheek-kissing (2 kisses but only if
you are friends)
Houses
Men do hug each other quite often, but kissing…
that only happens if Portugal wins at football.

8
CULTUR E S HO CK I N P OR T U G A L

You may find Portugal a more fashion conscious France, many of them walking the whole way; some Finally, two small things you need to know about
place than you’re used to. Business attire is relatively people simply disappeared, others spent time in po- Portugal. First, there are still a lot of people who
formal, and there’s a certain pride in being well turned litical prisons. Most people don’t like to talk about smoke, and a lot of bars and restaurants which allow
out. You’ll also find that Portugal is very family orien- those days, and you can’t blame them. Equally, they smoking (some don’t - watch out for the signs letting
tated. Children are given free rein and any festival will tend not to mention the negative side of Portuguese you know whether you can or can’t smoke). That might
turn into a family outing. If you’re moving to Portugal colonialism. come as a shock to those used to a more regulated
with young children you’ll find they will be positively environment. Secondly, the Portuguese have another
spoilt by everyone. Families get together at every op- Bring up the topic of football at your own risk, too. major addiction - to strong coffee. If you like milky,
portunity, and family businesses are very prominent It’s actually safer to insult someone’s religion than to weak coffee, or even worse, a cup of tea, you won’t find
- it’s considered quite natural to employ members of be rude about their football club. (Though 80% of Por- many places ready to indulge your tastes, so you’d bet-
your extended family in your business. tuguese are nominally Catholic, only about 20% are ob- ter learn to life your coffee hot, strong, and bitter. The
servant.) Perhaps the one safe thing you can say about Portuguese have different synonyms for coffee - “café”.
However, Portugal does have its dark side. Sala- football to a Portuguese is “Portugal has a great team”. They can also call it “Bica” in Lisboa or “Cimbalino” in
zar’s dictatorship saw whole families emigrating to You won’t find anyone disagreeing with you. Porto).

9
T HE COST O F L I VI N G IN P OR T U G A L

Portugal is relatively cheap Monthly budget can be limited to

EUR 750-1,000
The choice is yours

If you’re thinking of buying a property in Portugal,

or moving there to study or work, you’ll be happy to However, if you haven’t decided about your source
hear that it’s one of Europe’s cheaper destinations, of income, it will be hard to find the right job with the
with a great standard of living and very reasonable liv- same salary as you used to get in the UK, France or
ing costs. As a rule of thumb, you can live quite well Germany. The average annual household income is a
for EUR 750-1,000 a month, if you don’t have to pay a little bit more than EUR 20,000, lower than the OECD
high rent or no rent at all, particularly outside the capi- average which is about EUR 30,000. And the mini-
Porto
tal and the better known coastal resorts. mum monthly salary according to Eurostat is EUR
676.67 which won’t allow you to indulge yourself. On
the other hand, if you’re a retiree with a monthly bud-
Is Portugal expensive? get higher than this minimum, you will feel yourself at
home and even be able to live a bit better than before.

800 For instance, renting a flat somewhere like Porto or

Coimbra might cost you just EUR 400 a month. Even
600 in Lisbon, you can get a one bedroom flat from about Coimbra
EUR 650 a month - and if you’re buying, low prices
will mean you’ll be paying a relatively low mortgage. In
400
some inland villages, you can buy a house for the price
of a new car - even less if you’re willing to restore an
200 older property yourself!

0
Budget to live Average salary in Monthly rent Lisbon
well in Portugal Portugal

10
T HE COST O F L I VI N G IN P OR T U G A L

Utilities are relatively inexpensive. Numbeo sug- Actual expenses (starting from) As for daily living costs, food and drink are a bargain
gests the occupier of an 85 square metre apartment in Portugal. Groceries should cost you less than EUR
could pay between EUR 54 and EUR 150 a month, with 200 a month unless you eat a lot of prepared meals or
the average somewhere in the middle - that includes 60 want ‘home comforts’ which will come at a price (Oreos,
electricity, water, heating, cooling and refuse disposal. Heinz beans or Chinese noodles). If you’re eating out,
In fact, you might use less energy - many Portuguese 40 lunch in a tasca can cost as little as five euros in rural
families live without using air-con in summer and only locations and even in the Algarve you can get the ‘pra-
use heating for a limited period each winter - your mile- tos do dia’ (dishes of the day) from about EUR 3.50. A
20
age may vary, but it’s certainly possible to have much bottle of wine will set you back just EUR 2, if you’re not
lower bills. Note that when compared to other Europe- too choosy, and the local Super Bock beer costs less
an countries, there is no separate bill for heating. All 0 than £1 a pint (EUR 0.87 per half litre bottle) in the su-
the expenses that are connected to heating/cooling Utilities Internet Monthly pass permarket, a bit more if you drink it in the local bar.
are paid within the electricity bill.
to EUR 110 (for commutes from suburbs to cities) -
that compares with £131 for zones 1-2 in London, and What are the food and drinks expenses in Portugal?
Take thought about where your EUR 75.20 in Paris. If you’re moving to the deep coun-
income will come from, as minimum try, though, public transport may be limited, and the
salary is just EUR 676 bad news is that petrol is a bit more expensive than 200
elsewhere; unleaded costs EUR 1.64 a litre, against
EUR 1.47 in France and between EUR 1.30 and EUR
150
Portugal has a superb internet infrastructure, with 1.50 in Spain. Some people drive across the Spanish
broadband almost everywhere; allow EUR 25-40 a border to fill up and reckon the savings pay for the trip.
month depending on your usage and bandwidth require- 100

ments, and up to 75 euros a month for a combined phone, Keep an eye open for motorway tolls, too; they can
TV and broadband package. Service providers often run be high even for quite short stretches of road. 50
some promotions and the costs might be even lower.

Food is a bargain in Portugal 0

Public transport is cheap. A monthly pass in
Grocery Monthly lunch Eating out (meal for
Lisbon or Porto costs just EUR 36 (inside the cities) 2 in a restaurant)

11
T HE COST O F L I VI N G IN P OR T U G A L

Portugal cost of living compared to UK, Germany and France Portugal has an excellent healthcare system, and though there is
a charge to see a doctor or enter a hospital, it’s a small one (EUR 5-20);
once you’re through the hospital doors, you’re covered for all the treat-
Portugal UK Germany France ment you’ll receive. At Lisbon’s main hospital, nervous patients having
250 blood tests have sometimes even been treated to a verse or two of
fado by a singing doctor!

200
Pregnant women, children, and pensioners get free dental treat-
ment. If you’re resident in Portugal, and registered for the public sys-
150 tem, healthcare will cost you zero ( by paying your taxes you are al-
ready contributing to that).
100
Crunching the numbers, Numbeo reckons Portugal is 35% cheap-
er than France, 27% cheaper than the US, and 25% cheaper than the
50 UK. Which isn’t bad for a country that delivers good infrastructure,
great weather, picturesque towns and villages, and one of Europe’s
0 healthiest and tastiest cuisines.
Meal for 2 (mid- Monthly pass Basic utilities Cinema ticket
range restaurant) (bigger cities)

12
H OUSE PRI C E S I N P OR T U G A L

Property in Portugal is some of the best priced in Europe. Recent Average property prices in Portugal, the UK and France (EUR)
figures from National Statistics Institute show the average property
price in Portugal at just EUR 1,187 a square metre - EUR 1,243 for
flats, and EUR 1,090 for houses. That compares to EUR 2,649 in the 3000
UK, or EUR 2,300 in France, for instance.

2000

Property hunters should start with Evora,

Elvas, Coimbra or Aveiro 1000

0
However, property prices vary greatly between regions. The two Portugal The UK France
cheapest areas, Centro and Alentejo, have house prices a bit more
than half what you’d pay in the Algarve - in both regions, you could
buy property for less than EUR 1,000 a square metre. If you’re a bar-
gain hunter, this isn’t a bad place to start, around cities like:
- Evora
- Elvas
- Coimbra
- Aveiro.

13
H OUSE PRI C E S I N P OR T U G A L

The Algarve is truly golden

Look for a residence in the Algarve
The Algarve is the most expensive area to buy in,
with strong foreign interest. The ‘golden triangle’ of the
Algarve between Vale do Lobo, Quinta do Lago, and
Almancil in particular has seen interest at the top of
the market from investors in the ‘Golden Visa’ program,
which affords a long-term Portuguese residence per-
mit to individuals investing over EUR 500,000 in prop-
erty. EUR 1,524 a square metre is the going price here,
though you’ll generally pay more on the coast, and far
Albufeira Carvoeiro
less even just a few kilometres inland.

Algarve is the most expensive area

Average property price in Algarve EUR 1,524 Lagos Praia da Luz

Portimão Faro

14
H OUSE PRI C E S I N P OR T U G A L

The greater Lisbon area is also high up the list, which is hardly
surprising given Lisbon’s status as the capital and financial centre, as
Norte
well as a major tourist hotspot. In fact, Lisbon is the most expensive
1071
place in Portugal to buy larger apartments, at EUR 1,430 a square
Azores
metre for ‘T3’ (three-bedroom) flats.
1015

Somewhere in the middle comes the North of Portugal, including

the thriving city of Porto, as well as the island Portuguese territories -
Madeira and the Azores.
Centro
Of course, these prices are averages over large regions. The ma- 973
jor metropolitan areas have much higher prices - within the centre
of Lisbon, expect to pay EUR 2,500 or more per square metre for
large apartments. Porto will generally cost more than smaller cities
in Norte, too.

Lisbon
metropolitan area
1456

Alentego
Madeira 963
1222

Algarve
1524

15
H OUSE PRI C E S I N P OR T U G A L

Real estate prices are heading up Will the price growth last? House price/GDP per capita

The UK
Until recently, Portugal seemed to have missed out Some observers have raised concerns about the
on the European property boom. It’s now making up sustainability of current pricing in real estate. Some
France
for lost time; according to Eurostat, in 2017 it had the younger Portuguese are now finding it difficult to buy
fourth highest price growth in Europe, after Estonia, their first properties, and while the construction indus-
Lithuania and the Republic of Ireland. Property prices try is now increasing the number of housing starts, Portugal
troughed in 2014 and have been going up ever since - there’s still a shortage of newbuild in many areas.
the last quarter of 2017 saw prices rise by 10.5% year 0 20 40 60 80
on year, and the first quarter of 2018 saw this acceler- But Portugal’s economy is doing well. Government
ate to 12.2%. debt has been reduced, economic growth is running above
2%, and unemployment has been reduced. You can get a Still a bargain
feel for the distance the country has travelled since the
Q3 2018: 38000 transactions credit crunch by looking at the yield on Portuguese ten-year You can blame ‘property porn’ on the TV, you can
in Portugal bonds. As recently as 2012, Portugal had to pay investors blame Peter Mayle’s Year in Provence and Chris Stew-
18% to lend the country money - by 2016 the rate was down art’s Driving over Lemons, or you can blame easy cred-
to 2.3% and now it’s fallen even further, to under 1.9%. While it and quantitative easing - but the fact is, whoever’s
Although there’s strong foreign buyer interest, do- growth is decelerating, the fundamentals look pretty good. responsible, there aren’t many bargains in residential
mestic demand is strong, too. The number of trans- property left across Europe.
actions is high, with Q3 2018 seeing over 38,000 units It’s also worth noting that the ratio of house pric-
changing hands, an increase of nearly a quarter year-on- es to GDP per capita is relatively low for Europe, at 24 But Portugal does still offer attractive property
year. And while Lisbon and the Algarve may be hitting times. By comparison, property in the UK is valued at prices. And unlike some other ‘bargain’ countries,
the headlines, the price rise is widespread across the 74 times GDP per capita, and in France at 41 times. That it offers good infrastructure and a legal system you
country; figures from Confidencial Imobiliário show that suggests investors shouldn’t get too worried about the can rely on to protect your interests. It even offers
every single municipality reported an increase in house Portuguese housing market running out of steam. a ten-year tax holiday to foreigners moving to the
prices in the first quarter of 2018 - not just the hotspots. country under the Non Permanent Resident pro-
gramme. All this plus pasteis de nata! What more
Portugal’s economy is doing quite well could you want?

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H OW TO F I N D PRO P E R T Y IN P OR T U G A L

Criteria to keep in mind before choosing the house

Portugal may be a fairly small country; it’s only thir- Property search – the most exciting
teenth in size in the EU, at 91,568 square kilometres,
homework you can do!
less than a fifth the size of France or Spain. But it’s
still sizable enough and diverse enough that you’ll want
Once you’ve chosen an area (and especially if not
to do some research first to work out exactly where
yet), start looking seriously at properties. Use a com-
you want to buy - in one of the cities, on the coast, or
prehensive property search on Properstar with a
inland? In the sun-soaked south or the verdant (but
large number of local agents bringing you a good se-
sometimes rainy) north?
lection of properties for sale. Using various styles of
search can help you refine your ideas; you could search
It’s not just about geography. It’s also about the
by budget to see what you can get for your money, but
choice of a very different lifestyle, depending on wheth-
you could also search by the size of property, or ameni-
er you pick the bright lights and tourist trams of Lisbon,
ties such as a swimming pool or balcony.
the beaches and resorts of the Algarve, or the slow
pace of life in a mountain village. Do your research -
even if that means renting a place for a few months to Start your home search in Portugal
take the temperature of local life.

Choose the lifestyle before Once you have seen a number of places that fit your
narrowing down your search criteria and your budget, it’s time to contact agents.
Remember not just to enquire about a single property,
but also ask if there are other possibilities that fit your
You’ll want to think about transport links, too - noto- requirements. If you’re clear in explaining your priori-
riously slow on the Silver Coast north of Lisbon, much ties, a good agent may be able to suggest properties
faster on the Algarve. If you’re looking for a holiday that fit the bill, and might also show you properties that
home you might want to be reasonably close to an air- are just coming on the market. You are free to contact
port: Lisbon and Porto are the major hubs, though Faro multiple agents and select one of them. The agent’s
also has an international airport. fee is normally paid by the seller.

17
H OW TO F I N D PRO P E R T Y IN P OR T U G A L

Criteria to keep in mind before choosing the house

An agent may ask you to sign an

Don’t hesitate to contact agreement with them before being
agents representing a shown properties. There’s nothing
wrong with agreeing that if you pur-
property, they’re your
chase a property you see with them,
best source of info
you’ll do it through the agency, but be
sure that you understand exactly what
But anyway, even if you are not sure you’re signing. And remember, too, to
and have any questions feel free to ask check that the agency is registered with
an agent representing property. They are the Associação de Mediadores Imobi-
always happy to share info about the lo- liarios.
cation and any other similar properties.
On the Algarve and in some other
Agents will usually take you to see tourism-orientated locations you’ll find
the property by appointment - there’s agents who are orientated towards
no culture of ‘open house’ events. dealing with foreign purchasers, with
If an agent is willing to put together a English-speaking personnel.
number of properties for you to look
at, and take you to them, it’s well worth Quite a lot of property in Portugal is
your while taking up the offer - it gives sold without going anywhere near an
you a better feel for the market, and the agent. Owners simply put up a sign say-
agent’s knowledge of local roads and ing ‘Vende-se’ (‘for sale’). If you know ex-
short-cuts will come in useful. Remem- actly the area you want, perhaps having
ber to ask about local shops and fa- stayed there on holiday several times,
cilities, and how particular neighbour- this might be a good way to find a home,
hoods are regarded - and also whether but it’s realistically only going to work if
it’s easy to find properties of the kind you speak at least basic Portuguese or
you want, or whether they only come have a local friend who’s happy to help
on the market rarely. out, or, lastly, if the seller speaks English.

18
H OW TO F I N D PRO P E R T Y IN P OR T U G A L

Criteria to keep in mind before choosing the house

You’ll also want to be very confident that your estimate of the prop-
erty’s value is accurate - again, that’s only likely to be the case if you’ve
known Portugal and the particular area for some time.

Remember that the agent’s commission is

paid by the seller

Remember to allow adequate time to see houses properly, and

even perhaps time for a second visit to one of them if you’re close to
making an offer. Even in quite compact areas or single towns, don’t
budget for more than six properties a day or you’re likely either to run
out of time, or to be skimping on your inspection. In rural areas with
a drive down twisty lanes between houses, you’ll probably manage
even fewer.

This may sound like hard work, and it is. But it’s worth getting it
right - whether you’re aiming to buy a rental investment or to buy a
dream home, you want to make sure your eventual purchase ticks
all the boxes. And you know, after a hard day visiting houses, as you
relax with a glass of wine by the waterside, or a hearty Portuguese
meal in a backstreet cafe, you might have to admit that it’s been quite
fun, after all!

19
H OW TO BUY PRO P E R T Y IN P OR T U G A L AS A FOR EIGNER

If you want to buy a holiday house or home in Portu- if you’re going to be a Portuguese resident. You could
gal, the first thing you’ll be worried about is any restriction simply apply yourself at a local bank. But again, lan-
on your right to purchase or own property as a foreigner. guage might be an issue; you’re best using a mortgage
You needn’t worry - Portugal has no restrictions. You broker who will not only be able to speak your language,
can buy a home wherever in the country you want. but will probably be able to secure you a much better
deal than you’d be able to get on your own.
However, you will need to jump through a few
hoops as regards paperwork. For instance, you’ll need
to get a Portuguese tax number (numero de contribu- Find a Portuguese speaking lawyer
inte or NIF, numero de identificação fiscal) before you
can complete the purchase of a property. You’ll need to
apply to the local tax office or the financial department, Your biggest difficulty buying as a foreigner will
or go to a “Loja do Cidadão” (citizen’s store) and you’ll probably be the Portuguese language. It’s less well
have to pay a small fee. You can provide your lawyer’s known than French or Spanish, for instance, so you
address as a correspondence address if you don’t yet may want to use a translator, or to hire a lawyer who
have an residence in Portugal. speaks both English and Portuguese fluently. You
might also want to look for a bilingual property manag-
er if you’re planning to let the property out and won’t be
Portugal has no restrictions on there most of the time.
foreigners buying real estate

If you are a citizen of a non-EU country, you’ll also

need to appoint a tax representative in the country.
Again your lawyer will probably be first port of call.

Portuguese banks have no problem lending to for-

eigners, though they will only lend 70% of the value of
the property to non-residents; that goes up to 80%

20
H OW TO BUY PRO P E R T Y IN P OR T U G A L AS A FOR EIGNER

The process of buying resale property in Portugal

Sign the promise of

purchase*
You’ll pay a non-refundable
deposit (it might be as low
as 1-3% of the property
Contact an agent value, though 10% is more
Pay the rest of
Make sure the agent normal). It gives you 30
is registered with AMI days to arrange all the the sum and
(Associação de Media- things you need before FInd an sign the final
dores Imobiliarios) signing the final contract. accountant** contract***

1 2 3 4 5 6 7 8 9

Start Arrange a property Get a Portuguese Apply for Get your key
viewing tax number in ‘Loja mortgage
do Cidadão’

* You may get your money back if seller refuses to sell this property or any of the conditions in the es Administration (before March when the legal tax period ends). This way you won’t need to pay for an
“promessa” contract are not respected after 30 days. But you can lose your deposit if you don’t proceed accountant’s services (EUR 50-100).
to a purchase, so make sure all your legal enquiries are done and you have finance arrangements in place *** At this step, you will need to pay notary fees, all purchase taxes and make a payment for property
before you sign. registration (cash or by card) ‘Loja do Cidadão’ is a “store” where you will find official services (register
** Look for an officially registered accountant. If you are sure you can cope with it, reach out to the Tax- property, pay taxes, get NIF number etc).

21
H OW TO BUY PRO P E R T Y IN P OR T U G A L AS A FOR EIGNER

The process of buying a new build in Portugal

You can register

Pay the rest and your property
Contact the con- Check the reputa- sign the final con- yourself in Land
struction company tion of construction tract (‘escritura Registry or let the
(or agent) company* publica’)*** notary do it for you

1 2 3 4 5 6 7 8

Find the property View the proper- Sign the ‘promes- Get your key
ty (or check the sa’ with construc-
project) tion company
representative and
your agent**

* Ask locals and check its completed projects: if they have been completed, if all the units are sold etc. If there is a delay with property completion, you can get your deposit back (it also should be included into
** The contract should state when the property construction process is to be finished. the contract). Also, remember that all purchase taxes will be paid the same way at the day when signing
*** Please don’t sign the final contract until you check the property and it’s the same as you expected. the contract.

22
H OW TO BUY PRO P E R T Y IN P OR T U G A L AS A FOR EIGNER

Golden visa scheme – how to get residency in Portugal

The best thing about being a foreigner buying in You can apply on your own if you want, but most ap- years. That means you’ll need to get your NHR applica-
Portugal, though, is that you can take advantage of two plicants use a lawyer or specialist to help them through tion filed fairly quickly once you move, to avoid getting
separate schemes set up to attract foreign investment, the application process. Unless you really enjoy doing sucked into the Portuguese tax system.
the ‘golden visa’ scheme and the Non-Habitual Resi- paperwork, that’s probably the best route. So far, the
dent (NHR) tax programme. greatest proportion of applicants have come from All in all, buying property in Portugal can be a rela-
China, Brazil and South Africa, with a good sprin- tively quick and painless affair for most foreign purchas-
The golden visa scheme allows non-EU citizens to kling of Russians, but the scheme might also apply to ers - and the extra advantages make it well worth your
secure residency by investing EUR 500,000 in prop- Brits who move to Portugal after Brexit. while if you’re looking to move to Portugal permanently.
erty, or EUR 350,000 if they buy property for redevel-
opment within an urban renewal zone. There are other The NHR scheme is quite separate from the Gold-
ways to access the scheme, for instance by starting en Visa, and gives foreign nationals who are moving to
a business that employs more than ten people, or Portugal a ten year tax break. Any income that comes
investing in Portuguese smaller companies, but the from outside Portugal, and that is taxable by the coun-
property route is the one most often taken. Many pur- try from which you receive it, is received free of Portug-
chasers under this scheme have headed to Cascais or ese tax. So, for instance, if you retire to Portugal, your
Lisbon, but Porto and the Algarve could also be attrac- UK pension and savings income will be free of tax for
tive ports of call. 10 years. If you decide to work in Portugal, you might
also get a break - depending on your profession; sing-
ers and musicians, dentists, IT experts, and archaeol-
‘Golden visa’ program starts at EUR ogists are some of those who benefit from a 20% flat
350,000 tax on their income under the scheme.

The scheme gives residency for one year, renew- NHR scheme can give you a ten
able twice for two years. That will take you through to years tax break
the five-year point at which you’re eligible to apply for
permanent residency; wait another year and you can
apply for naturalisation as a Portuguese citizen, if you However, if you want to use this scheme, you must
want. (Note that Portugal allows dual nationality.) not have been a Portuguese tax resident in the last five

23
M O RTGAGE O PT I O NS TO B U Y A H OU SE IN P OR TUGA L

If you’re buying a property in Portugal, you may be Remortgage your existing property
fortunate enough to have found a cheap rural property
which you can buy cash down, or you may have funds For home owners with significant equity in their
from sale of a property or business, or an inheritance own home, remortgaging that property to help pay for
which you can use to purchase a property without re- a Portuguese home can be a sensible option. However,
quiring finance. However, most purchasers will want if things go wrong, you are putting your own home at
to finance part of the purchase price with a mortgage, risk. You might also find the interest rate you’ll be pay-
and you’ll need to think carefully about your borrowing ing is higher than what you would pay if you borrowed
options. in Portugal, where interest rates are very competitive.

There will always be a currency mismatch, for in-

stance, unless you’re borrowing in euros. If you borrow Only a few banks lend for overseas
in your home currency, you’ll be exposed to currency
properties
fluctuations which could mean the value of the mort-
gage might eventually exceed the value of the property,
if your home currency weakens. On the other hand if One possible advantage is that you might be able to
you borrow in euros but finance the mortgage with in- get an interest-only mortgage at home - though these
come in another currency, your monthly payments will are almost universally more difficult to access since
fluctuate; if your home currency weakens, you might the credit crunch. There are no interest-only options in
find it difficult to afford the payments. Portugal. If you have, for instance, a large long term
investment portfolio, it could make sense to borrow in-
terest-only rather than sell off investments, particularly
Mind currency exchange rate when if they are tax-efficient (like ISAs).
financing your property in Portugal

You’ll want to think carefully before you make

a choice, and perhaps allow yourself a 20% margin to
ensure you don’t get overstretched.

24
M O RTGAGE O PT I O NS TO B U Y A H OU SE IN P OR TUGA L

Get a mortgage in your own country Mortgage options for locals and non-residents
Santander, Novo Banco, BBVA,
Many banks offer international mortgage services EuroBic and Bankinter lend to Locals Non-residents
for other countries in which they have operations. Bar- international buyers
clays, for instance, lends for Portuguese properties as Years
well as to purchasers of property in France, Spain and 30
Italy. However, many banks don’t lend for internation- Interest rates are usually variable, based on Euri-
al properties or restrict their lending to particular types bor plus a percentage (12-month Euribor is currently
-0.16%), but up to 20 year fixed rates are available. If 20
of property or locations. While going this route helps
get over the language issues, it may not give you the you fix you’ll be paying a premium - for instance, 2.99%
best choice of deals or the best interest rate. against 2.25% variable - but if you think rates are likely 10
to rise, you may think it’s a premium worth paying.
Get a mortgage in Portugal 0
Generally, non-residents can get a 25 year mort- Length
Portuguese banks are happy to grant mortgages gage, and residents up to 30 years. Residents also have
to non-residents. You could go directly to one of the an advantage when it comes to loan to value; non-resi-
dents will have to put up a 30% deposit, but residents %
big banks - Santander, Novo Banco, BBVA, EuroBic or
80
Bankinter - but local branches have considerable auton- are only asked for 20%. Residents and non-residents
omy, and you might have to approach several to find the are equal, though, when it comes to two of the less
right deal. Language, as so often, can also be an issue - lovely things about getting a Portuguese mortgage - 60
remember, even if you speak Portuguese, there’s a lot of a lot of paperwork and high fees (around EUR 600).
very specific vocabulary involved in finance which can 40
make it hard going. A better option is to use a mortgage
broker, who is used to dealing with this type of transac- Find a mortgage broker to get the
tion, knows exactly which banks and branches to ask, 20
most attractive mortgage offer
and can probably secure you a better rate.
0
Deposit Coverage

25
M O RTGAGE O PT I O NS TO B U Y A H OU SE IN P OR TUGA L

Here you can see the real example of the loan related expenses, the deal has been Portuguese mortgages are also subject to strict affordability criteria. Your mort-
closed in 2017, house price is EUR 118.500 and the bank loan (80%) - EUR 102.200 gage payments must not amount to more than 30-35% of your net monthly in-
(please read our interview with property owner). come. There’s no such thing as a buy-to-let mortgage in Portugal, so that rental
income won’t be taken into account in assessing your loan, only your own income.
Mortgage loan related expenses Payment (EUR)
You may also find that certain types of property aren’t easy to find mortgages for.
Translation of documents (when required) 147,38 Rustic properties, particularly where drastic renovation is required, could be tricky to
Translation certification by Portuguese embassy in finance - so could properties with major refurbishment required even in the cities. In
50,90 that case, remortgaging your existing property is probably a better route.
your country

House evaluation fees 196,80 A final tip, when you’re working out your budget and what you can afford; don’t
Loan fees 100,00 forget to factor in transfer taxes and legal costs. In Portugal, they can account for
up to 10% of the property price, so you need to ensure you can handle those as well
Total 495,08
as the required deposit out of your cash reserves.
26
P ORT UG UE S E PRO P E R T Y TA X E S

While taxes overall are not particularly onerous, you Portugal’s taxes on property transfer rank it among a 6% flat rate is applied. There are different rules for
do need to build them into your budget - particularly the higher cost jurisdictions in Europe (slightly below residential property that is not being used as a perma-
when you’re looking at running costs. Spain, and above France). The first tax you will have to nent residence. (It’s also worth noting that urban prop-
pay when buying a house in Portugal is the Property erty acquired for rehabilitation is exempt, but there are
Unless you’re moving to Portugal lock, stock, and Transfer Tax (Imposto Municipal sobre a Transmissão quite tight conditions attached.) Tax rates do change
barrel, you’ll be taxed as a non-resident. The rules are Onerosa de Imóveis or IMT), that depends on the fol- fairly regularly, so ask an accountant for the latest
that to be resident, you either have to spend more than lowing criteria: rates before making any decisions.
183 days in a tax (calendar) year in Portugal, or your - type of the property (urban or rural)
Portuguese property has to be your primary address - its location (mainland or autonomous regions)
(for instance, if you travelled widely and didn’t have an- - purchase purpose (primary residence or second
other home). home)

Taxes when you buy the property The Property Transfer Tax in 2018 was set at 5% on
rural property, and 6.5% on urban properties.

Expenses when you buy a house in Portugal

Translation of documents (if not done yet) Be ready to pay EUR ~3,000 taxes
for property valued at EUR 100K
Property Transfer Tax (IMT), rates applied

Stamp Duty Tax (0,5-08%)

However, there are different, tiered rates which ap-
Deed registration fee (1%)
ply to exclusively residential urban property. For per-
Notary costs manent main residences, no tax up to EUR 92,407, 2%
up to EUR 126,403, and then 5-8% above that. Thus you
The IMI (for the first time all the sum)
can be completely exempt from paying this tax if you
VAT 19% for new properties (if not included in the buy a cheap property. If the property is valued at EUR
advertised price) 574,323 or more, you can forget the tiered system -

27
P ORT UG UE S E PRO P E R T Y TA X E S

You need to keep in mind that the Azores and Madeira Taxes for property owners
are considered as autonomous regions of Portugal
and the Property Transfer Tax is calculated at a dif-
All yearly payments for a property owner
ferent rate: no taxes are applied to the properties pur-
chased at less than EUR 115,509; you’ll pay 2% if the The IMI (0,3-0,8%)
property price is up to EUR 158,004 and 5% - if it’s up Insurance
to EUR 215,435. 7-8% are applied for properties priced
Condominium fees
between EUR 215,435 and 717,904.
Property management
But there are a lot of people who buy a house in Portu- Light/water/gas (up to EUR 100 per month)
gal as a secondary residence or holiday home. In this
case you will pay 1% for any property priced below EUR Once you own your Portuguese home, of course, you’re
92,407 in continental Portugal or EUR 115, 509 in au- committed to paying local taxes. This comes in the
tonomous regions. shape of the IMI (Imposto Municipal sobre Imóveis),
calculated as a percentage of the tax valuation of the
In addition to the transfer tax, you’ll pay stamp duty (Im- property. You’re responsible for the tax if you own the
posto de Selo) which adds another 0.8% to the tax bill property on the last day of the tax year.
or 0,5-0,6% if the property is financed by mortgage, de-
pends if the payments are done within 5 years (0,5%) IMI runs at 0.3-0.4% of the property’s value for urban
or more(0,6%), so that the total will usually come in at homes, and 0.8% for rural properties, but the rate de-
between 5.8% and 7.3%. You’ll also want to allow 1% pends on the municipality. You’ll generally pay in April,
for the deed registration fee; though technically that’s though amounts larger than EUR 250 can be paid in
not a tax, it’s still one of the obligatory transfer costs. two instalments; amounts of EUR 500 and more can
be split into 3 separate payments.
New property is also subject to VAT at 19%. Normal-
ly, the VAT is included in the advertised price, but it is
worth checking that this is the case - it will only take a Residents of blacklisted tax havens
few minutes and could literally save you thousands of will pay taxes at a higher rate
euros.

28
P ORT UG UE S E PRO P E R T Y TA X E S

If you have an urban property that’s worth more than How to qualify for IMI exemption?
EUR 600,000 (EUR 1.2m for couples who submit a 3 years free of IMI are available for
joint tax return) you’ll also pay an additional property For low income households whose annual income buyers of their first residence in
tax (AIMI), basically a wealth tax. AIMI is calculated at is less than EUR 15,295 the property value they pay Portugal
0.7% of the property’s value. taxes for doesn’t exceed EUR 66,500. Note that the
property address needs to be the same as tax ad-
Note that with property taxes, Portugal imposes a spe- dress, so this is a tax break for residents (in case
cial, higher rate of tax on properties owned by resi- you’re planning relocation or eventual retirement to
dents of blacklisted tax havens such as Bermuda, Portugal). Another option for tax benefit you can
Barbados, Monaco, Andorra, or the Cayman Islands. consider when moving to Portugal is 3 years free of
If you actually live in a blacklisted country, it may be the IMI for people buying their primary residence
worth while buying and holding your property through in Portugal.
an EU-domiciled company, instead.

If you rent out your holiday home, you’ll have to pay tax on You will be exempt from IMI if your
your rental income to the Portuguese authorities. This is income is less than EUR 15,295 (and
charged at a flat rate of 28%, and you can’t deduct your
you’re a resident)
mortgage payments - but you can subtract your mainte-
nance and repair costs, insurance premiums, local taxes
you’ve paid, and property management costs. Remember As with the IMT buildings that are subject to urban re-
that you’ll remain liable to tax on your rental income at home, habilitation get a tax break, and will be free of the IMI
as well, though a double taxation treaty means you’ll only for 3-5 years, depending on how long the rehabilitation
pay extra if your local tax rate is more (you won’t pay twice). takes.

Yearly expenses for a house EUR For companies under the Investment Support Tax Re-
gime the first 10 years can be free of IMI payments.
100K can make EUR 2,000, with
mortgage up to EUR ~7,000

29
P ORT UG UE S E PRO P E R T Y TA X E S

Tax when you sell the property Then they will only pay tax on 50% of the total gain, tax payments. But of course, you will get something in
at the Portuguese income scale rates, which go from return - hours of sunshine, great wine and food, lovely
14.5% up to 48%. This is a complex choice, as under scenery, and the chance to live in a country that really
Expenses when you sell a house in Portugal this alternative your entire (worldwide) income needs to knows how to hold a party!
Capital gains tax (up to 28%) be taken into account to find which marginal rate you
should pay. If the sale represents the majority of your in-
Agency fees
come for the year, choosing the Portuguese basis could
Land certificate (if it’s not ready yet) – EUR 30 be in your favour - but if you have significant income
elsewhere, or capital gains on the sale of shares or a
Building register – EUR 10
family business, you could end up paying more than
Energy certification (depends on the municipality, 28% with this option. Do your sums carefully, and take
but good if it’s already available when you buy a advice from a tax specialist if you feel doubtful.
house)

When you sell a Portuguese property, you’ll be liable If you’re a resident and selling
to capital gains tax on your profit. Non-residents pay your home to buy your new main
at 28% on the entire profit; Portuguese residents, on residence you can be exempted
the other hand, only have to pay tax on half the total from capital gains tax
gain that they’ve made, and they’re taxed on it as nor-
mal income, so that they pay the marginal income tax
rate applicable. If you’re a Portuguese resident, you’ll be exempted from
capital gains tax if you are selling your home, but only if
you reinvest all the proceeds in another EU/EEA locat-
Capital gains tax is 28% for non- ed property which is intended to be your main home.
residents If the new investment has a lower price, then you will
have to pay the tax on the amount you are now making.

There is a neat little wrinkle here for EU/EEA residents, Whatever kind of home you buy, and whatever its value,
who can elect to be taxed on the Portuguese basis. the Portuguese government will be happy to take your

30
P OTENT I AL PI T FAL LS OF B U Y ING A P R OP ER TY
IN PORT UGAL

If you want to buy a home in Portu- (By the way, if you’re moving to Por- rate, there could be a cousin living in
gal, you’re obviously dreaming of being tugal and want to buy a car when you Brazil, Bordeaux or Basildon who owns
happily settled in and putting your feet arrive, you need to know that the same part of the property and could block
up with a Super Bock or a glass of vin- applies to cars. Make sure it’s free of the sale. Even in the best case scenar-
ho verde. But in between seeing the debt when you buy by using a service io, trying to get hold of a distant relative
property you want and being able to like Autocheck!) who emigrated some time ago can de-
relax, there are a number of nasty little lay a sale by weeks or months. A good
pitfalls you need to watch out for, or Check the registered title lawyer will check the property’s own-
your dream could be spoiled for good. and ownership ers and can advise you if there is likely
Fortunately, we’re here to help you with to be a difficulty - if you’re in a hurry to
some good advice. Fortunately, any competent lawyer complete, you might want to pick anoth-
will find any debts that are attached to er property.
Watch out for law of subro- the property by checking the Certidão
gation de Teor, or registered title. They should
also check utility bills and local taxes are Check all the owners of
One big pitfall that could catch buy- up to date before you sign the contract. your future house
ers from elsewhere is the law of subro- But this is one reason you need to use a
gation. This attaches debts to the prop- lawyer who’s well versed in Portuguese
erty, rather than to the borrower, so that law, not your family solicitor back home. On the other hand, some purchasers
if you’re not careful, you could end up of beautiful rural houses for renovation
being liable for ten years’ unpaid taxes, Another possible problem buying in report waiting over eighteen months to
three years of electricity bills, and even Portugal - less so with urban properties finalise their purchase - and are still glad
a huge mortgage or personal debts that or newer properties, but remarkably of- they did so. If that’s the cost of securing
have been secured against the property. ten with rural houses - is the dispersion your dream home, they say, it’s worth it!
of ownership. Often, property has been
passed down in the family, and cousins,
Make sure your house is aunties, or grandchildren all have small
free of debt interests in the estate. Since Portugal
has traditionally had a high emigration

31
P OTENT I AL PI T FAL LS OF B U Y ING A P R OP ER TY
IN PORT UGAL

Make sure you know what you are with the vendor to get things sorted out - and working
buying out who should pay for it.

Rural properties can also be a bit of a problem when Making sure the deeds are correct can be a thank-
it comes to the title deeds. Sometimes a property is less task. Agents may be little or no help so again, find-
made up of numerous small parcels - they may be very ing a really good and thorough lawyer is key to a suc-
small strips indeed. Some may never have been sold, cessful purchase.
while others may have been subdivided. In communi-
ties where ‘João owns the field as far as that big stone Check if furniture goes with the house
there’ was the usual way of demarcating property, it
can be difficult to find out exactly what you’re buying. You may expect to move into a completely empty
Agents are often clueless when it comes to working out property. That’s great in theory - but often it won’t hap-
the details, so again, you need a good lawyer or agent. pen. If you’re happy to take over a hundred years’ worth
of possessions - including perhaps some wonderful
old furniture, but also a huge framed photograph of
Making sure the deeds are correct great-grandma at her most scary and cupboards full of
can be a thankless task old newspapers - go ahead! Otherwise, make sure that
you raise this issue during the purchase process and
reach a satisfactory arrangement.
Buildings may also have been put up with no ad-
ministrative record. That might mean your pigsty has With resort properties, on the other hand, it’s not
to come down, which isn’t so serious, but if it affects uncommon for buyers to make a bid for the furniture
the house itself or a building you were planning to con- as well, even though properties are generally marketed
vert, it could be disastrous. However, luckily there’s a as unfurnished. If you see an ideal seaside apartment
legal procedure to solve the problem. You may need to that’s been really well furnished, and you’re not look-
ensure that your purchase includes a ‘rectification’ not ing forward to the job of buying furniture for a holiday
only ensuring the record is up to date, but also legal- home when your time there will be limited to a couple
ising any existing buildings that don’t have a planning of weeks a year, this is an effective way to kill two birds
permission. The major difficulty is likely to be agreeing with one stone.

32
P OTENT I AL PI T FAL LS OF B U Y ING A P R OP ER TY
IN PORT UGAL

Back up your money you’re aiming to live there all year round,
do you know what things are like in win-
There’s one other little legal problem ter? Some areas of the coast are sum-
we ought to talk about. While in the UK, mer-only destinations and most of the
you’ll be paying your deposit to a solici- businesses close down over the winter,
tor, or in France, to an agent which has so there will be no shops, no bars, no
compulsory indemnity insurance or to a nightlife, and possibly no neighbours,
notary, in Portugal estate agents (and either. If you want an all year round des-
some legal firms) don’t have financial tination, Cascais or Estoril might be
guarantees. That could cost you your much more suitable - weekenders and
deposit if the agency goes bust. Check commuters from Lisbon keep them
whether your agent is bonded, and en- lively outside the peak season. Or you
sure your money is held in a separate might decide to purchase in Lisbon,
client account, not as part of the firm’s Porto, or one of the larger provincial
own funds. towns, instead.

When buying a house If you want an all year

ensure your money is round destination,
held in a separate client consider Cascais, Estoril,
account, not as part of Porto or Lisbon; Algarve
the agency own funds can be empty in winter

Finally, there is one big pitfall to buy-

ing in some areas in Portugal, particu-
larly on the Algarve. You might have vis-
ited the property in the summer, but if

33
34