Great gastronomic traditions, rich culture, enviable climate, and award-winning beaches – Portugal has almost no cons, right? If you are seriously considering buying a home in this country and moving there with a Portugal residence permit by investment, we recommend you study this guide.
Our guide for Portugal real estate buyers covers everything from the benefits of investing in the local real estate market and its history to mortgage and residence permit requirements.
Why buy property in Portugal?
Portugal has been a second home for many expats over the years. The charming coastline, friendly community, and unparalleled climate have made it one of the best destinations to move, work, rest and live in after retirement.
Lisbon stands out as one of the most affordable European capitals. About half a million people live in this city. Its small size and relatively small population compared to other European capitals give this city a unique charm. But you shouldn’t underestimate Lisbon and think it can’t offer all the amenities of a big and bustling European city.
Many other destinations are also popular among expats. For example, we can highlight Porto, Amadora, and the Algarve region’s charming coastal towns and villages. Portugal has something to offer any expat, whether they are looking for a big city vibe or quiet rural oasis magic.
We want to pay special attention to the Portugal Golden Visa program (a special program for obtaining a Portugal residence permit by investment). Buying local property allows a foreigner to participate in this program, paving the way for a Portuguese passport after five years of residency. This offer becomes even more attractive given official statistics and expert statements. They indicate that Portugal real estate market remains active and continues to thrive even during the Covid-19 pandemic.
Free consultation
choose the optimal country
to invest in with
professional assistance.
Choose the optimal country to invest in with professional assistance.
Portugal real estate market history and overview
Like the rest of the world, Portugal has experienced economic difficulties in the recent past. Average housing value reflected this, dropping about 11% between 2011 and 2012. Fortunately, after hitting bottom in 2012, the market began to recover the following year. The recovery accelerated between 2013 and 2014, and the market started to rise steadily.
An interesting feature of almost any real estate market is that it accurately reflects the respective country’s economic power. Back in 2016, the Portuguese property market showed just how strong the country’s economy is. Since then, Lisbon real estate has grown by about 2.4-2.6% annually.
But this is not the most unusual case. Some areas, such as Santa Maria da Feira, showed even more unprecedented growth. Prices there increased by about 12% per year! At the same time, some Portuguese regions did not show such impressive growth rates. For example, in the cities of Coimbra and Guimaraes, the average annual growth rate was only about 0.9%.
In 2021, the average property price in Portugal increased by 13.8%.
Real estate prices in Portugal
The amount you pay for property in Portugal will vary greatly depending on where you decide to buy such an asset. The choice of location, of course, depends on your goals. Retirees, for example, often choose Porto or Cascais, while young professionals prefer more lively destinations such as Lisbon.
In the table below, you will find the average price per square meter in various Portuguese cities in 2022 (top 5 highest and lowest prices).
| Most expensive places to buy property in Portugal | |
| City/town | Average price per square meter |
| Lisbon | EUR 3,692 |
| Faro | EUR 2,625 |
| Porto | EUR 2,270 |
| Setubal | EUR 1,960 |
| Madeira | EUR 1,925 |
| Cheapest places to buy property in Portugal | |
| Portalegre | EUR 604 |
| Guarda | EUR 650 |
| Castelo Branco | EUR 723 |
| Braganca | EUR 780 |
| Beja | EUR 840 |
Home ownership rate
Analyzing Portugal real estate market, we cannot ignore the home ownership rate. This vital indicator reflects the property owners’ share in the total number of people living in houses and apartments, including rented housing.
Home ownership rate depends on economic and demographic factors, including income, property prices, rental prices, population density, and household sizes.
Portugal has an unusually large number of homeowners. About 75% of its population lives in their own housing. This is approximately 10% more than in the US and the UK. Moreover, not only native Portuguese, but also expats solve the issue of acquiring their own real estate.
Many foreigners have already settled in Portugal to work remotely or have arranged to move here after retirement. Moreover, many of them prefer to invest in a second or even a third cottage or villa for rent, focusing on the local market prospects and its competitive development level.
Real estate types (terminology)
Portugal is a well-developed country with an equally developed real estate market. All over Portugal, you will find apartments for sale in abundance, ranging from studios to five-room apartments and large penthouses.
There are various terms that you need to know when looking for property in Portugal:
- The terms Casa or Moradia refer to a typical private house. Some of them have additional amenities, including a backyard or a patio, for example. Most of these houses are surrounded by a wall with front gates.
- Casa Geminada is a duplex house.
- Condomínios (condominiums) are separate apartment buildings that share common areas. They can be expensive, but in return, they offer a higher level of shared property care and security.
- Quintas are classic country houses or farmhouses. You can usually find them in rural areas, although some of them are in suburban areas.
- Terreno means land. Some foreigners prefer to buy land and build there their own houses. If you decide to follow their example, you must first check with the municipality (Câmara Municipal) to ensure that the land is not registered for agricultural and residential development purposes.
- When looking for an apartment in Portugal, you may find confusing numbers in the ads, including T0, T1, T2, etc. They mean the number of rooms. So, T2 will be an apartment with two bedrooms, a kitchen-living room, and all amenities. T0 means a one-room studio apartment. Sometimes, you will also notice +1 next to the ad title (for example, T2 + 1). This means a three-room apartment with an additional room without windows.
Where to buy real estate in Portugal?
It doesn’t matter whether you want to buy a villa somewhere in the countryside and live in a peaceful atmosphere or buy an apartment in a big city, Portugal has a lot to offer.
The secret to a successful real estate purchase lies in choosing an asset with the best location. Let’s tour Portuguese local housing markets that deserve the closest attention.
Lisbon
Lisbon is the heart and soul of Portugal. This is one of the cheapest European capitals, attracting many investors and expats. Many technology companies and start-ups appeared in Lisbon, turning the city into an economic prosperity center.
Lisbon’s housing market is a great place to invest. Prices in some areas of the city, including Avenida da Liberdade, Lapa, and Baixa Chiado, have risen sharply due to huge demand. However, you can easily find cheaper properties in areas further from the center (Amadora or Benfica).
Many young professionals prefer to live in even more distant places (Cascais or Estoril). And this makes sense since Lisbon is only 30-40 minutes by car, and real estate is much cheaper than in the capital’s center.
Porto
This mysterious fishing town combines a unique history and progressive urbanism. Foreigners moving to Portugal often prefer Porto. Firstly, they choose this city because of its proximity to the Atlantic coast and the availability of first-class real estate on the seashore.
Porto’s real estate market is showing promising growth. This city is both a tourist and commercial center. That is why it is a profitable place for investment.
Porto is unique in a variety of property types to choose from. You can choose, for example, the Foz Douro area, which boasts some of the best hotels on the Atlantic coast. On the other hand, if you are looking for commercial real estate, you will appreciate the Ribeira area.
Algarve
Most foreigners who decide to buy property in Portugal for their own residence or generate passive rental income prefer the Algarve region. The world-famous gold coast offers a wide range of properties, from villas and luxury houses to apartments with ocean views.
Vilamoura is famous for its luxurious houses and villas, making it the most expensive area in the Algarve. Places like Lagos and Albufeira also boast properties in the upper price range. In rural areas like Alcoutim or Monchique, you can find cheaper deals.
The idea of investing in the Algarve is never a bad one, as the region has always been a tourist and economic backbone for Portugal. It offers ample opportunities for capital growth.
Silver Coast
Few people know that the Algarve is not the only region in Portugal with fantastic beaches and a magical coastline. The Silver Coast, which lies between Lisbon and Porto, also offers incredible pristine beaches and properties.
If you are looking for a luxury villa or other residential property by the sea, but you are not ready to pay the Algarve high prices, such areas on the Silver Coast as Tomar, Peniche, Obidos, or Nazare will be your best choice.
! Important! From 2022, the Portuguese government has changed the rules for obtaining a residence permit by real estate purchase. Buying residential property in some major cities and coastal resort areas, including Lisbon, Porto, and most Algarve, no longer qualifies for it. If you are looking for a Portugal residency, please contact our experts to select suitable properties in other areas.
Step-by-step process of buying Portugal real estate by a foreigner
When we have looked at the market data and places to search for real estate, we can begin to discuss the buying process. Can a foreigner buy property in Portugal? Of course, yes! One of the most attractive Portuguese real estate market features is the lack of restrictions for foreigners.
In addition, you can enjoy the benefits of the Portugal Golden Visa program if you invest in real estate worth over the legal threshold. It varies depending on the property type and region (from EUR 280,000 to EUR 500,000).
You will need a notary to sign the sale contract. You will also need the Portugal tax number, which you can get in any local tax office. In addition, you have to provide the following documents at various stages of the process:
- ID with photo
- preliminary sale contract (Contrato-Promessa De Compra e Venda; CPCV), if available
- property energy certificate
- stamp duty payment certificate (Imposto de Selo)
- Property passport (Caderneta Predial), which confirms an asset record in the official register. It should contain key asset data, such as official value, structure and configuration, owner’s full name, etc.
To buy property in Portugal, you need to follow these steps:
- If you consider a mortgage, decide which type is best for you. We recommend you read the relevant section of this guide to learn more about mortgages in Portugal.
- Traditionally, there is a place for negotiation or bargaining, so it’s best to start by discussing the price with the seller.
- After agreeing on a price, you need to make an initial deposit. The initial deposit guarantees the property reservation. Usually, it is about USD 6,600.
- We advise you to sign a preliminary sale contract (CPCV). This is not a binding document, but it provides guarantees to both parties while waiting for the final contract signing. This is a good option if you are waiting for mortgage approval or construction completion, for example.
Portugal residence permit by real estate purchase
There are four investment options to obtain a Portugal residence permit by real estate purchase in 2022:
- From EUR 280,000 in property subject to renovation – real estate objects over 30 years old located in low population areas.
- From EUR 350,000 in property subject to renovation – real estate objects over 30 years old located in densely populated regions of Portugal.
- From EUR 400,000 – real estate, including newly built properties, located in areas with an underdeveloped economy and low population density.
- From EUR 500,000 – any other residential or commercial property in Portugal (from 2022, there are exceptions for some major regions and coastal resort areas).
You can also get a Portugal residence permit when buying real estate in the name of a company in your sole ownership.
As we have already noted, property in major cities and coastal resort areas, including Lisbon, Porto, and most Algarve, is not subject to Portugal residence by investment program. Please, contact us at info@offshore-pro.info to select real estate in suitable regions.
Mortgage in Portugal
It is possible to buy property in Portugal with a mortgage. Moreover, you can do this even if you plan to apply for a Portugal residence permit. In this case, your own funds’ amount has to be equal to or exceed the threshold established by investment residency program rules (EUR 280,000 – EUR 500,000 depending on the chosen property). Also, your own funds must cover at least 30% of the object value.
It’s always wise to sort out the mortgage terms beforehand to determine how much you can borrow and calculate your monthly payments. It is possible to use a mortgage loan with a variable or fixed rate in Portugal. It would be best to consider other factors to select the optimal conditions.
What are mortgage terms?
Many major Portuguese lenders are happy to provide mortgages to eligible individuals, including foreigners wishing to purchase property in Portugal.
Most banks provide loans for up to 50 years if you are a resident. For non-residents, this period is reduced to 30 years. In addition, there is a limit on the borrower’s age at the mortgage expiration date. This indicator varies from 70 to 80 years, depending on the lending services provider.
Down payment amount
The loan amount can range from 60% to 70% of the property value, depending on the lender. Therefore, you have to cover at least 30% with your own funds.
Variable rate mortgage
In this case, the loan rate may change over time. Sometimes it changes upwards, and sometimes downwards. If the second option happens, the mortgage loan becomes cheaper, making the purchase even more profitable.
The increase or decrease in mortgage interest rates in Portugal reflects the Euribor indicator dynamics (European Interbank Offered Rate). It represents the rate at which European banks will lend to each other. Based on the Portuguese Central Bank regulation, there is a 0.5% prepayment penalty for variable rate mortgages.
Fixed rate mortgage
This option allows better budget planning, as loan repayments will not increase during the fixed rate period (from 0 to 30 years). After that, the variable rate period will begin unless the agreement specifies a fixed rate for the entire loan period.
There is a 2% prepayment penalty for fixed rate mortgages, also regulated by the Portuguese Central Bank.
How can I get a mortgage? (financial status and real estate assessment)
When processing a request for a mortgage, bankers are interested in two things: a potential borrower’s financial status and the relevant property assessment results.
Financial status
The bank will require proof of your income or earnings to assess your financial status. For this, you can provide documents confirming the receipt of funds from the following sources:
- wage
- investment income
- retirement income
- payment of dividends
- rental income
In addition, bankers are likely to ask for information about any pre-existing debts and the employment history of the potential borrower. This information will help reassure the lender that the client will be able to make the monthly mortgage payments.
Property assessment
The bank will hire a licensed appraiser for a comprehensive analysis and assessment of the real estate object the potential borrower has decided to purchase.
Documents required for mortgage
You need to provide such documents to apply for a mortgage:
- passport copy
- Portuguese tax number (NIF) copy
- address confirmation (a recent utility bill will suit)
- credit history
- any recent payrolls
- any recent bank statements
- most recent tax return
- lease agreement copy (if available)
You will also need property and life insurance when applying for a mortgage loan in Portugal.
Portugal real estate taxes and fees
The main item of additional cost when buying real estate in Portugal is the property transfer tax (Imposto Municipal Sobre Transmissões, IMT).
This tax amount varies greatly depending on the situation. Its rate can go up to 10% for non-Portuguese citizens with tax haven residency. However, it can be even zero for buyers of cheap property as a first home. The fee depends on the asset value and will be higher if you buy a second or third property after the first transaction in the Portuguese market.
The seller usually covers the agency fees in Portugal, so you don’t have to pay them. But there are some fees and taxes that you as the buyer may still have to pay:
- Land registry and notary fees. These fees are paid together and typically range from 0.2% to 1.2% of the property value.
- Stamp duty. It is 0.8% of the purchased housing value.
Before buying, it is wise to discuss all sale transaction tax aspects with a professional who knows the costs depending on your situation.
FAQ
Can a foreigner buy real estate in Portugal?
There are no restrictions for foreigners on property ownership in Portugal. In fact, the government encourages foreign investment in the local real estate market. Individuals from abroad can buy real estate in Portugal if they have all the necessary documents.
Do I need a lawyer to buy property in Portugal?
Yes, we advise you to hire such a specialist to accompany the transaction. An independent lawyer will act on your behalf and only in your best interests. Be skeptical of the candidates proposed by the seller or developer.
What are the additional fees when buying Portugal real estate?
It all depends on the type, price, and other parameters of the property you purchase in Portugal. As a rule, the associated costs should be between 7% and 10% of the total purchase price.
Why buy property in Portugal?
Portugal is becoming an increasingly popular place to buy real estate (whether for relocation or investment). This small European country has a high life quality with low living costs, a pleasant climate, and a stable economy.
Is Portugal a good place to invest in real estate?
In recent years, the local real estate market has experienced steady growth, which makes it an excellent investment platform. In particular, buying real estate in Portugal for rent can be an excellent financial investment. It is especially profitable to purchase apartments in popular tourist cities like Lisbon and Porto. The rental income during peak tourist season makes this an extremely viable investment.
Is property cheap in Portugal?
Real estate in Portugal is relatively inexpensive compared to other Western European countries (especially if you compare Lisbon with other capitals). Property prices in Portugal vary greatly, but they are cheaper than the European average. You can learn more about real estate prices in Portugal from the relevant section of our guide.
Do expats pay taxes in Portugal?
If you are not Portugal fiscal resident, you have to pay taxes only on income received in this country. Fiscal residents must pay personal tax on income from sources around the world. You will become a tax resident if you reside in Portuguese territory for 183 days or more in 12 consecutive months.
What deposit do I need to buy property in Portugal with a mortgage?
To apply for a Portuguese mortgage, you need to deposit 30% of the property value from your own funds. Depending on the lender, the loan amount can vary from 60% to 70% of the property price or appraised value. Loans are available both with a variable and fixed rate.
Is property in Portugal cheaper than in Spain?
According to Numbeo, consumer goods in Portugal, including real estate, are 12% cheaper than the Spanish average. Restaurant prices are 32% lower. Meanwhile, prices in Spain are lower than in many other European countries.
Is there a property tax in Portugal?
As a property owner in Portugal, you will have to pay property tax, also known as IMI. Each Portuguese municipality has its own rate, set by the municipal assembly. Tax rates range from 0.3% to 0.8%.
Is there a wealth tax in Portugal?
Yes, there is such a tax. It is valid for owners of assets worth more than EUR 1 million. The tax rates are 0.4% for real estate owned by companies, 0.7% for individuals, and 1% for persons or structures with ownership interests in Portuguese real estate. A non-taxable minimum of EUR 600,000 is deducted from the value of all Portuguese real estate owned by an individual (but not a company) for calculating tax purposes.
Who will help you buy real estate in Portugal?
When buying property in Portugal, it is always a good idea to consult an experienced real estate agent. The Portuguese call such specialists imobiliaria. Each of them must have a license with a unique number assigned by the Portuguese Association of Real Estate Agents (Associacao de Mediadores Imobiliarios). If you want to check your agent’s license, you can do it by visiting the organization’s website.
For more information about the Portugal real estate market and the Portugal Golden Visa program, please contact InternationalWealth consultants. Our experts will do their best to help you. You can send a request for a consultation to info@offshore-pro.info.
Also, we can assist you with obtaining Portugal D7 visa – a great option to get European residency without large investments.
