How to purchase property in Portugal and acquire a residence permit: a complete guide

Are you thinking about purchasing a piece of real property in Portugal somewhere on the seacoast thus becoming eligible for legal residence in the country? If so, you have come to the right place and at the right time! InternationalWealth team specializes in immigration services and we help the readers of our Internet portal to purchase premium property in foreign countries. The real property prices are attractive in Portugal and an investment in a sufficient amount will make you qualified for the Portuguese ‘golden visa’ (residence permit). This guide will introduce you to the most appealing regions of Portugal where you can buy property and describe the main steps in the process of becoming a legal resident in Portugal.

A visa is an entry permit that is stamped in your passport by the authorities of the host country. There are student visas, working visas, travel visas, and transit visas. Since not a long time ago, however, a new type of visa has been put into use, namely, a golden visa.

A golden visa is effectively a long-term residence permit. Several European states issue golden visas to foreigners who bring some investments into their economies. The Portuguese golden visa program is rightfully among the most popular such programs. It is aimed at citizens of the countries lying outside the European Union.

The golden visa holder is entitled to live in Portugal and use the country’s educational and healthcare resources. After five years, the visa holder can apply for full citizenship of Portugal. The additional requirements are passing a test in the Portuguese language and physically residing in the country for a bit over a month in total (you have to spend one week every year in Portugal to meet the physical presence requirement).

The amount of investment that can bring you the golden visa varies between 280,000 and 500,000 euros. The exact amount will depend on where the property is located, on its type, and on its age. There are no serious restrictions in Portugal for foreigners buying real property in Portugal. Let us discuss where in Portugal you may want to purchase a house or an apartment.

Best regions in Portugal where you can buy real property

Portugal is a rather large country and its regions differ in climate and lifestyle. Of course, it would be a very good idea to pay a visit to the region/ community that you are interested in before buying property there. Talking to the locals would also be useful. However, in the times of the pandemic, you may have to be satisfied with a video excursion and a free consultation from InternationalWealth experts.

Every Portuguese region is unique and they offer various opportunities and ways of life. You can choose the vibrant cities of Lisbon or Porto or you can dwell in the sunny region of Algarve, on Madeira or the Azores. Anyone can find a nice place to live in Portugal. Below please find brief descriptions of the most attractive regions in Portugal.

• Eastern Algarve: The resort area of Algarve is made up of three sections of the coastline and the eastern part of it lying between Faro and Spain is less developed and thus quieter. The shallow shores and the lagoons of Ria Formosa nature park attract foreigners there who have turned Tavira fishermen’s settlement into a cosmopolitan little town at the seaside. You should also take a look at the place called Vila Real de Santo António with a nice marina and the town of Castro Marim lying close to the Spanish border.
• Central Algarve: The central part of Algarve encircles Vilamoura and it is especially popular with buyers of real estate as this densely populated area is well developed and it offers a great number of opportunities. The pearl of this area is the resort town of Vilamoura with a marina for 1,000 yachts and a golf course. Luxurious hotels, casinos, sports facilities, and beach clubs can be found in the town. The place is close to Faro international airport.
• Western Algarve: This region is a bit less developed but there is a wonderful coast of the Atlantic Ocean there with marvelous anglers’ villages and wide beaches. The beautiful city of Lagos is a popular tourist destination that is full of visitors all the year round.
• Nazaré: It is a small town with around 15 thousand people living there. This place is a surfers’ paradise. It was there where a surfer rode a 33-meter wave (the height of a ten-story building) in 2014, thus beating the world record.
• Peniche: It is a medium-size town with a population of about 30 thousand people. It is located on a small but picturesque piece of land washed by the sea on three sides. A cozy haven, old white windmills, great conditions for windsurfing, long sandy beaches, and a lively seaport are the main attractions that you can find there.  
• Caldas da Rainha: It is a resort town almost as large as Peniche with a long history, numerous museums, exhibition centers, shops and cafes. The villages around the town will let you immerse in the Portuguese countryside lifestyle simultaneously providing access to a wide range of services including public transportation (it takes an hour to get from Caldas to Lisbon by bus).
• Óbidos: It is an impressive walled town with wonderful landscapes. The town is filled with tourist attractions including extremely narrow medieval streets. No wonder it is one of the most frequently visited places in Portugal. When in Óbidos, you can try local fish served at the traditional Portuguese restaurants.  
• Lisbon: The city is the westernmost European capital. This is a wonderful place to spend winters there as the weather is very warm. Lisbon sits at the Atlantic coast, so it is also perfect for surfing lovers. Of course, the capital is full of fashionable restaurants and luxury hotels.  
• Cascais: It is an anglers’ village half an hour away from Lisbon. The buildings in the village are truly stylish. The place is ten minutes away from the magnificent Sintra that is a UNESCO world heritage site.
• Madeira archipelago: The subtropical archipelago of Madeira is growing in popularity with foreign investors. It is located in the Atlantic Ocean approximately 800 kilometers to Algarve and 450 kilometers to the west coast of Africa. The largest island that is called Madeira is referred to as ‘the pearl of the Atlantics’ due to its evergreen vegetation. This is the most frequently visited European island with high mountains and a stunning coastline. More than 60% of the territory of Madeira is occupied with a nature reserve that is one more UNESCO world heritage site.  
• Porto: If you love the Portuguese culture but Algarve feels a bit too sleepy to you, we suggest that you look at the second largest city in Portugal – Porto. Porto is a lovely city that is also on the list of UNESCO world heritage sites. In addition, it serves as a gateway to the fascinating Douro valley.

The process of purchasing real property in Portugal

Have you chosen the region in Portugal? Great! Let us now discuss the process of purchasing real property in the country. It consists of the following steps:

• Acquiring a fiscal number (Numero de Indentificacao Fiscal / NIF) from the local tax authorities (Financas). It is necessary for opening an account with a Portuguese bank that you will use to pay for the property and various professional services.  
• Deciding on the piece of property to buy. If you are unable to visit Portugal personally, you can choose to rely on photographs and video excursions. Please note that if the property that you like is currently leased, you may have to wait for video review until the present residents move out. Actually, this is a good sign: it means that the property has a good rent potential and you can return your investments with time.
• Making a promissory agreement between the seller and the buyer on signing a purchase agreement in the future (Contrato de Promessa de Compra e Venda; CPCV). This is a legally binding agreement that is signed by the parties in front of a notary public. If you cannot be present personally when the agreement is signed, you can issue a Power of Attorney in the name of a Portuguese lawyer who will act on your behalf. The agreement will contain the personal data of the signatories, information about the property rights, the agreed price, the amount of the security deposit, the date when the final purchase agreement (Escritura de Compra e Venda / Escritura) is to be signed, and the conditions of the property use during the transition period, if necessary. The security deposit is usually between 10% and 25% of the contract price. When the CPCV is signed and the deposit made, the deal is secure. In case the seller fails to commit to their obligations, they will have to return 200% of the security deposit to the buyer. If the buyer fails to commit to their obligations, the seller gets to keep the deposit.
• Then the lawyer that you will have hired (Advogado) will inspect the property for any encumbrances including mortgages. The inspection is required to avoid any unpaid debts or bills on the property such as utility bills, for example, as well as make sure that the ‘habitation license’ (Licença de Habitaçao) is in good order. The lawyer has to confirm that the seller is the rightful owner of the property. In addition to that, the land lot boundaries may have to be checked, the passage rights, the usage restrictions, and other aspects. 
• Drawing up and signing the final purchase agreement (Escritura). When the agreement is finalized, the property rights are transferred to the buyer. The Escritura also needs to be signed in front of a notary public.
• The original of the agreement then goes to the Land Cadaster (Conservatoria de Registo Predial) and the notary issues copies of it to the parties (it would be a good idea to ask for a couple of copies).
• The property right registration fee is payable to the Land Cadaster.
• Finally, the new property owner has to be registered with the tax inspection (Autoridade Tributária) and the communal service companies.

It is important to ascertain that you are using the services of a licensed real estate agent in Portugal. In accordance with the Portuguese legislation, the agents must undergo training and acquire INCI (Instituto da Construcao e do Imobiliario) certificates. The activities of the agents are closely regulated in Portugal, which simplifies finding a reliable one.

You can make sure that the agent is making a legitimate offer by asking for his/ her ASMIP (Associação dos Mediadores do Imobiliário de Portugal) license number. Real estate agents in the country have to provide their license numbers when publishing any sort of business-related information, be it a sales offer, a booklet, or a website announcement.

The ASMIP number can be verified at the official ASMIP website. Simply enter the number in the search box and press ‘enter’. If the system does not find the number, you can be sure that the agent you have contacted works illegally.

How much time is required for striking the deal? What are the transactional costs?

The process normally takes between 30 and 60 days. The additional costs will come up to about 8% of the contract price, as a rule. The additional money is required to cover the costs of the legal services, to pay the taxes, and so on.

• Tax on property rights transfer: its rate will depend on the class of property that you purchase. The taxable base equals that market price or the contract price (whichever is higher). Normally, the tax rate is 6.5% if the property is located in a city and 5% if it is located in rural areas. However, there are some nuances. Your lawyer/ realtor will give you detailed information.
• Registration fees: these can vary between 0.2% and 1.2% of the property price.
• Stamp duty: is charged at a fixed rate of 0.8%. The taxable base equals that market price or the contract price (whichever is higher).
• Added value tax: the rate is 23% on the continent and 18% on the islands. It is payable on the cost of legal and other professional services that you use.

Real property in Portugal for different budgets

Portugal is a nice country to live there permanently, or to spend winters, or go there for summer vacations. The real estate price range is diverse and any foreign investor is likely to find something to his/ her liking in this or that budget category. The property can be rented out or lived in. In the latter case, you can enjoy the comparatively slow pace of life in Portugal.

70,000 €

Believe it or not, but you can really buy real property in Portugal that costs as little as that. And we are not talking about a tiny log cabin here. In rural areas, somewhere in the mountain regions to the northeast of Porto you can buy a three- or even four-bedroom villa! At the same time, lease opportunities will be limited.

70,000 — 120,000 €

An investment of this amount is going to be enough for a one-bedroom apartment in Tavir at the coast in Algarve. Probably, you can also buy a small villa in the same region. This amount will also be sufficient for buying an apartment in such cities as Vila Real de Santo António or Castro Maxin, for example. You can hardly make a sizable profit if you let these apartments on a lease though, bearing the maintenance costs in mind.  

120,000 – 280,000 €

This sum would be enough for an apartment in Albufeira that is within half-an-hour drive from Faro airport. You will have a large choice of two-bedroom apartments in low-rise condominiums with swimming pools and within a walking distance from the beach. Good short-term lease opportunities in the summer. You can also consider buying a similar apartment in San-Antonio.

280,000 — 500,000 €

An investment in a single piece of property in Portugal that is worth as much will make you eligible for a golden visa. The lower sum is sufficient if you invest in rural areas or in the property that needs to be restored. As far as the upper sum is concerned, imagine a three-bedroom villa next to the golf course or a two-bedroom apartment close to the historic center of Lisbon! This sum will probably be enough to buy residential accommodations near Funchal, the largest city of Madeira… You are going to have no trouble renting such property for a short or a long term. A hefty income is almost guaranteed!

Do local banks help foreign investors purchase property in Portugal?

The short answer is ‘yes’: Portuguese banks do give mortgages to foreign investors seeking legal residence in the country. The key advantages of taking a mortgage from a Portuguese bank are as follows:

• They charge relatively low interest rates.
• They will inspect the property for you before giving the loan.
• If you decide to let your property on a lease, the rent may cover part or all of your monthly mortgage payments. As the rent will come in euros, there are virtually no exchange rate risks.

A few dozen Portuguese banks give mortgages to foreign investors including BBVA, Santander, Bankinter, Banco Best, and Banco CTT. Every bank will have its own requirements for the borrower.

Property rent in Portugal

Portugal is located at the southwest tip of the Iberian Peninsula and it has winters that are warmer than anywhere else in Europe. This is the reason why many northern Europeans like to spend winters in Portugal.

These ‘migratory birds’ would usually rent one and the same place from November to April every year. Between June and the end of September, summer tourists look for places to rent for one or two weeks.

If you are planning to purchase rental property in Portugal thus qualifying for a golden visa (which is a perfectly legal and very popular option) please remember that you are going to have maintenance costs. In particular, you will have to cover the cleaning services and accommodate the property depreciation costs.

There are management agencies, however, that can take care of your rental apartment in Portugal in exchange for a fee. So you can have some passive income from your property in Portugal while staying in your home country for the best part of the year and use it for summer (or winter) vacations!

Watch out for fraudsters when purchasing property in Portugal

When you make a contact with a Portuguese real estate agent, make sure to ask for their Associacao de Mediadores Imobiliarios license number (see above). If the agent refuses to give it to you, please do not have anything to do with them.

If the seller/ the realtor suggests that you should pay in cash thus evading taxes, refuse pointblank. This tax evasion scheme is well known to the Portuguese fiscal authorities and you will not be able to get away with it. You certainly do not want this sort of trouble being a foreigner in Portugal.

The professional agent will always be able to supply printed materials. If the realtor / seller insists on oral communication only, it is a warning sign.

The agent/ realtor must be able to show the piece of property to the prospective buyer. If the agent does not have access to the property, you are dealing with a fraudster.

Who can help you purchase property in Portugal?

It is going to be relatively simple to purchase property in Portugal if you use the services of a professional real estate agent. An Internet forum where foreigners in Portugal share their experience may be a place to start. Unfortunately, there are swindlers around so you will be well advised to apply for professional legal assistance when buying property in Portugal.

If you do not want to run any risks and you are not willing to surf the web for reliable information, please apply for a personalized consultation with InternationalWealth experts! Contact us today! The consultation is free of charge!