What to Consider Before Buying a Property in Portugal
Portugal has emerged as a top destination for many international citizens looking for a place to settle down. Beautiful sun-soaked beaches, a long coastline, Mediterranean lifestyle and a wonderful climate are some of the most attractive factors about living in Portugal. According to the Global Peace Index, Portugal has been rated as the 3rd most safe and peaceful country in the World in 2017, after Iceland and New Zealand and popular cities like Lisbon, the capital, and Porto have been having an overwhelming increase in tourism and housing since 2014.
If you are enamored by the prospect of living in Portugal, first there are some aspects you must consider before getting in the process of buying a property in Portugal, especially if you are a foreigner, to make this journey as easy and smooth as possible.
The good news is that there are no restrictions on foreigners and expats buying properties in Portugal. But before getting ahead of things, the first things you should take care of to initiate the property buying process in Portugal is a valid passport of your country and a tax number issued by the Portuguese Government.
Where to look?
Then, the second thing that follows is which places to look according to what better suits you and your lifestyle. There is a wide range of opportunities to choose from when you look at the landscape of Portugal:
If you want to enjoy life in a big city, you have Lisbon, the capital of Portugal – it is not too chaotic as other major capitals in Europe and has a population of only half a million people. Lisbon also has a lot to offer. A mix of multiple neighborhoods with their own characteristics. Each one has different things to do, places to eat, different lifestyle and different atmospheres.
On the other hand, if you are more into a quiet and peaceful lifestyle, the Algarve is a perfect choice. It is a beautiful region in the southern part of Portugal, famous for its beautiful beaches, world known resorts, golf courses and amazing gastronomy.
A wide region divided into three different areas: Western Algarve, a place more about nature and outdoor sports and less about development; Central Algarve, known for the famous towns of Albufeira, Loulé, and Faro but with a wider selection of sports facilities and vibrant nightlife; and Eastern Algarve, home to the most picturesque villages in Algarve, with a lot of history and culture to offer. See our fantastic selection of properties available in the three distinct regions of the Algarve.
You also have the amazing city of Porto, the second-largest city in the country, as a great option. Located in the north of Portugal, this is a thrilling city, very well known for its historic buildings and exciting environment.
Get to know the cost of living in Portugal
Another important information to know before initiating the process of buying a property in Portugal is the cost of living. It might help you compare the cost of living in other European and American cities to give you a good idea of the cost of living in a specific country.
If you are a European or an American, you will find the cost of living in Portugal lower than any other European country. For example, you must expect an average net-disposable income per household to be of about 18,000€ a year in Portugal. Also, a couple can expect monthly living expenses to be around $2000, or more if you have kids or other dependent family members.
Like any other capital city, the cost of living is higher in Lisbon compared to smaller cities like Porto and Faro as well as coastal villages. Boosted by the increasing demand fueled by the reviving of tourism along with improved economic conditions, Portugal’s housing prices also started to rise. For example, you must expect an average cost per square meter in Lisbon to be around 1.308€ for a two-bedroom property or in the center of Cascais, a famous coastal resort town just 20 minutes away from Lisbon city center, much sought after by high income expats and foreigners, to be the double of Lisbon’s value.
The cost per sqm in Lisbon tend to grow once you’re closer to the city center, which according to the Global Property Guide can be around 2.500€ per square meter for 120 sq.m. In Algarve, despite being a famous beach destination and an ideal place for retired people and foreigners to settle down, the prices for a 120 sq. m. apartment in the Algarve is of 1.800€ per sq.m.
Additionally, with the opportunity of applying to the Portuguese Golden Visa by acquiring a piece of real estate above 500.000€, most foreigners are looking to Portuguese properties as investment opportunities.
Taxes and fees involved in buying a property in Portugal
Once you have identified the property of your dreams and decided to buy it, you must think about taking care of the necessary amount required as a down payment as well as for other costs associated with the purchase of your home.
There are some taxes and fees you must pay when buying a property in Portugal and their total cost comes to around 10% of the value of the property.
So you should consider:
- IMT: is the property transfer tax: It can go up to 8% for properties valued from €287 213 to €574 323; This is the heaviest tax to be taken into account since it is the tax on the acquisition of a property. The IMT will focus either on the value of the contract or the taxable value of the property, whichever is greater;
- However, there are tax fees according to the purpose of the asset. For example, if you are buying a property as a vacation home you will have to pay an additional 1% IMT;
- Stamp Duty: is the onerous or free transfers of ownership of parts thereof: 0.8% of the home’s value;
- Land and Registry Fee: 0.2% to 1.2% of the total cost;
Adding up to this taxes, don’t forget to include mortgage fees and, if you decide to contact a lawyer to help you buy a property in Portugal, the lawyer’s fees.
Assistance in buying a property in Portugal
Another minor task but still an important one is that, if you’re not familiarized with the Portuguese Real Estate market, it is important to hire the services of a good quality, reliable lawyer to assist you while starting the process of buying a property in Portugal. Also, to make sure that all legal formalities are completed and all taxes are paid you must have a notary check.
Investing in a property is an exciting task but you should assure that you conduct a complete research while buying a property in a new country:
- Be sure to choose the region of Portugal that suits your lifestyle better;
- Get to know the cost of living in the country you’re heading to;
- Know which taxes and fees are required in the process;
- Choose reliable consultants and lawyers to assist you in this procedure.
It can become a challenge, but buying a property in Portugal is straightforward. Just make sure you research about it first and choose the appropriate partners to work with.