Buying property in Lisbon: The 2024 guide for investors
Lisbon should be at the top of your list if you’re looking for a city with a fantastic quality of life.
Known locally as Lisboa, Lisbon is enchanting; with its stunning architecture, delicious food and welcoming culture, it’s no wonder that more and more people are choosing to invest in property here. But what does the process of buying property in Lisbon look like? What should you be aware of before you make your decision?
If you already have a specific property in mind, you can also calculate now how much your property could be generating by using our income calculator.
Read on for our guide to buying property in Lisbon as an investor – we’ll walk you through everything you need to know to get started.
1. What are the requirements to buy a property in Lisbon?
The great news is that there are very few restrictions for overseas buyers to purchase property in Lisbon. You’ll need to have your finances in order and be prepared to provide some documentation. This will include putting a 20% down payment if financing through a loan or mortgage, plus completing the loan application process itself.
While welcoming overseas investment, Portugal also operates a Golden Visa program, allowing anyone that invests over 500,000€ in property to qualify for residency. You’ll need to visit the country for 7 days a year to retain this residency, and after 5 years, you can qualify for citizenship. There are tax benefits to obtaining residency, which we go over below.
One thing to remember when approaching property investment in Portugal is that, like most European countries, Portugal operates on a first-come, first-served basis. It’s high in demand, but for good reason! So, if you find your dream property, it’s essential to act fast and put in an offer as soon as possible.
Estimate your property’s potential
Are you curious about how much your property could earn on Airbnb? Use our estimate tool to quickly gauge your property’s earning potential. Enter your property details and get an instant estimate to help you make informed decisions to optimise your income.
2. Is buying property in Lisbon a good investment?
Lisbon is quickly becoming a hot spot for property investors. The capital of Portugal is predicted to see a 1.3% GDP growth (year on year) in 2024, and 1.8% in 2025.
Further, employment is growing steadily, partly due to an increase in foreign workers. Wages have also grown faster than inflation. The predicted unemployment rate is forecast at 6.5% in 2024, and 6.4% in 2025.
Lisbon was also the most visited Portuguese region in 2022 after the Covid-19 pandemic, with a whopping 5.4 million overnight visitors. Take a moment to let that sink in.
According to Statista, Lisbon ranks in the top 8 for the top real estate prospects in Europe in 2024.
3. How much tax do I pay when buying a property in Lisbon?
As a buyer, assuming this will be your first or second property, you’ll pay 3 taxes:
- transfer tax: IMT – Imposto Municipal sobre as Transmissões Onerosas
- annual property tax: IMI – Imposto Municipal sobre Imóveis
- stamp duty: Imposto de Selo
For rural land, a 5% flat rate is levied, while commercial property and building plots attract a 6.5% rate.
In addition to the IMT, you’ll also have to pay the stamp duty which is 0.8% to 10%, and the IMI (Imposto Municipal sobre Imóveis), between 0.3 and 0.45% for urban properties in Lisbon and other cities and towns.
There is a big caveat to this – if you are a resident in, or are running your business from any tax havens, you’ll pay 7.5% IMI.
In Lisbon, you’ll pay a flat rate of 28% tax on rental income, though this can be mitigated by Portuguese residents that are on the lowest tax rate of 14.5% if you add the rental income to your other annual income.
If you have not taken advantage of the Non-habitual resident scheme, you are restricted to the 28% tax bracket on your rental income as a non-resident. If you apply for the Non-habitual resident status you’ll pay a flat rate of 20% for 10 years. In addition, rental income from residential rentals is taxed at 25% for contracts signed or renewed from October 2023 onwards.
If you are a Portuguese resident, you may also be liable for capital gains tax when selling your property. This is calculated at 50% of the profit made on the sale.
However, certain conditions allow you to avoid paying this tax – for example, if you’ve owned the property for over 5 years or reinvest the proceeds into another property for primary permanent residency.
4. How to find a property in Lisbon?
There are many great ways to locate property in Lisbon. Here are a few suggestions:
- Idealista is a property portal that specialises in Portuguese homes
- OLX is an international community hub (of Portuguese origin) and marketplace where you can find everything from cars to properties.
- Local Estate Agents: Many local estate agents will have an extensive list of properties in Lisbon
- Engels & Völkers is an international estate agent with a strong presence in Portugal
- Castelhana is another international estate agent with a wide variety of properties listed in Lisbon and across Portugal as a whole.
- Portugal Homes are luxury estate experts in Portugal with over 30 years of experience.
5. Where to buy property in Lisbon?
There are many neighbourhoods to choose from in Lisbon, each with its own unique character. When deciding where to buy property in Lisbon as an investor, it’s important to consider what type of tenant you’re hoping to attract.
For example, students may look for a property close to the University of Lisbon in Campolide or Entrecampos. In contrast, young professionals prefer a more central neighbourhood like Baixa or Chiado. Families might look to the suburbs like Carnide or Loures.
Of course, each area has pros and cons, so it’s important to do your research before making a decision. We’ve covered a few of the highest-yield locations below.
Graça
Graça is a popular neighbourhood with tourists and young professionals alike. It’s located on one of Lisbon’s seven hills, offering great city views.
Real estate here sells for between 3,000€ and 6,000€ per square metre, with the 2020 average being 4,535€.
You can expect typical yields of 3.8%, the highest of Lisbons’ central neighbourhoods.
Yet, properties in Graça and other areas (including Alfama and Bairro Alto) cannot open new short-term rentals due to oversaturation. It’s part of the city’s response to combat having too many short-term rentals and not enough long-term options for residents. Graça is, therefore, better for long-term rentals or other property non-rental investments.
Chiado
Chiado is Lisbon’s most central neighbourhood, making it an excellent choice for those looking for a property close to the city’s best amenities. It’s also one of the most expensive areas in Lisbon, with real estate selling for an average of 6,129€ per square metre.
Despite the high prices, you can still expect to see healthy yields of 2.9%.
Bairro Alto
Bairro Alto is one of Lisbon’s most vibrant and lively neighbourhoods. It’s known for its nightlife, with bars and clubs open until the early morning hours. This makes it a great choice for investors looking to rent to students or young professionals.
Prices here are lower than in Chiado, with the average square metre selling for 5,951€. Yields are also slightly higher at 3.1%. Barrio Alto is one of the districts affected by short-term rentals, so long-term rentals are the better option here.
Estrela
Estrela is a leafy, residential neighbourhood located in central Lisbon. It’s popular with families and offers a more relaxed atmosphere than some of the city’s other neighbourhoods.
Real estate here is relatively affordable, with the average square metre selling for 5,531€. You can also expect to see healthy yields of around 3.1%.
Lapa
Lapa is another central neighbourhood that’s popular with families and young professionals. It’s located close to Estrela and has a similar atmosphere.
Prices here are slightly higher, with the average square metre selling for 5,851€. Yields are also marginally higher at 3.3%.
Alfama
Alfama is one of Lisbon’s most historic neighbourhoods and is known for its traditional architecture and cobbled streets. It’s a popular tourist spot, making it a great choice for investors looking to rent their property to holidaymakers. Alfama is not allowing short-term renting licenses, but long term renting is allowed.
Real estate here is relatively affordable, with the average square metre selling for 5,951€. You can expect to see healthy yields of around 3%.
6. What are the pitfalls of buying property in Lisbon?
Any investor needs to be aware of specific potential risks when buying property in a new city or country.
In Portugal, the first thing to be aware of is property debt, which we covered in our Buying Property in Portugal blog, which we strongly recommend you familiarise yourself with. However, any Portuguese property lawyer will check for such obligations before allowing you to proceed.
There have been issues with scams involving Portugal’s popular Golden Visa scheme, where agents have produced fake listings and forged documents in order to secure deposits from unwitting buyers, however, in Lisbon the strong expat community helps to ensure that unscrupulous vendors are quickly exposed and shut down.
If you plan on opening a short-term rental, there are some limitations, such as the contention areas in Porto and similar contention areas in Lisbon.
7. Why buy property in Lisbon?
In the past decade, Lisbon has undergone something of a renaissance. The city has been revitalised, with new infrastructure, restaurants, cafes and bars popping up all over the place. This has made it an increasingly popular tourist destination, which in turn has had a positive effect on the property market.
Prices have been rising steadily for the past few years and are expected to continue. Furthermore, the impressive tourism numbers and rise in short-term rental platforms makes Lisbon an excellent choice for investors looking to capitalise on the city’s increasing popularity.
If you are new to the short-term rental market, a range of tools are available to help you calculate the daily rental rate of your property.
Lisbon is also a relatively safe investment when compared to other European cities. The Portuguese property market is not as susceptible to bubbles as other markets, making it a more stable option for savvy investors.
8. Can foreigners buy property in Lisbon?
Yes, foreigners can buy property in Lisbon. There are no restrictions on who can purchase property in Portugal.
However, it’s important to note that if you’re not a resident of Portugal, you will be subject to capital gains tax when you sell your property.
This is currently set at 50% (but calculated with individual income and expenses) if profit is not reinvested for permanent residency within 2 years.
9. Is it worth buying a property in Lisbon?
Absolutely! As we’ve seen, there are many reasons why buying property in Lisbon is a great investment. The city is growing in popularity, prices are rising, and the market is relatively stable.
Although the average yield sits at around 3%, this can increase to 5-6% in some areas, if you can get the right in-demand property.
Lisbon should definitely be on your radar if you’re considering investing in property.
10. Is now a good time to buy property in Lisbon?
When buying property, timing is everything if you’re looking for the best value for your money.
Prices in Lisbon have been rising steadily for the past few years and are expected to continue to do so.
So, if you’re thinking of investing in property in Lisbon, now is a great time to do it. Remember to think about the type of occupants you want on your property.
We’ve highlighted areas that are popular with tourists, students and young professionals, but you can work on smaller niches too.
For example, you could consider buying properties on the outskirts of Lisbon, or in neighbouring towns, such as Mafra, Torres Vedres, or Sintra – all areas with outstanding surfing and water sports.
Find out more about the best rental yields in Lisbon with our handy article.
11. Invest with GuestReady in Lisbon
Here at Guestready, we pride ourselves on being a leading short-term rental management company in Europe and Asia.
We offer a range of services to help property investors maximise their return on investment.
If you’re considering investing in Lisbon, contact us today to find out how we can help you achieve your investment goals and maximise your rental return.
Estimate your property’s potential
Are you curious about how much your property could earn on Airbnb? Use our estimate tool to quickly gauge your property’s earning potential. Enter your property details and get an instant estimate to help you make informed decisions to optimise your income.
Extra: FAQs
Is Airbnb profitable in Lisbon?
Yes, Airbnb is profitable in Lisbon as long as you plan on short-term renting in one of the non-oversaturated districts, as they no longer allow new short-term rentals to be set up.
What is the average rental yield in Portugal?
The average rental yield in Portugal is approximately 5.65% as of 2023.
What is a good rental yield?
A good rental yield is between 5-8%. It’s important that your rental income covers the property costs (note: short-term rental expenses are often higher).
What are the pitfalls of buying property in Portugal?
Sometimes, Portuguese properties run into structural pitfalls, such as swimming pools that did not have permission to be built. Also, short-term rentals are not possible in some districts.
