Buying property in Portugal: Your property investment guide
Choosing where to buy property in Portugal is usually driven by one of two driving factors for most buyers. For residential buyers, the driving force is often a desire to live in the chosen location, while for investors, it is the potential yield of the property that drives the decision-making process.
This article examines the intricacies of buying property in Portugal with an eye on investment opportunities.
Table of contents
- What are the requirements to buy a property in Portugal?
- How much tax do I pay when buying a property in Portugal?
- How to find a property in Portugal?
- Where to buy property in Portugal?
- What are the pitfalls of buying property in Portugal?
- Why buy property in Portugal?
- Is it worth buying a property in Portugal?
- Can foreigners buy property in Portugal?
- Is now a good time to buy property in Portugal?
- Invest with GuestReady in Portugal
1. What are the requirements to buy a property in Portugal?
The great news is that Portugal is one of the most welcoming countries in Europe for foreign buyers, with very few restrictions in place.
You don’t need to be a resident to buy property in Portugal, and there are no limits on the number of properties you can purchase.
Buying a property in Portugal is relatively straightforward and takes around two to three months to complete. You will need a VAT identification number, called NIF – número de identificação fiscal, can be obtained by opening a Portuguese bank account or by visiting a tax office.
2. How much tax do I pay when buying a property in Portugal?
Upon completion of a Portuguese property purchase, you will be charged up to 8%, plus an additional stamp duty of 0.8%.
You’ll then begin paying a Portuguese tax (equivalent to council tax in the UK) between 0.3% and 0.8%. The exact amount will depend on your property’s type, age, and municipality.
Finally, bigger investors need to note that investments over 600,000€ will attract a yearly wealth tax of 0.4% and 1.5% of any amount over this threshold.
As this is per person, couples looking to buy property in Portugal won’t need to concern themselves with this tax until their joint investment exceeds 1.2 million euros.
3. How to find a property in Portugal?
Finding a property in Portugal is relatively easy, with many English-speaking agents and agencies operating in popular areas such as Lisbon and Porto. If you can, visiting a local agent brings a wealth of local knowledge to help you decide.
If you are looking at buying property in Portugal remotely or beginning your search from abroad before you visit, the best way to find a property that meets your specific requirements is to use an online search engine such as JLL, Chestertons, or REMAX. These websites allow you to search for properties by location, price, and type.
Another option is to use online marketplaces, such as Idealista or OLX, to begin your search for the right property to buy in Portugal.
4. Where to buy property in Portugal?
Knowing where it is best to buy property in Portugal largely comes down to what type of property you are looking for, as different areas of the country boast different types of housing stock.
If you are looking for an apartment in Lisbon, then areas such as Chiado, Baixa, and Lapa are popular with foreign buyers. These central districts offer a mix of old and new properties, with many apartments in beautifully restored buildings.
If you are looking for something more modern, then areas such as Campolide or Parque das Nações are worth considering. Lisbon’s western suburbs also offer excellent value for money and are becoming increasingly popular with foreign buyers.
Braga
Braga is Portugal’s third-largest city and is located in the country’s north, just over an hour from Porto by car. Braga is a historic city with a rich culture and heritage, and this is reflected in its architecture.
The city centre is home to many well-preserved churches and buildings, while the surrounding areas offer a mix of traditional and modern properties. Braga is also a university city, which gives it a young and vibrant feel.
Braga’s homes are reasonably priced, making them a great option for those looking for good value for money, especially for those looking to invest in several properties.
In Braga, a city centre apartment will typically cost 1,816€ per square metre, with a gross rental yield of 6.5%, based on figures from Numbeo. This is the second highest yield on this list, coming in behind Setúbal.
Porto
Porto is Portugal’s second-largest city on the River Douro in the north of the country. Porto is a historic city with a rich culture and heritage.
The city centre features many historic buildings, while the surrounding areas offer a mix of traditional and modern properties.
It is well worth considering an investment in property in Porto, as the city is growing in popularity with foreign buyers and renters increasing the demand for properties.
Porto offers city centre apartments at 3,413€ per square metre and a gross rental yield of 4.62%.
Coimbra
Coimbra is in central Portugal on the River Mondego. Coimbra is a rich mix of modern and historic buildings, with many well-preserved churches and monuments.
Coimbra is an excellent choice for investors looking for a buy-to-let property. The city is home to several universities, so there is a constant demand for student accommodation.
Additionally, Coimbra is located in central Portugal and is well connected to the rest of the country, making it an excellent base for exploring.
Coimbra compares well to Porto, with slightly lower costs but marginally lower average yield. A city centre apartment will set you back 2,224€ per square metre and provide a yield of 4.41%.
Lisbon
Lisbon is Portugal’s capital and the largest city. It is located on the River Tagus. If you are looking for an apartment in Lisbon, then areas such as Chiado, Baixa, and Lapa are popular choices with foreign buyers.
These central districts offer a mix of old and new properties, with many apartments in beautifully restored buildings. If you are looking for something more modern, then areas such as Campolide or Parque das Nações are worth considering.
Lisbon’s western suburbs offer excellent value for money and are becoming increasingly popular with foreign buyers.
We can attest that investing in Lisbon property is a fantastic opportunity for investors looking to build a portfolio in Portugal. The city is Europe’s westernmost capital, and its mild climate, beautiful architecture, and thriving cultural scene make it an attractive place to live. It’s also a popular tourist destination, so there is high demand for short-term rentals.
Buying an apartment in Lisbon is a sound investment, as prices are currently rising, and there is strong potential for capital appreciation.
Lisbon prices are the highest on this list, as you’d imagine for the capital city. Average apartments in the city will cost 5,239€ per square meter, with a rental yield of around 4.38%.
Setúbal
Setúbal is another historic city on the River Sado, south of Lisbon. In addition to many preserved churches and ancient buildings, the surrounding areas offer a mix of traditional and modern properties.
The city of Setúbal is an excellent choice for investors looking for a buy-to-let property. The city is home to several national natural attractions, so there is a constant demand for tourist accommodation. Additionally, Setúbal is located close to Lisbon, making it an excellent base for exploring Portugal’s capital city.
Setúbal is a ripe opportunity right now, with a city centre apartment costing just 1,500€ per square metre and a rental yield of 9.55%.
Lagos
Lagos is a historic city located on the southwest coast of Portugal. Lagos is a popular tourist destination with high demand for short-term rentals.
Buying an apartment in Lagos is a sound investment, as prices are rising, and there is strong potential for capital appreciation.
If you are looking for an apartment in Lagos, then areas such as Meia Praia, Praia da Rocha, and Ponta da Piedade are popular choices with foreign buyers.
These central districts offer a mix of old and new properties, with many apartments in beautifully restored buildings. If you are looking for something more modern, areas such as Lagos Marina or Parque da Floresta are worth considering.
Lagos city centre apartments will set you back at 3,337€ per square metre while offering a rental yield of 5.57%.
5. What are the pitfalls of buying property in Portugal?
Any investor needs to be aware of specific potential risks when buying property in Portugal. The first is property debt. In Portugal, the Law of Subrogation means that debts belonging to the previous or current property owners can be set against the house, not the occupant.
This means buyers must do their due diligence and check for any outstanding debts on a property before completing a purchase. Thankfully any competent Portuguese property lawyer will check the deeds for debt.
Property scams are another important risk factor to be aware of. A common scam in Portugal is the advertising of fake listings on properties not owned by the advertiser. The intent is to secure an advance payment (essentially a deposit) and disappear with your money.
It’s worth knowing that, unlike in the UK, your money has no guarantee to protect you should the estate agent go bust before completion, potentially risking your deposit. As mentioned above, getting advice from a qualified Portuguese property lawyer will keep you on the right side of this potential risk.
If you plan on opening a short-term rental, there are some limitations to be aware of, such as the contention areas in Porto and the contention areas in Lisbon.
6. Why buy property in Portugal?
Buying property in Portugal is a fantastic opportunity for investors looking to build a lucrative portfolio. The country is home to some of Europe’s best-preserved architecture and stunning coastal towns.
Its mild climate, beautiful scenery, and thriving cultural scene make it an attractive place to live, making short stay lets easy to come by and highly profitable. In contrast, long stay lets are a steady and secure income.
Portugal also offers excellent value for money, with prices significantly lower than neighbouring Spain’s. Portugal’s Golden Visa scheme makes it easy for foreign investors to obtain residency in the country.
If you’re looking for a safe and profitable investment, then buying property in Portugal is a great option. 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.
7. Is it worth buying a property in Portugal?
The short answer is yes! Buying property in Portugal is a great way to invest your money, whether you’re looking for a holiday home, a retirement property, or an investment to rent out.
We’ve seen that the returns from short-stay property lets are particularly profitable in Portugals tourist and student-heavy cities. With the right advice, you can minimise the risks involved in any property purchase.
8. Can foreigners buy property in Portugal?
The great news is that you do not need to be a Portuguese resident to buy property in Portugal. However, Portugal offers a fantastic Non-Habitual Resident (NHR) scheme for foreign investors that choose to reside in Portugal for the first time, or for Portuguese Expats that haven’t been resident in the country for 5 or more years.
9. Is now a good time to buy property in Portugal?
If you’re considering buying property in Portugal, there are plenty of real estate opportunities with impressive rental yields. In our article, Best rental yields in Portugal, we have explored examples that achieve a rental yield of up to 7.2%.
It’s worth noting that the Portuguese property market has been relatively stable throughout 2020, despite the Covid pandemic, and has continued to gain value throughout 2021/2022. If you’re thinking of buying property in Portugal, now is the time to do it.
10. Invest with GuestReady in Portugal
Guestready offers a range of advice, guides, and short-term rental management services in many countries, including the UK, France, Spain, and Portugal. We help promote your rental property with professional photography, listing, and price optimisation.
We manage your guest’s stay, from booking and customer services, check-in and key exchange, and the necessary after-stay services to prepare your investment property for its next occupant.
If you’re ready to start earning money from your property investment in Portugal, get in touch with one of our team today. We would be happy to answer any questions you have about the Portuguese property market and our management services.
