Expat Guide to Buying a Property In Portugal

Portugal

In this expat guide we explore how buying property in Portugal works, what to expect from the process, and ways to ensure you’re getting the best value from your move.

With a cheap, laid-back lifestyle, warm weather and the Golden Visa fast track to residency, Portugal is growing in demand as a destination for British expats.

Charming coastal villages, an exceptional climate and outstanding beaches throughout the Algarve all add to the appeal, inviting retirees, professionals, digital nomads and families to these warm and friendly shores.

The capital of Lisbon is home to about half a million people and is one of the most affordable cities in Europe, yet with all the vibrancy and culture you’d expect.

Approximately 75 per cent of Portuguese residents are homeowners – 10 per cent higher than in the UK. 

The real estate market is an exciting investment opportunity and offers the chance to claim residency status with purchases above specific values. 

Rules For Expats Buying Property in Portugal

First, we’ll clarify the rules. Many expats find themselves unable to buy in their country of choice or face restrictions on the types of property they’re permitted to purchase legally.

In Portugal, the 60,000 or so British expats have no such limitations.

You will need to register for a Personal Fiscal Number (called the numero fiscal de contribuinte).

Expats can apply for this easily through a local tax office and don’t necessarily need to open a local bank account.

Otherwise, you’re free to purchase as you wish.

However, suppose you are investing in Portuguese property as part of a residency application. 

In that case, you will need to ensure the purchase is of a qualifying value and complies with changing rules about which areas are eligible for Golden Visa applications.

Buying Portugal Property As A Golden Visa Expat

Many UK nationals choose to buy a Portuguese home as part of the Golden Visa route

This programme entitles foreign investors to claim residency status in much the same way Willy Wonka handed out his famous golden tickets to visit his chocolate factory.

Only there’s no luck involved, residence permits are awarded to investor’s families, as well as the individual named on the deeds.

The rules are pretty straightforward:

  • Purchases need to be from €280,000, €350,000 or €500,000 (£240,700, £300,850 or £429,800) depending on the type of property and where it is located.
  • You need to keep the property for at least five years and spend seven days in Portugal as a minimum in the first year of the visa, increasing to 14 days for every two years after that.

Applying for residency status usually takes at least two months, but you won’t need to pass any language tests or move to Portugal permanently if you don’t want to.

Other options for gaining residency through investment include depositing at least €1 million (£859,600) in a Portuguese bank, buying at least €1 million of government bonds, or making a business investment which will create at least five jobs, with a threshold of €350,000 (£300,900).

The minimum property investment value changes depending on the region – we’ve shown the criteria in the below table.

Minimum Property Value:Criteria:
€500,000 (£429,800)The most common investment minimum currently covering any property or combination of investment properties.
€400,000 (£344,000)The minimum property purchase threshold in a low-density area, with more significant properties available in less touristy regions for this value.
€350,000 (£300,900)Threshold purchase cost for a property built at least 30 years ago, requiring rehabilitation work, or located in a designated rehabilitation zone.
€280,000 (£240,700)Properties in areas identified as low-population density and where the Portuguese government is trying to encourage more investment.

Note that from December 2021, there are changes to the Golden Visa scheme. 

These mean that expats won’t be allowed to buy a qualifying residence in major coastal areas such as Porto, Lisbon, some of the Algarve and Setubal.

You can still buy a property here – but won’t be able to use the investment to apply for residency status.

Don’t forget, you do not have to move to Portugal to qualify and the Golden Visa allows free access to crossing EU borders within the Schengen Zone as a bonus.

The Property Purchase Process In Portugal 

Whether you’re buying a permanent home in Portugal, want to apply for the Golden Visa route, or are purchasing as an investment, you’ll need to understand how the process works.

The first thing to check is that any estate agent you purchase through is appropriately registered. If so, they’ll have an AMI number. 

Next, you will need a lawyer or solicitor (called an advogado or solicitador

We’d recommend using local professionals to represent your interests, and you can find plenty of property experts offering English-speaking communications. Your legal adviser should be independent of your estate agent, the developer or seller.

There are two main stages to buying a property in Portugal:

Promissory Contract 

This contract is called the Contrato de Promessa de Compra e Venda, abbreviated to CPCV. 

It is made between the buyer and seller and indicates the condition of the property.

Note that your CPCV agreement is legally binding, must be prepared by a legal professional, and should be witnessed by a notary (notario) or signed on suitably licensed premises.

These contracts include the details of the buyer and seller, confirmation of the title, price agreed, deposit due, and deadline for the final deed (Escritura) to be signed.

Most deposits on Portuguese property purchases are between 10 per cent and 25 per cent of the purchase cost.

If you sign a CPCV and pay the deposit but then default on the purchase, you will lose the downpayment. You may also be required to repay double the original deposit value to the seller, so it’s essential never to proceed until you’re sure you wish to go ahead.

After the CPCV has been signed, your lawyer will run checks on any charges held on the property, habitation licensing, and verify the vendor’s ownership.

Escritura 

Next, when all the checks have been completed, you move forward to the final deed. This document is called the Escritura.

After the final deed is signed in front of a qualified notary, the property then transfers to your ownership.

Your notary provides you with a stamped copy of the contract and forwards another to the Land Registry. 

You’ll need to register with the Portuguese tax office (Autoridade Tributária) and the local utility providers at this stage.

Portuguese Property Tax

So, if you’ve found your dream Portuguese property, have a great local solicitor, have agreed on a competitive price and are applying for residency status – what other costs do you need to budget for?

Be careful about your budget because while some property prices may be competitive, the associated costs can be a fair bit higher than you’d expect in the UK.

Here are some of the primary property taxes in Portugal you’ll need to cover:

  • Imposto Municipal Sobre a Transmissão Onerosa de Imóveis – a transfer tax paid by the buyer for Portuguese property resales. The exact rate ranges from one to eight per cent, depending on the property price, whether it’s a residential, commercial or investment property, and whether the property is a primary residence or second home.
  • Imposto do Selo – stamp duty, calculated as 0.8 per cent of the cost.
  • Notary public fees for witnessing both contract stages and submitting the documents to the Land Registry and authorities for the deed transfer.
  • In some cases, you’ll be asked to sign a reservation contract ahead of the Promissory Contract, along with a small holding deposit called a sinal.
  • Survey costs – surveys are highly advisable since this is the only way to ensure there aren’t any issues with the condition or structural integrity of the property. Any problems found can allow you to insist corrective works are carried out before the final contracts are signed or negotiate the price down regarding the repairs required.
  • Deposits are usually at least 10 per cent.
  • If you buy a new build, the developer will usually be VAT registered. They will add the flat rate of 23 per cent IVA tax to their invoices.

We’d advise any new expats to consult an experienced agent or broker to ensure you’ve got an overview of the taxes on Portuguese properties before searching – so you aren’t disappointed if those costs tip the total investment over budget.

Ongoing Property Ownership Costs in Portugal

As with many EU countries, you’ll need to budget for property wealth taxes, depending on how much your home is worth.

Portugal charges a few different types of tax, impacting property owners.

Council tax is called Imposto Municipal Sobre Imóveis (IMI) and costs between 0.3 and 0.8 per cent depending on the age, location and type of property.

Some homes are exempt, but if you buy a rental property, you can be charged double IMI if it is vacant or be charged up to ten per cent if the jurisdiction is considered a tax haven.

Property wealth tax is called the Adicional ao Imposto Municipal Sobre Imóveis (AIMI) and charged on properties worth over €600,000 (£515,800).

That applies to all property owners, whether or not they are Portuguese residents, and the rates are:

  • For properties owned by a company, 0.4 per cent.
  • Individual property ownership – 0.7 per cent.
  • Increased to one per cent for properties valued at over €1 million (£859,600).

AIMI allowances apply per person, so if you purchase a home in Portugal jointly, you won’t need to pay the annual tax unless your home is worth over €1.2 million (£1.03 million).

If you rent out a property in Portugal as a non-resident, you will need to declare the rental income and pay a flat rate of 28 per cent tax, although you can deduct maintenance costs from the reported earnings.

Borrowing To Buy A Property In Portugal

Many expats will need to apply for a mortgage to purchase an overseas property, and you’ll need to understand the application process to know where to start.

Now, not all Portuguese banks offer the same conditions. Others will lend specifically to expats, whereas others will offer very different terms to foreign nationals.

As a UK expat, you’ll need to apply for a non-resident mortgage unless you are relocating permanently and securing residency status.

Banks will generally look at your tax status in deciding what type of home loan you qualify for. In essence, if you pay tax outside of Portugal, you’re considered a non-resident for a mortgage.

The difference can be vital, since:

  • Non-resident mortgages are usually capped at 70 per cent of the property value or purchase price.
  • Some mortgage providers have a maximum limit of 60 per cent on mortgages for non-residents.
  • If you are a fiscal resident and pay taxes in Portugal, you can borrow up to 80 per cent of the property cost through a mortgage.

As in the UK, there are many options, such as appointing a guarantor as additional security.

Foreign nationals can also apply for construction mortgages if they wish to build their own home in Portugal, usually capped at between 50 and 60 per cent of the land’s cost and building works.

Interest on Portuguese mortgages is usually linked to the Euribor base rate, and then the lender’s additional interest is added. 

Therefore, you’ll usually see mortgage rates quoted as, say, Euribor plus two per cent.

Portugal Mortgage Terms and Conditions

Some Portuguese mortgage lenders impose conditions if you borrow from them, for example:

  • Only offering mortgages to applicants who already bank with them.
  • Requiring mortgage applicants to take out life insurance with the bank’s designated provider.
  • A compulsory requirement for mortgage borrowers to purchase home insurance with the bank’s chosen insurance provider.

Rates vary, but the lowest tend to be around Euribor plus 1.75 per cent, going up to 3.5 per cent or higher.

Fixed-rate mortgages are typically more advantageous, with current low base rates. 

However, it’s advisable to shop around and consider using a reputable broker to secure the lowest rates on the market.

Mortgages are similar to the UK in that they’ll usually run for around 25 years on a residential property purchase or up to 30 years for tax residents.

Lenders will also have different criteria and policies. For example, some will lend up to age 75, and others will offer a maximum 20-year term for non-residents.

Choosing Where To Buy A Portuguese Property

The cost of property in Portugal varies widely, with homes in rural locations often substantially cheaper than those in popular areas such as Lisbon, Porto, and the Algarve.

As a rough guide, the average price per square metre is around:

  • €1,117 (£960) per square metre as a national average (compared to £4,322 for central city properties in the UK or £3,030 for non-central areas).
  • €1,668 (£1,434) per square metre in the Algarve.
  • €1,515 (£1,302) per square metre in the Lisbon Metropolitan Area.
  • €1,250 (£1,075) per square metre in Madeira.
  • €1,136 (£977) per square metre in the Porto Metropolitan Area.

Of course, a lot depends on why you are moving. Tourist regions are undoubtedly the most expensive but carry the highest demand for rental properties and holiday lets.

Professionals tend to look for homes near Lisbon or Porto, depending on their career sector and the employer’s location.

Lisbon is the best place to live for expats working in the financial sector. Still, it is also at the higher end of the price spectrum, with apartments commanding higher than the cost of a great family home in a quieter location.

Aveiro is close to Porto and a city famous for the elegant canals – there aren’t as many expats here, and fewer people speak English, but properties are far more affordable.

Coimbra is another option, as a safe city with great nightlife and beautiful architecture. Coimbra is also home to the oldest Portuguese university and is well connected with direct train routes to Lisbon.

If you have your heart set on the Algarve, why not visit Portimão, a relaxed place to live and the second-largest city in the region.

The expat community here is lively. While there are fewer employment opportunities, you can live right beside the beach and enjoy a wealth of trendy eateries as well as a historic town centre with amenities that attract lots of retirees.

Finally, it’s well worth exploring the Azores – an archipelago of some of the most stunning islands in the world.

Ponta Delgada offers lower living costs and sustainable tourism. Although it’s a little remote, it is an excellent place for families with exceptional air quality and an astonishing natural landscape.

Frequently Asked Questions

Most common questions asked by expats looking at purchasing a property in Portugal:

Can foreigners buy a home in Portugal?

Yes, unlike many countries, no rules prevent foreign nationals from buying property in Portugal.
 
That makes it an appealing destination for expats, retirees, and investors who are keen to add to their portfolio of holiday rentals or long-term investment properties.
 
The Portuguese government offers incentives for foreign property investment through the Golden Visa programme. 
 
In short, if you purchase a property over a particular value, you are eligible for a Portuguese residency permit, allowing you to work, live and study in the country with visa-free travel throughout the EU.
 
Residency holders can apply for permanent residency, or citizenship, after five years.

Which property taxes are payable on Portuguese property purchases?

Like when buying a home in the UK, you’ll need to account for taxes such as stamp duty to purchase a property in Portugal.
 
Costs include:
 
Imposto do Selo (stamp duty) – usually charged at 0.8 per cent of the purchase price.

Imposto Municipal Sobre a Transmissão Onerosa de Imóveis (transfer tax, also known as IMT) – this tax is charged on resale purchases, paid by the buyer to the Portuguese tax authority within 30 days of the transfer of deeds.

IVA (VAT) charged at a flat rate of 23 per cent if the seller is a developer and is registered for IVA.

Mais-Valias (capital gains tax) – paid by the vendor, although many expat property purchases include an agreement to include this.

Imposto Municipal Sobre Imóveis (IMI – an annual property tax). Property taxes are paid annually by the owner, between April and November, based on around 0.3 per cent of the value.

How Does Buying a Portuguese Property Impact My Residency Status?

It depends – on how much the property is worth, when you’re buying, and where.
 
The Golden Visa programme offers residency benefits on purchases starting from €280,000 (£240,700) in low population density regions. 
 
In higher demand areas, qualifying purchases must be €500,000 (£429,800) or more.
 
However, from December 31, 2021, some regions will be excluded to encourage foreign investment in less populated areas.

Are properties expensive in Portugal?

Again, it all depends on where you are buying and your budget.
 
The Algarve is one of the most popular areas with expats, and with varying types of property and values in the west and east, there are plenty of options available.
 
Properties around Lagos in the western Algarve have increased in price and now cost similar values to those in attractive regions around Albufeira and Vilamoura.
 
The ‘Golden Triangle’ close to Quinta do Lago and Vale do Lobo (resort regions with a strong tourist industry) tend to be the highest cost.
 
You can find less expensive properties near Loulé, in Castelo Branco and Beja. Inner regions such as Vila Real, Guarda, Portalegre and Santarém are also affordable.

Where are the best places for expats to purchase Portuguese properties?

As we’ve discovered, the Algarve remains the big-ticket area, with a beautiful Mediterranean coastline and some of the best golf courses and beaches in Portugal.
 
The cities of Lisbon and Porto are also in strong demand, particularly with working expats who need to live closer to the economic and employment areas.
 
However, with changes from December 2021, expats may need to look further afield if they are buying to qualify for residency.
 
An example of an alternative investment location is Alcácer do Sal, a medieval village south of Lisbon in Alentejo. 
 
The village is around 60 per cent more affordable than Lisbon and has a lower investment value to be eligible for the Golden Visa scheme.

Related Guides

Below are links to other country specific expat guides:

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