Portugal has emerged as a popular destination for expats and investors looking to purchase real estate. With its stunning landscapes, rich culture, and favorable climate, it’s no surprise that many are considering buying an apartment in this beautiful country.
Whether you’re looking for a holiday home, a rental investment, or a permanent residence, here are some essential tips and insights to help you navigate the buying process in Portugal.
Portugal’s real estate market has seen significant growth in recent years, particularly in urban areas like Lisbon, Porto, and the Algarve, with 6,7 billion EUR in transactions in the 1st quarter of 2024 in housing transactions. Prices aren’t cheap, with an average price/sqm in Lisbon of just above EUR 5,500 and EUR 3,900 outside the capital (2024 data provided by Idealista), but there are still opportunities for affordable properties, especially in less touristy regions.
Portugal's stable political climate and resilient economy have fostered a favorable environment for foreign investors. Despite global economic uncertainty, Portugal’s GDP was worth 287.08 billion US dollars in 2023. Additionally, Portugal’s relatively low cost of entry compared to other Western European markets makes it an appealing option for investors seeking to diversify their portfolios.
High Quality of Life
Portugal consistently ranks among the top countries for quality of life, thanks to its mild climate, low crime rates, excellent healthcare, and relatively low cost of living compared to other Western European nations. The 2024 Global Peace Index ranked Portugal in the 7th place, after Iceland, New Zealand, Ireland, Denmark, Austria, and Singapore.
Portugal’s capital, Lisbon, was ranked 15th in the Expat Insider 2024 top, with Quality of Life ranking on the 7th and Ease of Settling In on 15th.
Legal Considerations
- Residency Permits
It is not mandatory to have Portugal, EU or EEA citizenship in order to acquire property in Portugal.
- Legal Requirements
Before buying, ensure you have a Fiscal Number (Número de Identificação Fiscal), which is essential for any financial transactions in Portugal. It’s also wise to hire a local lawyer to assist with the process and ensure all legalities are covered.
- Property Registration
Once you’ve agreed on a purchase, the property must be registered with the Land Registry (Conservatória do Registo Predial) to confirm ownership. This process involves submitting a series of documents, including the sale agreement and proof of payment.
Costs Involved
When buying an apartment, it’s important to factor in additional costs beyond the purchase price:
- Property Transfer Tax (IMT): This ranges from 1% to 8%, depending on the property price.
- Stamp Duty: Typically around 0.8% of the purchase price.
- Legal Fees: These can range from 1.25% - 2.00%
- Notary Fees: Expect to pay around 0.20% - 1.20% for notary services.
Another cost you might want to pay attention to, if you’re buying to rent, is that rental income from housing is taxed at 25% for short-term rentals (but can be reduced if contracts exceed 3 years).
Tax Incentives for Foreign Investors
Portugal’s Non-Habitual Resident (NHR) tax regime is another significant draw for foreign investors. Introduced in 2009, this regime offers tax benefits for a period of 10 years. This has attracted entrepreneurs, professionals and retirees, to settle in Portugal.
In 2022, over 74,000 people benefited from the NHR tax exemptions (source).
Researching Locations
Consider your lifestyle and preferences when choosing a location. Some popular areas include:
Lisbon: The capital city offers vibrant culture, dining, and nightlife. Probably the first destination to come to mind for tourists, digital nomads, expats and investors.
Porto: Known for its wine and historic architecture, Porto is a great option for those seeking a lively atmosphere.
Porto is the second major city in the country, after the capital, and the costs here are smaller, with an average of EUR 4055/sqm in the city center.
Cascais attracts visitors from around the world with its beauty and history, but it’s nothing short from cheap (on average, prices/sqm reach EUR 7100 - higher than in Lisbon).
There are many other options in Portugal you can consider for investing, besides these 3, all with their charm and stunning beauty, such as Algarve or Setubal. Learn more about costs and rental prices here.
Rental Yields
Portugal’s booming tourism industry has made the short-term rental market particularly attractive. In 2023, the country welcomed 26.5 million tourists, up 19,2% from 2022. Popular tourist destinations like Lisbon, Porto, and the Algarve offer lucrative opportunities for investors to capitalize on platforms such as Airbnb.
If you’re considering buying to rent, then you might want to take the following data into account:
In Portugal’s capital, Lisbon, the rental yield is 5.65%, placing it on the 6th place in a top 10 European cities by yield in 2024 (if you’re wondering, Dublin is in 1st place).
You might as well consider other cities in Portugal - for example, in Setúbal, the average yield is 6,51% and Porto, Faro, Aveiro have an average yield exceeding 5% (source)
Buying an apartment in Portugal can be an exciting venture, offering a blend of cultural experiences and investment opportunities. By understanding the market, navigating legal requirements, and working with local experts, you can make your dream of owning property in this picturesque country a reality.
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