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Portugal property market overview
Since the early 1960s, Portugal, in particular the Algarve, has been one of the most popular holiday destinations from the UK and the rest of Europe and its southern coast has since become one of the best-known second home destinations for British and Irish property buyers. Intrepid property investors are now looking beyond the Algarve and buying property in the rest of Portugal, where fine beaches, unspoilt countryside, fascinating cities and, of course, some stunning golf courses.
- There is a wide choice of flights to Lisbon, Oporto and Faro at all times of year
- Buying Algarve property can be very expensive but other parts of Portugal offer much cheaper property
- The Algarve has some of the best sports facilities and golf courses in the world
- Portugal is a very popular holiday destination so property rental opportunities are abundant
- The government has already invested in infrastructure and has long-term strategies for development of “undiscovered” Portugal
Choice of Portugal properties
Even with all the new opportunities for buyers of Portugal property, it is natural to begin our property tour in the ever-popular Algarve. Along with the well-established resorts of the central Algarve, many with five-star facilities and featuring some world-class golf courses, the rest of the region is also worth a look for the more adventurous buyer of Algarve property.
The western part of the coast has benefited from the development of some excellent, quality resorts in recent years and yet still retains much of its natural beauty and a great deal of its charm in lovely fishing villages, quiet coves and gorgeous, sandy beaches. The eastern Algarve is much less developed at the moment, yet has the same wonderful climate and stunning coastal scenery as the rest of the region and a growing number of modern resorts. Inland Algarve should not be overlooked as its rolling countryside, mountains and rural tranquillity are a world away from the bustling coastal resorts.
Portugal’s western Atlantic coast has been much visited by Portuguese and Spanish holidaymakers for many years, and now overseas visitors are looking at the Costa Azul, Costa Verde and Costa da Prata as an alternative destination to the south. Property developments and tourist facilities are now springing up with the overseas property investor in mind.
In its cities, Portugal illustrates its long, colourful history and thanks to government investment, their reputation as rather shabby and backward urban centres is being reviewed as restored historical buildings, new infrastructure and modern development drag Lisbon and Porto in particular into the 21st century.
Inland Portugal is little changed over the decades, and parts of Alentejo and the Douro Valley conduct life in much the same way as they would have done at the beginning of the 20th century. The most intrepid of home buyers might consider buying into a slice of rural life in one of these areas – prices for properties are still incredibly low, though you’d have to be prepared to buy into the traditional lifestyle as much as your home itself.
The Portugal Property Market
Overseas home buyers from the UK and Ireland have been buying property in Portugal for many years, mainly heading for the central part of the Algarve coast in the south of the country. The superb beaches and developments, along with an abundance of cheap flights from UK airports, have attracted many British property buyers to buy property in Portugal and there is a large expat population of retirees whose most difficult choice in their twilight years is which golf course to play next.
There are some developments in the central Algarve, between Faro and Albufeira, which have been established for decades. Ever on the search for new property hotspots in Portugal, however, more intrepid buyers have been buying property further east and west along the Algarve coast, while the more adventurous still are looking north at the myriad property choices of the other coasts and the countryside of this beautiful country.
The western Atlantic coast, from the Costa Verde in the north to the Costa Azul in the south, has a wealth of natural beauty and a number of excellent resorts already, long-popular with the Portuguese and Spanish and now firmly on the overseas property buyer’s map. Inland Portugal has traditional rural homes galore, both dilapidated properties to renovate and restored, habitable homes – an entirely different proposition from a coastal new-build but an interesting option for those seeking a countryside home abroad.
In Lisbon and Oporto, Portugal has two cities of huge cultural and historical importance and there are a number of other towns and cities that might appeal to those looking for an urban home, such as Braga and Coimbra.
The archipelagos of Madeira and the Azores are wonderful island locations with some spectacular scenery, and are already established holiday destinations that will tempt some overseas investors.
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The Process of Buying Property in Portugal
- The first step is usually a verbal agreement between the property buyer and seller, after which the property buyer’s lawyer should carry out all necessary checks – title, building licence, etc
- A preliminary contract is then signed, which lays out the terms of the sale, including the completion date. At this point a deposit is paid, usually 10%. This deposit is forfeited if the property buyer backs out; if the seller withdraws he/she must pay the buyer double the value of the deposit - 20%
- On completion both parties sign the deeds (escritura) in front of a notary and ownership is transferred. The balance of the purchase price plus all fees and taxes must be paid before the escritura can be signed
- As soon as possible after signing the deeds, the transfer of title should be lodged in both the land registry and the local tax office
- If buying property off-plan a smaller deposit is usually required, followed by stage payments. This depends entirely on the developer
- When buying a resale property, make sure a survey is carried out in addition to usual checks.
Fees & Taxes
When buying residential property in Portugal there are two different taxes to be paid before the final documents are signed: the stamp duty which is levied at a rate of 0.8% on the price of purchase; and the transfer tax which is levied at sliding scale that goes from 1% up to 6% - for instance the transfer of a property purchased by euro 250,000 would be taxed at euro 9.576 (+/- 3.9%); properties purchased by euro 534,700 or above are levied at a fixed rate of 6%.
Lawyers fees vary according to location, value of the property, complexity of the operation, but are usually charge at between 0.5% and 1% of the price of the property, plus VAT (presently at a rate of 20%). Other legal fees with notaries, registries and documents usually do not exceed euro 1,000.
Foreign residents require fiscal representation in Portugal, a service which is provided by specific companies. These companies usually charge an initial fee of approximately euro 250, and an annual fee of approximately euro 250.
Buying property with a mortgage will carry additional costs. Real Estate agents charge a commission that varies between 3% and 5%, in most cases only to the vendors.
There is an annual tax that is levied at a rate that varies from municipality to municipality between 0.2% and 0.4%, on the property tax value. The tax value is calculated by the tax department, and intends to be close to the commercial value, but often stays some 50% to 30% below it.
To give you a practical example, considering the purchase of an euro 300,000 property purchase (without mortgage), the purchaser would be expected to pay in taxes, fees and expenses a total of euro 20,787.95 (roughly 6.9% of the purchase price):
Stamp duty: euro 2,400
Transfer tax: euro 13,287.95
Lawyer’s fees: euro 3,600 (VAT included)
Notary, registries, documents: euro 1,000
Fiscal representation: euro 500 (initial fee and one year of services)
The tax value depends on the evaluation carried out by the tax department, but it is reasonable to expect a value close to euro 200.000. At the maximum rate of 0.4%, the annual tax would be of euro 800 per year.
Hotspots to Buy Portugal property
Algarve propertyWith property agents discounting some resort properties by as much as 30% and offering 100% mortgages, you might think that property that property in Algarve is moving into freefall. But with its enduring holiday rental market and if short-term capital growth is not your priority, there’s probably never been a better time to buy here.
Silver Coast propertyPortugal's Silver Coast (Costa da Prata) was, until quite recently, a secret well kept by the Portuguese. With it's expanse of beautiful sandy beaches, historic towns and verdent farmland all bathed in the region's fabled 'silver' light. Silver Coast properties offer buyers cheaper prices and authentic Portuguese lifestyle.
Property in MadeiraMadeira has no sandy beaches but spectacular 600-metre cliffs and 70% of the island is protected conservation land. It has year-round golfing weather; a spring-like climate, incredible mountain views, colourful flowers and excellent gift shopping.
- Population: 10,676,910
- Capital: Lisbon
- Languages: Portuguese
- Area (km2): 92,391
- Currency: euro
- Exchange rate: £1 = €1.25
- Dialling Code: +351
- Emergency services: 112
- Embassy in UK: http://www.portugal.embassyhomepage.com
There are varying accounts of the Portuguese healthcare system. Some are full of praise and others recall nightmare stories, so it really depends on the individual hospital involved. For minor complaints the standard public system is probably fine, but for specialist treatment, operations or chronic illnesses, it’s probably best to go private
For those buying on the Algarve, a wide selection of low-cost flights is available to Faro throughout the year from most regional airports around the UK. There are also plenty of options for scheduled flights to major cities such as Lisbon and Porto, available through airlines such as BA and TAP
Top Tip for Buying Property in Portugal
Navigating your way thorough the Portuguese legal system can be very complicated, so finding a good, reliable lawyer who is fluent in both English and Portuguese should be one of the first things on your list. It will save you a number of headaches later on
Some information contained herein may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and/or financial advise from a qualified professional.