Our aim in writing this guide is to enable every foreigner who wants to buy property in Portugal to know precisely how to do it. Of course, as international real estate agents, we are with our clients every step of the way. We guide homebuyers through the buying and payment process to get title deeds as quickly as possible.
However, many clients also want to be fully aware of what is happening and when. On average, foreigners buy 20,000 homes in Portugal every year, proving its worth as an international destination. So, we do not need to discuss why Portugal makes an excellent real estate investment but, in this article, look at topics like mortgages, extra purchasing costs, the buying process and how to get title deeds.
How to Buy Property in Portugal
Personal Fisco Number
Every foreigner who buys property in Portugal needs a personal fisco number issued by the local tax office where you plan to buy. Alternatively, if you open a Portuguese bank account, you automatically receive one. We recommend opening a bank account for the purchasing process and handling bills and upkeep of the property after receiving the title deeds.
Foreign Exchange Company
As well as deciding your final budget, source a foreign exchange company like Wise. Companies like this offer better transfer fees, and because the property purchase is made in euros, better exchange rates. Furthermore, opening an account is simple and free to do.
Portugal Golden Visa Program
Born in 2012, the golden visa scheme was designed to attract non-EU residents to invest in Portuguese property. In return, they get a five-year residency and the right to live, work and study in the country. The scheme is particularly popular with Chinese nationals. New rules that come into effect in Jan 2022 prohibit investors from buying in high-density areas like Lisbon, but to meet the new rules, buyers need to invest 500,000 euros in property less than 30 years old, or 350,000 in property older than 30 years. However, buyers can knock 70,000 euros off that price if the property is in a low-density area. Read more about the Golden Visa Scheme here.
Is Property in Portugal a Good Investment?
Naturally, as with any investment into real estate, careful planning, research, and knowledge are crucial to making it work. After the last five years, the country’s real estate market has shown steady growth after a risky period in which property values halted. There are no quick wins. To make a good investment, you must aim to keep the property in mind for the long term of five to ten years. Also, remember that sellers who are not buying another property in Europe pay 25% capital gains tax.
Finding Property for Sale in Portugal
To start your property search, browse our portfolio of apartments and villas for sale in Portugal. Each listing contains the price, location, home features and why that property stands out. There are also contact details to find out more via email or telephone or arrange a viewing. Alternatively, call us today, let us know your budget and property requirements, and we can send a portfolio of homes for sale in Portugal via email. Then, when you have found a property, we convey your offer, and when it is accepted, we can officially start the buying process.
Solicitor and Notary
Your solicitor is responsible for arranging a house survey to check it is in good condition. They also negotiate contracts, which we pass onto the notary, who cross-check the property with the land registry and oversee the transaction. Once both parties have signed the agreement, it becomes legally binding. Our next step is to obtain title deeds and register the property in your name. Don’t forget to factor in lawyers and notary fees into your budget.
Payments and Extra Costs
A deposit needs to be paid at the time of signing contracts, and at this point, a final payment date is also agreed upon. The most significant tax to pay is the IMT which stands for Imposto Municipal Sobre Transmissoes. If your new home is your residence, you don’t need to pay this tax on the first 92,407 euros. However, if you declare usage as a holiday home, you pay 1% on the first 92,407 euros. Any property value over this then climbs up in brackets to 8%—also factor in 0.8% stamp duty and land registry fees. When you buy a property through us, we give a complete payment plan detailing all extra costs and when to pay them.
Portuguese Mortgages for Foreigners
If you want to finance a property purchase with a mortgage, banks lend to foreigners, either on a repayment or interest-free basis. Due to market conditions, you could need a 25% deposit to apply based on non-residency status. Mortgage lenders review financial situations, and the mortgage must be paid by the age of 80. If buying with a mortgage, don’t forget to factor in the additional fees, like legal administration, document survey, appraisal and registration
Buying Rental Property in Portugal
You might consider buying property to rent it out, which is an attractive option because some areas present high rental yields. As with any property rental, creative marketing skills are needed, and a company can manage bookings, or you may choose to do it yourself. Don’t forget, though; you must legally pay rental income tax, which for non-residents is 28%. You can deduct running and business expenses, but mortgages are not included.
Where to Buy Property
House buyers have a splattering of islands, coastlines, and the mainland to choose from. While Madeira is the most famous island, many expats and foreign property buyers choose other destinations, including Chaves, sitting close to the border with Spain. Within this Portuguese region is 40 neighbourhoods to choose from. Porto, Portugal’s second-largest city, sits in the north, so residents enjoy lower temperatures. Lisbon is another popular expat haven, and if you are looking at a rental property to the holiday market would be an ideal choice. However, Lagos and its state-of-the-art marina would be a good choice for those looking at the Algarve region. Find out more about the best places where people buy Portuguese property.
Build a Villa in Portugal
There is another option: buy land that has planning permissions and then build your villa. Town halls are responsible for issuing building licences, and records are freely available. You will also need to find an architect, but this is where you can get creative and design your idea of the perfect home. When sourcing a constructor, always ask to see their portfolio and visit any examples of their work. This is not a time to cut costs but opt for the builder who provides quality work. When the villa is complete, the builder is responsible for the snagging list, and for a year, any minor problems, and structural problems for up to five years.
Guide to Moving and Living in Portugal
Many people buy property in Portugal to live there permanently. We understand the lure. From Lisbon to the Algarve, this corner of Europe offers much potential to retirees. This article talks about places and areas, residency, money management, and expat life, including more helpful information about Portugal.
We are Spot Blue, an international real estate agent who prides ourselves on a professional service. If you have any more questions or want advice, call us today and chat with a local agent about buying property in Portugal as a foreigner.