What You Need to Know When Buying A Property in Portugal

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Portugal has become one of Europe’s most attractive destinations for property investment, not just for locals but also for expats, retirees, and global investors. Here are some of the top reasons why buying property in Portugal is a smart move.

| The Golden Portugal

Why Buy Property in Portugal?

1. Strategic Location

Nestled on the western edge of Europe, Portugal offers easy access to the rest of the continent, Africa, and the Americas. Its proximity to major European capitals makes it a perfect base for international travelers and businesspeople.

2. High Quality of Life

From the mild Mediterranean climate and stunning coastline to the laid-back lifestyle and welcoming culture, Portugal consistently ranks among the best countries for quality of life.

3. Affordable Cost of Living

Compared to many Western European countries, Portugal offers lower living expenses—especially in housing, healthcare, and dining—without compromising on quality or comfort.

4. Attractive Real Estate Market

Property prices in Portugal remain competitive, especially when compared to neighboring countries like Spain and France. There are opportunities for both short-term gains and long-term value appreciation.

5. Stable and Safe Environment

Portugal is one of the safest countries in the world, known for its political stability, low crime rates, and reliable public services.

6. Strong Rental Yields and Tourism Market

Cities like Lisbon, Porto, and coastal regions such as the Algarve are tourism hotspots, offering high demand for short- and long-term rentals.

7. Excellent Infrastructure and Healthcare

With modern transportation networks, fast internet, and high-quality medical services, Portugal ensures a comfortable lifestyle for residents and investors alike.

Homeownership Rate in Portugal

Portugal has one of the highest homeownership rates in the European Union, with approximately 74% of the population owning their own home as of 2023.

Homeownership Rate in Portugal vs EU

Understanding the Context

  • Cultural Preference for Ownership: Traditionally, owning a home is deeply rooted in Portuguese culture. Homeownership is often seen as a symbol of stability and financial success.
  • Housing Affordability vs. Income: While property prices have risen in major cities like Lisbon and Porto, many Portuguese still opt to buy rather than rent due to favorable mortgage conditions and long-term value appreciation.
  • Homelessness Situation: Though Portugal has made strides in addressing homelessness through government programs and EU funding, there are still vulnerable populations affected—especially in urban centers. The housing crisis has intensified in recent years, particularly among low-income families and immigrants.

How Portugal Compares to Other EU Countries

  • Germany has a notably low homeownership rate at around 49%, largely due to a strong rental market and different financial incentives.
  • Italy and Spain have rates similar to Portugal (around 72–75%), reflecting a shared cultural emphasis on homeownership.
  • France sits at about 65%, while the EU average is close to 70%.

Portugal’s relatively high ownership rate, despite economic challenges, shows how ingrained homeownership is in its social fabric and why the property market continues to attract both locals and foreign investors.

Can Foreigners Buy Property in Portugal?

Absolutely. Portugal imposes no legal barriers on foreign nationals purchasing property. Whether you’re an EU citizen or from outside the EU, you can freely buy real estate in Portugal. This openness has contributed to the country’s popularity among international investors, retirees, and digital nomads.

Foreign Buyers in Portugal: Key Statistics

  • Market Share: In 2024, foreign buyers accounted for approximately 12% of the total property sales volume in Portugal, with an average annual growth rate of 8% between 2019 and 2024.
  • Investment Volume: Foreign direct investment in Portuguese real estate reached a record high in the third quarter of 2023, totaling €30.4 billion, marking a 14% increase compared to the same period in the previous year.
  • Average Spending: Non-EU buyers tend to invest more in Portuguese properties, paying an average of €405,000 per property, compared to €277,000 by EU buyers.

Popular Regions Among Foreign Buyers

Foreign investors are particularly drawn to certain regions in Portugal:

  • Algarve: This southern coastal region is the most popular among foreign buyers, accounting for nearly 30% of international property purchases in 2023.
  • Lisbon Metropolitan Area: The capital region attracts about 25% of foreign buyers, with neighborhoods like Alcântara and Parque das Nações being particularly sought after.
  • Porto and Northern Portugal: Approximately 15% of foreign real estate investments are in this region, with areas like Foz do Douro and the historic center of Porto gaining popularity.

Impact of Policy Changes

Portugal’s Golden Visa program, which previously allowed non-EU citizens to obtain residency through real estate investment, underwent significant changes in 2023. As of October 7, 2023, the option to qualify for the Golden Visa through real estate investment was removed. Despite this change, foreign investment in Portuguese property remains robust, indicating sustained interest from international buyers.

Portugal Property Market Overview

Types of Properties and Their Portuguese Terminology

Understanding the local terminology is essential when navigating the Portuguese property market. Here are common property types:

  • Apartamento: An apartment or flat, typically found in urban areas.
  • Moradia: A house, which can be:
    • Moradia Isolada: Detached house.
    • Moradia Geminada: Semi-detached house.
    • Moradia em Banda: Terraced house.
  • Vivenda: Often used interchangeably with “moradia,” typically referring to a detached house with a garden.
  • Quinta: A traditional country estate or farm, often located in rural areas and surrounded by countryside or vineyards.
  • Condomínio: A condominium or gated community, usually offering shared amenities like pools and gyms.
  • Tipologia (T1, T2, T3, etc.): Indicates the number of bedrooms; for example, T2 means a two-bedroom property.

Average Costs by Property Type

Property prices in Portugal vary based on location, property type, and market trends. As of late 2024:

  • Apartments: Average price of €1,920 per square meter.
  • Houses: Average price of €1,317 per square meter.

Regional variations are significant:

  • Lisbon Metropolitan Area: €4,935/m²
  • Porto Metropolitan Area: €3,937/m²
  • Algarve: €4,385/m²
  • Northern Portugal: €1,903/m²
  • Central Portugal: €2,098/m²
  • Alentejo: €3,181/m²

These figures highlight the affordability of properties in regions outside the major urban centers.

Affordable or Up-and-Coming Places to Live in Portugal

For those seeking value and potential growth, consider these locations:

  • Mêda (Guarda District): One of the most affordable towns, with average property prices around €156/m².
  • Figueira de Castelo Rodrigo (Guarda District): Average prices at €185/m².
  • Tabuaço (Viseu District): Properties averaging €226/m².
  • Santarém: Approximately one hour northeast of Lisbon, offering affordability and potential infrastructure developments.
  • Évora (Alentejo Region): A historic city with a youthful atmosphere due to its university, offering a blend of culture and affordability.
  • Setúbal: Located 30 minutes from Lisbon, this coastal city is gaining attention for its affordability and vibrant local culture.

Exploring these areas can provide opportunities for affordable living and investment potential in Portugal’s diverse property market.

How to Buy Property in Portugal as a Foreigner

Portugal welcomes foreign investors with a straightforward property purchasing process. Whether you’re an EU or non-EU citizen, there are no restrictions on foreign ownership of property in Portugal.

Documents Required to Buy Property

To purchase property in Portugal, you’ll need the following documents:

  1. Valid Passport: Serves as your primary identification.
  2. Portuguese Tax Number (NIF): Essential for any financial transactions in Portugal, including property purchases. Non-EU citizens must appoint a fiscal representative to obtain a NIF .
  3. Proof of Address: A recent utility bill or lease agreement from your country of residence.
  4. Portuguese Bank Account: While not mandatory, opening a local bank account is advisable to facilitate transactions and manage currency exchange rates
  5. Financial Documentation (if applying for a mortgage):
    • Recent payslips.
    • Bank statements.
    • Credit report.
    • Most recent tax return .

Step-by-Step Guide to Buying Property

  1. Obtain a NIF: Visit a local tax office (Finanças) or appoint a fiscal representative to acquire your Portuguese tax number.
  2. Open a Portuguese Bank Account: Facilitates smoother financial transactions and helps manage currency exchange fluctuations.
  3. Engage a Real Estate Agent or Buyer’s Agent: They can assist in finding suitable properties and navigating the local market. Buyer’s agents may have access to off-market listings and can negotiate on your behalf .
  4. Search for Property: Explore listings online, attend viewings, and shortlist properties that meet your criteria.
  5. Negotiate and Make an Offer: Once you’ve found a property, negotiate the price with the seller.
  6. Sign the Promissory Contract (Contrato-Promessa de Compra e Venda – CPCV): This preliminary contract outlines the terms of the sale. A deposit, typically 10% of the purchase price, is paid at this stage .
  7. Conduct Due Diligence: Your lawyer will verify the property’s legal status, ensuring there are no outstanding debts or legal issues.
  8. Finalize the Sale (Escritura Pública de Compra e Venda): The final deed is signed in the presence of a notary, officially transferring ownership.
  9. Register the Property: Update the land registry to reflect the new ownership.
  10. Pay Applicable Taxes and Fees:
    • Property Transfer Tax (IMT): Varies based on property value and type.
    • Stamp Duty (Imposto de Selo): Typically 0.8% of the purchase price.
    • Notary and Registration Fees: Additional costs associated with finalizing the sale .

By following these steps and ensuring all documentation is in order, foreign buyers can smoothly navigate the Portuguese property market.

Property Taxes in Portugal

Understanding the tax landscape is crucial for anyone considering purchasing property in Portugal. The country imposes several taxes on property transactions and ownership, applicable to both residents and non-residents.

Types of Property Taxes and Their Descriptions

IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) – Property Transfer Tax
This tax is levied on the transfer of property rights. The rate varies based on the property’s value, location, and purpose (primary residence vs. secondary). For residential properties, rates range from 0% to 7.5%. Rural properties are typically taxed at 5%, while commercial properties are subject to a 6.5% rate.

IMI (Imposto Municipal sobre Imóveis) – Annual Municipal Property Tax
An annual tax based on the property’s taxable value (VPT). Rates range from 0.3% to 0.45% for urban properties and 0.8% for rural properties. Some exemptions apply, such as a three-year exemption for properties valued under €125,000 used as a primary residence by individuals with an annual income below €153,300.

AIMI (Adicional Imposto Municipal sobre Imóveis) – Wealth Tax
Applicable to properties with a taxable value exceeding €600,000. Individuals pay 0.7% on the value between €600,000 and €1 million, and 1% on values above €1 million. For properties over €2 million, the rate increases to 1.5%. Legal entities are taxed at a flat rate of 0.4%.

Imposto de Selo (Stamp Duty)
A one-time tax of 0.8% applied to the property’s purchase price or taxable value, payable before the final deed is signed. Additionally, a 10% stamp duty is levied on gifts or inheritances of property to individuals other than spouses, descendants, or ascendants.

Capital Gains Tax
When selling a property, capital gains tax is applicable. Residents are taxed on 50% of the gain at their marginal income tax rate, while non-residents are taxed on the full gain at a flat rate of 28%.

Do Foreigners Pay Property Taxes in Portugal?

Yes, foreigners are subject to the same property taxes as Portuguese residents. This includes IMT, IMI, AIMI (if applicable), stamp duty, and capital gains tax upon sale. The tax obligations apply regardless of residency status.

Tax Obligations for Foreigners

  • Non-Residents:
    • Must obtain a Portuguese Tax Identification Number (NIF) through a fiscal representative.
    • Subject to a flat 25% tax on rental income derived from Portuguese properties.
    • Required to pay IMI annually and AIMI if the property’s value exceeds €600,000
  • Residents:
    • Taxed on worldwide income, including rental income from Portuguese properties, at progressive rates ranging from 14.5% to 48%.
    • Eligible for certain exemptions and deductions, such as the IMI exemption for primary residences under specific conditions.

It’s advisable for foreign property owners to consult with a tax professional familiar with Portuguese tax laws to ensure compliance and optimize tax liabilities.

Pitfalls to Look Out For When Buying Property in Portugal

Purchasing property in Portugal can be a rewarding investment, but it’s essential to be aware of common pitfalls that may arise during the process. Being informed can help you avoid costly mistakes and ensure a smooth transaction.

Skipping Legal Due Diligence

Failing to verify the legal status of a property can lead to unforeseen complications. Some properties may have legal irregularities, such as unauthorized extensions or outstanding debts. Engaging a qualified real estate lawyer to conduct thorough due diligence is crucial to confirm clear title, proper documentation, and absence of encumbrances.

Underestimating Total Costs

Beyond the purchase price, buyers should account for additional expenses, including:

  • IMT (Property Transfer Tax): Varies based on property value and type.
  • Stamp Duty: Typically 0.8% of the property’s value.
  • Notary and Registration Fees: Approximately 1.5% to 2% of the property’s value.
  • Legal Fees: Usually between 1% and 3% of the property’s value.

It’s advisable to budget an additional 10% on top of the property’s price to cover these costs.

Ignoring Currency Exchange Risks

or international buyers, fluctuations in exchange rates can significantly impact the final cost of the property. A small change in currency value can translate to substantial differences in the amount paid. Utilizing currency exchange services to lock in favorable rates can mitigate this risk.

Neglecting Property Inspections

While not mandatory in Portugal, conducting a professional property inspection is highly recommended. Inspections can reveal structural issues, dampness, or unauthorized modifications that may not be apparent during a casual viewing. Identifying such problems early can save significant repair costs in the future.

Choosing an Unsuitable Location

Selecting a property in a location that doesn’t align with your lifestyle or investment goals can lead to dissatisfaction. Factors to consider include proximity to essential services, accessibility, local amenities, and potential for property value appreciation. Researching and visiting different areas can help ensure the location meets your needs.

Overlooking Legal Assistance

Attempting to navigate the property purchase process without legal support can be risky. A local lawyer can guide you through the complexities of Portuguese property law, ensure all documents are in order, and protect your interests throughout the transaction.

Not Considering Future Resale Value

Even if you plan to keep the property long-term, it’s wise to consider its resale potential. Properties in areas with strong infrastructure, good schools, and growing economies tend to retain or increase in value over time. Assessing these factors can make your investment more secure.

By being aware of these common pitfalls and taking proactive steps to address them, you can make informed decisions and enjoy a successful property purchase in Portugal.

Warmly,

Susana Yang
Founder & CEO, The Golden Portugal

We have helped more than 500 families on their Portugal Golden Visa journey. 

We are also the pioneer firm to help clients to invest through funds back from 2020 until now. Come talk with us.

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