Embarking on the journey of purchasing property in Portugal can be an exciting endeavor, particularly when considering the option of buying off-plan. Offering potential cost savings and the opportunity for customization, buying off-plan properties has become an attractive choice for investors and homebuyers alike. 

In this article, we delve into the intricacies of buying off-plan property in Portugal, exploring the benefits, challenges, and key considerations to empower readers in making informed investment decisions in this dynamic real estate market.”

What is an Off-Plan Property?

An off-plan property denotes a real estate investment where buyers acquire unfinished properties before construction or completion. Essentially, buyers invest in the property based on architectural plans, blueprints, and other specifications provided by the developer. They often buy off-plan properties during the pre-construction phase or early stages of construction, with the expectation that the property will increase in value by the time it is completed. 

This type of investment allows buyers to secure a property at a potentially lower price compared to purchasing a completed property and may offer customization options depending on the developer’s offerings. However, buying off-plan properties also comes with risks, such as construction delays, changes to the final product, and financial uncertainties.

What to consider when buying Off-Plan Property in Portugal

When considering buying off-plan property in Portugal, it’s crucial to take several factors into account to ensure a successful investment. Here are some key considerations:

1. Due Diligence of the Project

Before signing any documents for a property purchase, it’s crucial to conduct due diligence due to the substantial investment. This involves thoroughly surveying and analyzing all available information and data regarding the property and the project.

By doing so, the prospective buyer can accurately evaluate the future property they intend to acquire, assess the contractor or developer, and understand the risks associated with a project that may take several years to complete.

2. Schedules and Requirements for Signing the Deed

One aspect that must be addressed in the promissory contract is the deadline for executing the final purchase agreement and the conditions that must be met for its completion. Typically, some of the contractual conditions include:

  • Secure the horizontal property regime (if the property being transacted is an independent fraction).
  • Registration of the property under the horizontal property regime at the Land Registry Office and the urban land registry.
  • Issuance of the usage permit.
  • Habitation technical file with the Municipal Council.
  • Providing evidence of the absence or waiver of any legal preference rights, if applicable.

3. Alteration to the Original Project

During the construction phase, the developer may need to make adjustments to the initial project outlined in the promissory contract. These adjustments could be due to requirements imposed by licensing entities, the need for compatibility between architectural plans and technical specifications, or other technical or legal necessities.

The contract should stipulate that such changes do not warrant modifications or termination of the promissory contract. However, the developer is obligated to inform the buyer of any changes that will be implemented.

4. The Initial Deposit

Determine the amount of the initial deposit required to secure the off-plan property and ensure that you understand the refund policy in case of project delays or cancellations. The deposit amount typically ranges from €5,000 to €10,000, although it may vary depending on the specific property projects.

5. Payment Schedule

Review the payment schedule outlined by the developer and ensure that it aligns with your financial situation and expectations.

The payment schedule must be explicitly outlined in the contract. For instance, the buyer may be required to make payments, such as X amount six months after signing the purchase agreement, and X amount upon signing the deed. Additionally, payments may be contingent on meeting specific construction milestones, such as the commencement of building foundations or the completion of the concrete structure.

Furthermore, various other aspects, including penalties, communication methods between parties, expense management, and charges, need to be clearly regulated within the off-plan buying contracts.

off-plan property

Pros of Buying Off-Plan Property in Portugal

Lower Initial Costs: Off-plan properties are often sold at lower prices compared to completed properties, allowing buyers to secure a property at a potentially lower cost.

Customization Options: Buyers may have the opportunity to customize certain aspects of the property, such as finishes, fixtures, and layout, according to their preferences.

Potential for Capital Appreciation: As the property is typically purchased at a pre-construction stage, buyers may benefit from potential capital appreciation once the property is completed and the market value increases.

Payment Flexibility: Developers may offer flexible payment plans, allowing buyers to spread out payments over the construction period, making it more manageable for some buyers.

New Build Quality: Off-plan properties are usually constructed with modern building techniques and materials, offering higher energy efficiency and potentially lower maintenance costs compared to older properties.

Cons of Buying Off-Plan Property in Portugal

Construction Delays: Delays in construction are common in off-plan developments due to various factors such as weather, labor shortages, or permit delays, which can result in extended waiting times for buyers.

Uncertain Final Product: Buyers may face uncertainty regarding the final product, as they are often unable to physically inspect the property before purchase and must rely on plans and models provided by the developer.

Financial Risks: There is a risk of financial loss if the developer encounters financial difficulties or if the property market experiences a downturn before completion, potentially leading to project cancellations or changes in specifications.

Lack of Immediate Rental Income: Investors looking for immediate rental income may need to wait until the property is completed, which could result in a period of negative cash flow.

Potential Changes in Surrounding Area: The surrounding area may change during the construction period, affecting factors such as views, amenities, or neighborhood dynamics, which could impact the property’s value or desirability.

Why to work with us?

Local Expertise

We know Portugal well. Therefore, based on our extensive local knowledge, we firmly believe that concentrating our services in a single country destination is the best approach to provide you with the most thorough and useful information.

Holistic Approach

Also we offer a streamlined communication channel for the entire process, ensuring a seamless experience from start to finish. Our comprehensive service encompasses all facets of your real estate investment journey, seamlessly handling property search, negotiation, legal matters, due diligence, and property management.

Independent Service

As an independent buying agent, we possess the flexibility to collaborate with any agent, seller, promoter, or developer, thereby granting you access to a wide array of options in the real estate market. This allows us to objectively analyze every opportunity and locate the ideal property for you at the most favorable price, devoid of any complications.

Simple Process

Technology plays a pivotal role in our company, enabling us to furnish you with detailed property market information and reduce our clients’ engagement in paperwork. As customers ourselves, we possess a deep understanding of how to effectively cater to your needs.

Frequently Asked Questions About Buying Off-Plan Property in Portugal

What is off-plan property?

Off-plan property involves buying real estate before construction finishes, usually relying on developer-provided architectural plans and specifications.

How does buying off-plan property in Portugal work?

Buyers sign contracts with the developer to buy properties that haven’t been built yet. They may pay a deposit upfront and make staged payments as the construction progresses.

What are the benefits of buying off-plan property?

Possible savings compared to a finished property, customization options, and potential value growth before completion make off-plan appealing.

What are the risks associated with buying off-plan property?

Construction delays, changes to the final product, financial risks if the developer encounters difficulties, and uncertainty about the surrounding area.

How can I finance the purchase of off-plan property in Portugal?

Buyers can use personal savings, obtain a mortgage from a Portuguese bank, or explore financing options offered by the developer.

What should I consider when choosing a developer for an off-plan property?

Thoroughly research the developer’s track record, reputation, financial stability, and previous projects.

What documents do I need to review before buying off-plan property?

Documents such as the property deed, Land Registry Certificate, Caderneta Predial, Utilization License, and Energy Certification should be reviewed carefully.

Can I customize the off-plan property to suit my preferences?

In many cases, yes. Buyers may have the opportunity to select finishes, fixtures, and other features according to their preferences.

How long does it take to complete an off-plan property purchase in Portugal?

The timeline can vary depending on the project, but it typically takes several months to a few years from signing the initial contract to completion.