Thinking about purchasing a property in Portugal? You may be wondering how to buy a house in Portugal. The process of buying a house in Portugal is generally straightforward, but there are some differences to be aware of compared to other countries. In the following article, we’ll cover all the key points you need to know.
The Portuguese real estate market
Real estate in Portugal has become increasingly popular in recent years, especially among foreign buyers.
Portugal offers an excellent quality of life, good weather, and a relaxed lifestyle that many people find appealing.
Additionally, programs such as the NHR (Non-Habitual Resident), which offers tax benefits to those who move to Portugal or the Portugal Golden Visa which offers residency to non-EU citizens who invest in real estate, has boosted demand for property in Portugal.
Property prices in Portugal vary depending on the location, with prices being higher in popular tourist destinations such as Lisbon, Porto, and the Algarve region.
However, compared to other Western European countries, buying a house in Portugal is still relatively affordable, making it an attractive destination for those looking to invest in property or buy a second home.
In Portugal, the real estate market is regulated, and there are several legal and administrative procedures that need to be followed when buying property.
It is recommended that buyers seek the advice of a qualified lawyer and a real estate agent when navigating the buying process.
Why buy a property in Portugal?
Portugal is a popular destination for property buyers from around the world and there are many benefits to owning a house in this beautiful country. Here are some of the top benefits of buying property in Portugal:
Portugal’s real estate market is relatively affordable, especially compared to other European countries. This makes it an attractive option for buyers looking for a good deal on a property.
In the year 2023, the World Peace Index placed Portugal in the seventh position among nations around the globe. This notable ranking reflects Portugal’s efforts and commitment to fostering peace and stability within its borders.
The country’s proactive approach to international relations and its dedication to resolving conflicts through diplomacy have contributed to this achievement.
Portugal is known for its stunning natural scenery, including its coastline, mountains, and forests. Owning a property in Portugal allows you to enjoy this beauty up close and in person.
Rich culture and history
Portugal has a rich cultural heritage, with a long and fascinating history that is evident in its architecture, cuisine, and art.
Owning a property in Portugal allows you to immerse yourself in this culture and explore all that the country has to offer.
Portugal is known for its laid-back, relaxed lifestyle, with a focus on enjoying life and spending time with family and friends.
Owning a property in Portugal allows you to embrace this lifestyle and enjoy a slower pace of life.
Is buying a property in Portugal a good investment?
Buying a house in Portugal can be a good investment for several reasons, but it depends on various factors and your individual circumstances.
Here are some advantages you may consider:
How to find a house for sale in Portugal?
Property auctions are a popular method of buying a property in Portugal. Property auctions, or “leilões imobiliários” in Portuguese, are typically organized by banks, financial institutions, and public entities such as municipalities, courts, or tax authorities.
One popular platform for property auctions in Portugal is E-leilões, an online auction site that specializes in the sale of distressed and repossessed properties.
Popular areas to buy property in Portugal
Portugal offers a wide range of locations to buy property, from cosmopolitan cities like Lisbon and Porto to charming coastal towns like Cascais and Albufeira.
The Algarve region is also a popular area for those looking for a holiday home or retirement property.
Lisbon is the capital of Portugal and is known for its historic architecture, cultural attractions, and lively nightlife.
The city has a diverse range of neighborhoods, each with its own character and atmosphere.
Property prices in Lisbon are generally higher than in other parts of Portugal, particularly in popular areas such as Chiado, Baixa, and Bairro Alto.
Porto is Portugal’s second-largest city and is known for its port wine, charming riverside district, and historic buildings.
The city has a more laid-back atmosphere than Lisbon and is popular with expats looking for a slower pace of life.
Property prices in Porto are generally lower than in Lisbon but have been rising in recent years.
The Algarve is a popular tourist destination in the south of Portugal, known for its sandy beaches, golf courses, and warm climate.
The region is particularly popular with retirees and second-home buyers. Property prices in the Algarve can vary widely depending on the location, with some of the most sought-after areas being Vilamoura, Albufeira, and Lagos.
The Silver Coast is a region of Portugal located north of Lisbon and stretches from the Atlantic Ocean to the hills of the interior.
The area is known for its rugged coastline, traditional fishing villages, and historic towns.
Buying a home in the Silver Coast is generally cheaper comparing to Lisbon and the Algarve, but there are still some areas that are popular with expats, such as the town of Obidos and the beach resort of Sao Martinho do Porto.
Madeira is known for its stunning natural beauty, with lush forests, rugged mountains, and crystal-clear waters.
This makes it an ideal location for those who love the outdoors and want to enjoy a relaxing, natural lifestyle.
Madeira consistently ranks high in quality-of-life indices, which make the island a popular tourist destination, with millions of visitors each year.
This means that there is a high demand for short-term rental properties, making it an attractive option for those looking to invest in vacation rentals.
Types of properties available in Portugal
Portugal offers a range of property types, including apartments, townhouses, villas, and farmhouses. Each property type has its advantages and disadvantages, so it’s important to consider which one suits your needs and lifestyle.
This is the Portuguese word for an apartment, which is a self-contained living unit within a larger building that is typically divided into multiple units.
This is the Portuguese word for a house or a dwelling, which refers to a standalone residential property that is not connected to any other building.
This is a style of living space that is typically characterized by high ceilings, large open spaces, and minimal partitions. Lofts often have an industrial aesthetic and are commonly found in converted warehouses or factories.
This is a type of semi-detached house, which is a residential property that shares one or more walls with another house. Moradia geminada is a specific term used in Portugal to refer to this type of property.
This is a residential unit that spans two floors of a building. Duplexes often have a staircase that connects the two levels, and may include features like a private entrance or outdoor space.
This is a Portuguese word for a villa or a large, luxurious house, often with a large garden or outdoor area.
Casa de Campo
This is a type of dwelling that is typically small and rustic in design, often featuring a steep-pitched roof and made of wood or stone.
This is a luxurious apartment that is typically located on the top floor of a building, offering panoramic views and often featuring high-end finishes and amenities.
This is a Portuguese word for a country estate or farm, often featuring a large house or manor, as well as agricultural land or gardens.
Process of buying a property in Portugal
Step 1 – Property search
Begin by searching for properties that meet your requirements and budget. You can work with a real estate agent, browse property websites, or attend property expos.
Step 2 – Offer and negotiation
Once you have found a property that you are interested in, make an offer to the seller. Negotiations may take place until a final price is agreed upon.
Step 3 – Preliminary contract
The next step is to sign a preliminary contract, also known as a promissory contract (CPCV). This is a legally binding agreement between the buyer and seller that outlines the terms of the sale, including the price, payment terms, and other conditions.
In this t this point, the buyer is also required to do a downpayment, in general equivalent to 10 percent of the agreed price to avoid buyer pulls out of the deal.
Step 4 – Property Check
It’s recommended to carry out a survey of the property to identify any potential issues or defects. This can be arranged by the buyer or through a surveyor recommended by the real estate agent.
Step 5 – Due Diligence
A law firm will carry out legal checks on the property, including verifying ownership, checking for any liens or mortgages, and ensuring that all permits and licenses are in order.
Step 6 – Property Deed
Once all legal checks and surveys have been completed, the final contract can be signed. This is typically done at a notary public office, and the full purchase price is paid at this time.
Buying a house in Portugal as a foreigner
Foreigners are allowed to buy property in Portugal, and the process is relatively straightforward. However, there are some regulations and requirements that you should be aware of before you begin the process.
Here are some key points to keep in mind when buying a property in Portugal as a foreigner:
Tax Number (NIF) in Portugal
As a foreigner, you’ll need to obtain a Portuguese tax identification number (NIF) in order to buy a property in Portugal. This can be obtained from the Portuguese tax office (Finanças).
Portuguese Bank account
You’ll need to have a Portuguese bank account in order to purchase a property in Portugal. This is where you’ll transfer the funds for the purchase, pay the taxes and fees, and receive any rental income.
It’s highly recommended to work with a Portuguese lawyer who is experienced in real estate transactions. They can help you navigate the legal aspects of the purchase and ensure that everything is in order.
Known as property insurance, its mandatory in Portugal and provides coverage for damage to your property and personal belongings, as well as liability coverage if someone is injured on your property.
It can also provide coverage for natural disasters such as earthquakes or floods, which can be common in Portugal.
Applying for a mortgage in Portugal as a foreigner
Foreigners can obtain a mortgage in Portugal to buy a house in Portugal, but the process may be more complex than for Portuguese citizens. Here are some things to keep in mind:
Interest rates for mortgages in Portugal can vary depending on the lender and the borrower’s creditworthiness. In some unique situations non-residents may be subject to higher interest rates than residents.
Maximum loan-to-value (LTV)
The maximum LTV ratio for non-residents is typically 80% of the property’s value. However, some lenders may offer higher or lower LTV ratios depending on the borrower’s financial situation.
Subscribing a life insurance is requested by the Portuguese banks and it provides financial protection for your loved ones in the event of your death.
Mortgage documents in Portugal are typically in Portuguese, so it’s important to work with a lender who can provide translation services or who can provide documents in your native language.
Non-residents will typically need to provide the following documentation to support their mortgage application:
- Portuguese Tax Number (NIF)
- Proof of Address
- Credit report
- Last 3 pay slips
- Recent bank statements
- Most recent tax returns
- A copy of the tenancy agreement
- Floorplan of the apartment /house
Costs associated with buying a house in Portugal
Property transfer tax (IMT)
IMT tax is based on the purchase price of the property and can range from 0% to 8% for residential properties. There are 3 main criteria’s that has influence the IMT calculation: a) Urban property vs. rural property, b) Property is in Mainland vs. islands (Madeira or Azores) and c) Primary residency vs secondary home.
You can use this IMT tax Calculator.
Stamp duty is charged for all documents and arrangements in respect of real estate, including deeds, contracts and mortgages. This tax is based on the purchase price of the property and is typically 0.8% for residential properties.
It’s important to hire a lawyer to review the purchase contract and ensure that all legal requirements are met. Legal fees can range from 1% to 2% of the purchase price.
Notary fees are charged for the services of a notary public, who is responsible for verifying the legality of the transaction. Notary fees can range from 0.3% to 0.5% of the purchase price.
These fees are charged for registering the property transfer with the Land Registry. Registration fees can range from 0.05% to 0.25% of the purchase price.
Real estate agent fee
If you use a real estate buyer’s agent to help you find a property, their fees will typically be around 5% of the purchase price.
Taxes related to property ownership in Portugal
After completing the purchase, there are ongoing taxes and fees associated with property ownership in Portugal. Here are some of the most common:
Annual property taxes (IMI)
IMI is an annual tax based on the tax value of the property. The tax rate ranges from 0.3% to 0.8% for urban properties and 0.8% for rustic properties.
You can IMI tax details cost using IMI Calculator.
Additional Annual wealth property Tax (AIMI)
AIMI stands for “Adicional ao Imposto Municipal de Imóveis” which translates to Additional Municipal Property Tax. It is an annual property tax in Portugal that is levied on the combined fiscal value of all residential properties owned by a taxpayer as of January 1st of each year worth above €600.000.
There are three levels of AIMI Tax in Portugal:
- 0,7% on properties valued between €600,000 and €1M
- 1,0% on properties valued between €1M and €2M
- 1,5% if the total properties value is over €2 million
Tax on rental income generated by the property
If you rent out the property, you’ll need to pay income tax on the rental income generated. There is a flat tax rate of 28%.
Common deductible expenses include property management fees, repairs and maintenance costs, insurance premiums, local property taxes (IMI), financing costs such as loan interest, and other relevant expenses like advertising and professional fees.
Non-resident individuals may have the option to be taxed under the Non-Habitual Resident (NHR) regime or applicable tax treaties.
Are you interested in renting out your property? Check out what you should consider when finding a good property manager in Portugal.
Tips for a successful property purchase in Portugal
Learn the language
Knowing some basic Portuguese can be extremely helpful during the buying process, especially when dealing with local professionals.
Check the property’s legal status
Make sure the property is free of any legal issues, such as liens or encumbrances, and that all necessary permits and licenses are in place.
Get to know the neighborhood
Visit the area where you’re considering buying a property to get a sense of the local culture, amenities, and infrastructure.
You might like to read the comprehensive guide about the pros and cons of living in Portugal.
Be aware of the costs
In addition to the purchase price, be aware of the various costs associated with buying a property in Portugal, including taxes, fees, and ongoing expenses.
Setting a budget
Before you begin your property search, it’s important to have a clear idea of your budget. This will help you narrow down your search to properties that fit within your price range and avoid wasting time looking at properties that are out of your budget.
Hiring a lawyer or real estate agent
It’s recommended that you hire a lawyer or real estate buyer’s agent who specializes in Portuguese property law.
They can guide you through the buying process, help you negotiate with the seller, and ensure that all legal requirements are met and also avoiding the most common mistakes.
Understand financing options
If you require financing to purchase a property in Portugal, it’s important to research the various options available to you.
This may include obtaining a mortgage from a Portuguese bank or seeking financing from a bank in your home country.
Why invest with Portugal Residency Advisors
We know Portugal. Due to our extensive local knowledge, we believe that concentrating our services in a single country destination is the best way to give you the most thorough and useful information.
We offer a streamlined communication channel for the entire process, delivering a comprehensive service that encompasses all facets of your real estate investment journey, including property search, negotiation, legal matters, due diligence, and property management.
As an independent buying agent, we have the flexibility to collaborate with any agent, seller, promoter, or developer, providing you access to all available options in the real estate market. This enables us to objectively analyze every opportunity and find the right property for you at the best price, free from complications.
Technology plays a significant role in our company, allowing us to provide you detailed property market information and minimize our clients’ involvement in paperwork. As customers ourselves, we understand how to best serve your needs.
Frequently asked questions about buying a property in Portugal
What are the steps involved in buying a property in Portugal?
The process of buying a property in Portugal typically involves finding a property, negotiating the price, getting a property survey, signing a promissory contract, transferring funds, completing the transaction at the notary, and registering the property with the local land registry.
What are the legal requirements to purchase a property in Portugal?
To purchase a property in Portugal, you will need to have a Portuguese fiscal number, a Portuguese bank account, and a valid identification document, such as a passport. It’s also advisable to work with a qualified lawyer who can guide you through the legal process.
How can I find a reputable real estate agent in Portugal?
You can find a reputable real estate agent in Portugal by searching online, getting recommendations from friends or family members, or working with a real estate agency that is licensed and regulated by the Portuguese government.
What kind of taxes and fees will I need to pay when buying a property in Portugal?
The taxes and fees associated with buying a property in Portugal include stamp duty, property transfer tax, notary fees, and registration fees.
These costs can vary depending on the value of the property and other factors, so it’s important to work with a qualified lawyer to understand your financial obligations.
How can I ensure that the property I am interested in has a clear title and no outstanding debts?
Before purchasing a property in Portugal, it’s important to conduct a thorough title search to ensure that there are no outstanding debts, liens, or encumbrances on the property. A qualified lawyer can help you with this process and ensure that the transaction is legally sound.
How do I get a mortgage in Portugal, and what are the requirements?
To get a mortgage in Portugal, you will need to have a Portuguese fiscal number, a Portuguese bank account, proof of income and employment, and a good credit score. It’s also important to work with a qualified mortgage broker who can help you find the best loan products and rates.
Are there any restrictions on foreigners buying property in Portugal?
There are no restrictions on foreigners buying property in Portugal.
What are some important factors to consider when choosing a property in Portugal?
Some important factors to consider when choosing a property in Portugal include location, property type, price, condition, and potential rental income.
How can I protect myself from fraud when buying a property in Portugal?
It’s important to work with reputable real estate agents and lawyers, conduct thorough due diligence, and verify the seller’s identity and ownership of the property. It’s also important to avoid making payments in cash or through unsecured channels.
What kind of legal support can I expect when buying a property in Portugal?
From a qualified buyer’s agent or lawyer who can help you with due diligence, contract review, negotiation, and transaction management. A lawyer can also help you navigate any legal issues that may arise during the buying process.