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Last Updated on 11th October 2024

Owning a home, second residence, or investment property in Portugal is a fantastic opportunity, whether you’re already living in the country as an expatriate, want to establish residency in the future, or are keen to tap into a fast-growing real estate market with above-average returns.

As with any large outgoing, it is essential that you are fully prepared for the costs, legalities, and practicalities of buying a property overseas and make informed choices about the type of property that best suits your plans within a location that matches your objectives.

Our specialist financial advisers and wealth management specialists in Portugal have compiled a checklist of Portuguese property ownership aspects every foreign national buyer should know well before signing any contracts.

1. Non-EU Citizens Must Obtain an NIF Number Before Buying a House in Portugal

One of the first questions we often discuss with clients considering buying a home in Portugal is whether foreign nationals are allowed to own real estate. The quick answer is yes – provided you have the finances in place and work with a reputable estate agent and adviser, there is little to prevent you from buying a home or second property.

The caveat is that even though anybody can buy property in Portugal, that doesn’t automatically give you the right to live there full-time. Foreign nationals from outside of the EU must have a residency permit to live in Portugal, with most non-residents able to stay for a maximum of 90 days every six months otherwise.

It’s also important to ensure you understand the process of applying for an NIF number either in person through the local tax office or online. This is a Portuguese tax number similar to a National Insurance number in the UK.

Property owners must have a Portuguese bank account and a recognized NIF code before they can purchase property, especially if they are reliant on a mortgage loan or another source of financing since most institutions and banks will only accept payments from a local account.

Likewise, you’ll need a local bank account to set up direct debits to pay for utilities, broadband, a TV connection, and other municipal services.

2. Working With an Independent Lawyer and Wealth Adviser is Strongly Advisable

We recommend that any foreign national buying a house in Portugal consult with a well-established, reputable and fully regulated real estate agent or other property professional to avoid pitfalls or scams.

While rare, there are plenty of issues a representative can help to ensure you avoid, especially if you aren’t fluent in Portuguese.

An agent can assist with:

  • Scheduling viewings and recommending properties new to the Portuguese real estate market.
  • Negotiating purchase prices and terms with the seller.
  • Suggesting areas, properties and regions that match your requirements.
  • Clarifying the contrasts between price and quality of resale and new-build properties.
  • Explaining the nearby amenities, schools and transport connections.

You’ll also need a solicitor, lawyer or notary to conduct checks on your behalf and fulfil all due diligence requirements, such as verifying there are no outstanding debts linked with the property deed before proceeding.

It is common to pay a reservation fee as part of an initial agreement to reserve the right to purchase a property. While this should be refundable if anything changes, it is key to have a solicitor or notary check the documentation to ensure this is the case.

3. Expatriates and Residents Can Select From a Wide Array of Property Types Depending on Location

If you have a dream home in mind, you may already know the type and location of your preferred real estate acquisition. However, the types of homes and estates in Portugal vary widely, and they may differ between busy city centres, coastal regions popular with international visitors, and more rural areas.

As a summary, you’ll find:

  • Period apartments and city lofts in Porto and Lisbon, many of which have generous floor plans and are located across one or two storeys. City properties also include individual apartment units, townhouses, and modern apartments that conform to contemporary energy efficiency standards.
  • Villas, sea-view apartments, and gated communities in coastal areas, predominantly in the Algarve, with panoramic views over the beach and ocean, command a premium and act as an ideal holiday home or investment property.
  • Cottages, farmhouses and homes with ample land are widely available throughout the Portuguese countryside, often appealing to restoration enthusiasts and those keen to build their own property.

Other areas feature luxury houses, extravagant villas, and mansions, with high-value real estate in Cascais, Comporta, and Melides.

4. Popular Portuguese Tourist Regions Command the Highest Real Estate Prices

Like almost all other European countries, real estate prices in Lisbon are inevitably higher than the national average – but some of the other areas mentioned above also have vibrant, affluent real estate markets that appeal to the wealthiest investors.

The pricing below is based on the average cost per square metre of purchasing a city centre apartment in several of the highest-demand cities, towns, and regions.

Buying a house in portugal table

For context, the average national price of buying a city centre property is €3,340 (£2,899) per square metre, compared to £4,966 as a UK average.

The cost of real estate in Lisbon is roughly 60% lower than in London, and properties in the suburbs around the outskirts of the capital are over 66% more affordable.

Evaluating Whether a Holiday Home or Rental Property Will Prove a Viable Investment

If you’re purchasing a Portuguese property as an investment or rental asset, it’s equally important to review the yields and returns you can expect to achieve, as well as the initial cost associated with buying the type of real estate you are interested in.

While areas around the Algarve and Lisbon tend to be higher priced than the average, along with the premium locations on the southwest coastline we’ve mentioned, the yields available are also likely to provide a greater return as a percentage of the investment.

Current average rental yields stand at around 5% to 6% across Lisbon and exceed 7.5% in high-demand coastal resorts, whereas properties in Porto attract a yield of around 5.5%.

Your agent should be able to provide a more accurate, property-specific indication as to the rental prices you could expect to achieve during the peak tourism season and from longer-term rental incomes.

5. Portuguese Property Ownership Comes With Tax Obligations

Finally, any foreign national buyer should ensure they are up to speed with the taxes linked to property ownership and have budgeted for these during the initial buying process.

Taxes include stamp duty, property transfer tax, potentially VAT if you are buying a new building or property from a developer, annual property taxes called the IMI, and possibly wealth tax, depending on the total value of your real estate assets located within Portugal.

You’ll find further information about Portuguese property taxes in our earlier guide, and you are welcome to contact the experienced wealth managers and financial advisers at Chase Buchanan Wealth Management local offices at any point to discuss your real estate investment or homeownership aspirations.

*Information correct as at September 2024