With an attractive climate, beautiful coast, and friendly communities, Portugal is a top destination for anyone looking to relocate, either for work or retirement or as an investment. Many choose Portugal's capital Lisbon, which is also the largest city in the country. With just over half a million residents, it is a manageable size, but with the amenities, you might expect from a European capital. Other popular destinations include the slightly smaller city of Porto and the coastal towns and villages of the Algarve. In fact, Portugal has something to offer any foreigner looking for a new life - whether that's vibrant city living or a quiet rural retreat. In our previous article, we introduced top tourist attractions of Portugal.
What is the property market like in Portugal?
Property in Portugal at the moment is a hot investment. House prices started to recover in 2014 and have been rising since.
House prices rose by 4.5% in 2015, 4.8% in 2016, 4.6% in 2017 and 6.1% in 2018. Demand remains healthy. During the first three quarters of 2019, prices soared by almost 8% (7.7% in real terms), the total value of housing transactions rose by 4.3% y-o-y to €18.65 billion while the number of transactions was steady at 132,246 units.
The Portuguese housing market is expected to remain buoyant this year, with Moody’s Investors Service predicting house price increases of around 4% - a slowdown from last year’s strong price growth but still one of the biggest increases in the region.
Can foreigners buy property in Portugal?
There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low.
Portugal grants a 5-year residency permit to non-EU citizens who buy a minimum of €500,000 worth of property, allowing holders to work or study, and travel to Schengen countries. They can apply for permanent residency after five years.
Buying Your Property
Buying your property in Portugal with the Global Broker could not be easier. We can manage the whole process on your behalf through our expert nominated legal partners. The team has extensive experience in managing property purchases for overseas clients and will ensure due diligence and compliance are at the top of their priorities. You can of course appoint your own legal representative.
Reservation Process
In order for a property to be removed from the market, it is customary for the potential buyer to place a reservation deposit of between €5,000-€10,000 (this amount varies depending on the property, the developer, etc.). The deposit amount will be deducted from the final agreed price of the property.
A period will be set for you to decide if you want to complete your purchase and sign a promissory contract, or to back out of the transaction. Should you decide not to complete your purchase the full amount of the deposit will be refunded to you. This period is usually 30-60 days and may vary according to the developer.
Inspection Visit
You may, at any time, schedule an inspection visit to the property you have chosen. Our team here at Global Broker will be delighted to assist with the planning and organizing of this visit for you. We will be there to meet you and to show you around your chosen property, the surrounding area, and local places of interest. We will also be able to answer any questions you may have.
Due Diligence
Once the reservation deposit has been paid, your legal representative will request the contact details of the vendors' lawyer to notify them of their representation and to request from them the necessary documentation in order to carry out the appropriate due diligence in which they will verify all relevant aspects related to the property, such as:
- The legal identity of the owner/the seller of the property you intend to buy;
- That the property under construction is legally registered in the corresponding Land Registry (for new-build developments);
- That the property is free from charges (mortgages, liens, encumbrances, etc);
- That the property has been granted the corresponding municipal building permit and habitation license (where applicable) by the Town Hall in question and respects local urban planning rules;
- That the construction specification or quality specifications are made available to the buyer and included in the annex to the purchase agreement (for new-build developments);
- That there is a Bank Guarantee or Insurance Policy in place in order to provide a guarantee for all monies paid to the developer during; the construction process (for new-build developments);
- Revision of the purchase contract drafted by the developer to assure that its content respects the buyer’s rights and that it is fully understood by the buyer.
Promissory Contract
Once the due diligence is completed and providing that everything is in order, in a period of 2-3 weeks from the payment of the reservation deposit, your legal representative will proceed with the preparation and subsequent signing of the promissory contract with the payment of the amount previously agreed with the sellers.
The private contract is a very important step, as herein the terms and conditions of the purchase will be set; your legal representative will carry out all the necessary negotiations with the sellers’ legal representatives in order to protect your best interests.
You may choose to grant power of attorney to your legal representative for them to act on your behalf in Portugal during the buying process. This will enable them to sign the relevant paperwork related to the purchase, if necessary.
Public Deed of Purchase
After the signing of the private contract, and according to the agreed completion schedule, the public deed of purchase will be signed by you with our assistance or your legal representative with the aforementioned power of attorney. At this moment, the balance of the purchase price must be paid to the seller, with the buyer taking physical possession of the property.
What kind of taxes and fees will I need to pay?
Although you are liable to fees as a buyer, these vary according to the circumstances, the main cost is IMT transfer tax. Talk to your legal representative about the costs likely to be levied in your circumstances.
Fees and taxes include:
- Stamp duty: Levied at a flat rate, 0.8% the value of the home
- Property transfer tax—Imposto Municipal Sobre Transmissões (IMT): This is calculated on a sliding scale depending on the cost of the home. A higher tax is payable if the property is a second home.
- Notary and land registry fees: These are usually combined and comes in at around 0.2% to 1.2% of the property cost.
Estate agents’ fees are usually paid by the seller.
Miscellaneous
Your legal representative will also be able to advise and assist you in obtaining a Portuguese Fiscal Number, opening a local bank account, contracting utilities and setting up direct debits from your local bank account, or registering a last will and testament. We can also register your property with the tourism office if you intend to rent it or assist with any other requirements you may have.