While I feel very lucky to wake up in my new Portuguese home, it took more than good luck to get me here. It was the process leading up to my purchase that did it.
Knowing this, I caution all potential foreign investors to roll up your sleeves and dig into your homework beforeyou start looking at properties.
Familiarize yourself with Portuguese law and governance, especially pertaining to real estate. International “White List” treaties, the application of property and income taxes, and fiscal responsibilities may factor into your future. Remember that the “beach and café vacation” you fell in love with isn’t the daily reality experienced by most Portuguese home owners.
The Portuguese Consulate website clearly defines the information relative to each buyer’s citizenship. Depending on where you’re coming from, different rules and policies will apply. The website will also refer you to other resources where further investigation will help you compile a focused snapshot of current conditions in the Portuguese market.
Consult with a lawyer, accountant, and real estate agent based in your target area. Their offices will share the local information you need.
Set Your Personal Priorities
Narrow your search with a personal checklist. My list featured climate, medical services, accessible regional and international transportation, recreational facilities, walkable shopping and dining options, and whether the library and cinema offered English language books and movies.
But these items reflected my goal as a permanent resident. If you intend to limit your stay or rent your property, your list may be very different.
This process eventually led me to the Eastern Algarve but, as much as I loved the idea of a great beach, I didn’t relish the flood of vacationers that overcrowd them every summer. A tamer, more traditional adventure was key… and Tavira was my perfect fit.
Here’s a synopsis of my real estate market that I hope will pique your curiosity and enhance your search success:
Typical Portuguese property descriptions may include the word quinta, referring to a home on rural acreage or any properties built on former farmland, or villafor any detached, semi-detached, or town house that has a yard or urban land around it, or “Algarvean Cottage,” which describes the traditional architectural style of this region (typically measuring about 120 meters squared).
Of course, there are multi-purpose and multiple dwelling structures, including store top flats, residential condominiums, and resort apartments.
Some Helpful Tips
- Establish what features are included in the listing’s size. Some include balconies, terraces, patios, storage areas, and garages—even those that must be accessed by a stairwell or elevator.
- Are these features for private use only or part of a common space that’s shared? Is the property surrounding the listing owned by the municipality? That shaded patch of grass behind your unit could be a poop-and-scoop greenbelt for dogs.
- Is parking important? Verify whether the listed space is underground, designated, first-come, first-served street parking, free, metered, or limited to certain days and times.
- Access may be an issue. Listings may be in pedestrian-friendly, no-traffic zones. Some are on one-way, steep, narrow, or cobblestoned roads. Can the property be reached by car or will groceries and luggage have to be carried on foot?
- Residential buildings may be centered in heavily congested commercial districts blocked by deliveries. Will you experience a high level of street noise? Observation over time will play a huge part in your decision to purchase here.
Listen To A Local Expert
Real Estate Specialist Anabela Perez shared some details with me…
“Buyers must possess a Fiscal Number (referred to as a NIF), a passport, and a Portuguese bank account before they make an offer. Our market has shown steady gains in the last few years and prices continue to climb, mostly due to the growing presence of foreign investment.
“The average foreign purchase in Tavira approaches 230,000 euros (US$268,223) for apartments and about 400,000 euros (US$466,475) for houses, but most choose apartments as they offer a variety of maintenance and security advantages.
“Purchasers of investment properties can expect long term-rental fees of approximately 700 euros (US$816) per month for an attractive-two bedroom unit to approximately 850 euros (US$991) for larger, three-bedroom units. Short-term, high-season rentals are usually priced by the week and can be much higher, depending on proximity to the beach and amenities.
“Anyone trying to estimate carrying costs should know that our property tax tables can be complicated. This municipality does not apply a standard mill rate.
“Tax exemptions (up to three years) are available on properties assessed at less than 125,000 euros (US$145,773) that are the permanent residence of the owner. Assessment factors include location, amenities, age, and general condition. Some current listings fall into this category but as our market continues to rise, they are becoming harder to find.”
A more costly tax table determines property taxes on homes classified as rentals. Properties purchased under the Golden Visa program assessed at 550,836 euros (US$642,378) or more for non-residents or 574,323 euros (US$669,768) or more for permanent residents are taxed at a flat rate of 6%.
Closing costs vary, but generally, if you’re buying a property, they’re no more than 5% and often less, including lawyer’s fees. This doesnot include costs associated with a mortgage.
Stamp Duty, Municipal Real Estate Transfer Tax (IMT), Deed, and Registry charges will be assessed on your final documents, but no funds will be directed to your real estate agent, who is paid in full by the seller. This is one of the reasons closing costs are higher when you are selling a property.
You must understand one important factor that applies to all hopeful speculators: Closing costs absorb almost one-third of profits (generally around 28%) realized from real estate sales by non-residents.
Portuguese residents incorporate profit resulting from property sales into their annual income tax filing. They usually pay tax on half the total, based on their tax rate in the year their property sold.
Consulting with a lawyer prior to closing helps untangle the details. Lawyers are mandatory for property purchases, and Portuguese law states that foreign buyers must have a Fiscal Number and a registered Fiscal Representative.
My very qualified attorney provided me all of these services and also implemented my contracts for local utilities, postal service, home insurance, and condominium management. Having a strong legal team in place is an important final piece of the property asset process.
With all of this information under your belt, I can now confidently say, “Welcome to the Portuguese real estate market!”