If buying a home in Portugal to live, vacation in or maybe even retire has been your long life dream, it might be time to get it done. Portugal is home to millions of expats due to the year round sunny climate, the culture, and the high quality of life. The European country has one of the highest numbers of homeowners, with about 75% of the population owning their home. Although during the 2008 economic crisis the Portuguese real estate market was hit hard, today, buying property in Portugal won’t only provide you with a home, but a sound investment. The real estate market has been growing in value, all around the country. Buying a home could potentially even land you permanent residence or even citizenship if you are eligible to apply for a Portugal Golden Visa!
How easy is it to buy property in Portugal as a foreigner?
Buying property in Portugal as a foreigner is quite simple. The country has no restrictions on foreigners looking to buy a house in Portugal. You won’t have to fill in any extra paperwork or meet any criteria to buy a home per say. All you need is a VAT identification number, known as a número de identificação fiscal (NIF) or número de contribuinte in Portugal. Anyone can get this by opening a Portuguese bank account or through a tax office in the country.
What’s the property market like in Portugal?
The real estate market in Portugal keeps growing but did slightly decline during COVID. In 2020, property prices in Portugal rose by 6.32% to a median price of €1,144 per square meter. This is a high increase, but it is still a decrease from the year before, which saw a 11.16% growth. However, post-COVID, prices are expected to rise even further and get back on track. The growth in 2020 does also differ by area. Let’s take a look:
- Lisbon metropolitan area: rose by 5.83% to a median price of €1,507 per square meter
- Northern Portugal: rose by 6.54% to a median price of €994 per square meter
- Central Portugal: rose by 3.87% to a median price of €833 per square meter
- Alentejo: rose by 2.84% to a median price of €833 per square meter
- Algarve: rose by 7.28% to a median price of €1,562 per square meter
- Azores: rose by 3.41% to a median price of €940 per square meter
- Madeira: rose by 2.55% to a median price of €1,168 per square meter
Should you buy a house in Portugal?
- Become eligible for a Portugal Golden Visa and potentially obtain residency (as well as citizenship after 6 years).
- Solid investment, Portugal has great rental potential.
- Low cost of living in comparison to other European countries.
- Moderately warm climate.
- In 2019, Global Finance magazine ranked Portugal fourth amongst the safest countries in the world.
- High-quality education and healthcare services
- A large number of English speakers so not necessary to learn Portuguese (however, this is helpful).
- No central heating in most houses in Portugal.
- Bureaucratic systems, things get done slowly and sometimes inefficiently in Portugal so it might take longer than expected to buy property.
Where to buy a house in Portugal
Cascais is one the most expensive areas in Portugal to buy a house for a reason. This Portuguese Riviera municipality has a 30-kilometre seacoast with some of the best beaches in the country. The center is lively all year long, with high-quality restaurants and shops. The old summer destination for the Portuguese Royal Family, Cascais is a hidden gem in Portugal of great historical significance. This place is a top place to raise a family, due to its nature, clean parks, and quality public schools. Cascais features well-funded infrastructures due to a high IMI, as seen in the amazing public transportation that has a 30-minute train to Lisbon.
The Algarve is the top vacation destination in Portugal, boasting the best weather and warmest seawater. With more than 300 days of sunshine, the Algarve is a favorite spot for retirees, particularly from the US and the UK. The Algarve has a large variety of public and private schools, including international ones. English is widely spoken and it is one of the safest places in Portugal. From larger expensive houses to affordable homes, Algarve has many options for investing in real estate.
The real estate market in Lisbon has been the target of investment by companies and individuals all around the world. The market is growing exponentially. This is definitely not a cheap place to buy, but you can always find more affordable houses outside the city center. Lisbon has great infrastructure with quality transportation, affordable prices, as well as beautiful beaches and parks. It is one of the safest cities in Europe and has some of the best public schools in the country.
A solid investment, the city of Porto is 280 km north of Lisbon and lies along the Douro River. Porto is one of our favorite cities in Portugal and one of the most beautiful places to live in. The city gets 220 days of sunshine per year and offers a low cost of living (lower than Lisbon). Porto has attracted expats over the years and has a large international community. The city has a low crime rate and excellent infrastructure such as efficient transportation and clean parks.
As prices in Lisbon, Porto, and Algarve rise ridiculously, the Alentejo remains a great alternative. We wouldn’t even call it an alternative. You can find everything in Alentejo that you would in Algarve, but better, as you won’t find the region as oversaturated by tourism. Alentejo has the beautiful coastline of the Algarve, while also featuring dry areas where the relaxing farm life is the norm.
Where is the cheapest place to buy property in Portugal?
The city of Braga in the North is one of the cheapest places to buy a house in Portugal. A house in the city center here costs €1,481 per square meter. This is a large difference to Lisbon where a house costs €4,623 per square meter. The most expensive place is in Cascais in the Portuguese Riviera, where a house costs €5,395 per square meter. In Porto, a house costs €2,709 per square meter in the city center. Keep in mind that if you are applying for a Portugal Golden Visa, can no longer purchase real estate in Lisbon, Porto, and coastal towns to be eligible.
Can you buy a house for Portuguese residency?
Does buying a house in Portugal give you residency? It could! It depends on your financial situation, nationality, amount of time spent in the country, and other requirements. But if you are looking to buy a house in Portugal to obtain residency, the Portugal Golden Visa could be the right path for you.
Portugal Golden Visa
The Portugal Golden Visa allows non-EU citizens to qualify for a residency permit (and eventually citizenship) if they make an investment, such as buying a house. Created in 2012 to boost foreign investment, the Portugal Golden Visa is known as one of the most attractive in the world. With a Portugal Golden Visa, you can live in Portugal and travel within most European countries without an issue. However, you do not need to live in Portugal to be eligible for this visa. All you need to do is to stay in the country for at least 7 days in the first year and 14 days in the subsequent years.
Portugal Golden Visa: How much does the house have to cost? (Updated for 2022)
If you purchase real estate in a low-density area in Portugal, the minimum to spend is €400,000, whereas in a high-density area it’s €500,000. You can also buy real estate that is over 30 years old in an urban rehabilitation area and renovate it for at least €350,000. You do not need to buy one property, you can purchase multiple properties. Just make sure to meet the minimum amount. You can also combine your investment with other applicants. For example, if you purchase a €1 million house with a friend, both of you can apply for the Portugal Golden Visa, as each of you has spent a minimum of €500,000.
If you decide to not rent out the property, you do not pay any tax on it. However, if so, your real estate income is taxed at a flat rate of 28%.
Since January 2022, you cannot purchase real estate in Lisbon, Porto, and coastal towns. Only properties in Azores and Madeira, as well as interior territories, are now eligible for the Portuguese Golden Visa as these are low-density areas. Although Porto and Lisboa are the most common places to purchase property, there are also other areas like Braga that are great investments.
Also, keep in mind that if you want to qualify for a Portugal Golden Visa, you cannot get a mortgage from a Portuguese bank to invest in property.
Top Benefits of the Portugal Golden Visa
- Visa exemption: The Portugal Golden Visa allows you to enter Portugal and the Schengen area (26 EU Countries). You can travel freely without requiring a visa, essentially granting you the travel privileges of European Union citizens.
- Stay in Portugal: The visa grants you the right to live, study and work in Portugal as if you were an EU citizen.
- Family reunification: The program includes family reunification, meaning that a spouse, minor children, children over 18, children over 18 who are studying, and parents who are financially dependent on the investor are all granted the same rights. They can all live and work in Portugal and travel freely within the Schengen area, as well as enjoy all the visas’ benefits.
- Permanent residence: The investor can apply for permanent residence if they follow all the requirements and complete the 5 years necessary.
- Citizenship: After legally residing in Portugal for at least 6 years, the investor can apply for Portuguese citizenship and potentially obtain a passport.
- Tax incentives: You will not be faced with any tax responsibility unless you become a tax resident, meaning you spend more than 183 days of the year in Portugal. If so, under the Portugal Gold Visa, you can follow the Non-Habitual Resident (NHR) tax regime where you transfer your tax residency to Portugal. Some of the benefits of this tax regime are a 10% flat rate tax for pensions and only being taxed on your worldwide income after the first 10 years of residence.
Portugal Golden Visa Application Process
This is only the highlights about the Golden Visa. If you’re interested in pursuing the Golden Visa, please read the full Portugal Golden Visa Guide.
Mortgages in Portugal: How to get a mortgage as a foreigner in Portugal
Although being a foreigner usually has no influence on buying a house in Portugal, it does when it comes to getting a mortgage. If you are not a resident, this impacts how much you can borrow. Non-residents will only be offered loans up to 65-75% of the value of the home or the sale price (whichever is lower), while fiscal residents can borrow up to 90% of the sale price (whichever higher). Most banks will also not allow your existing debts and your new mortgage payments to go over 35% of your monthly income. Portuguese banks will usually give you a mortgage that runs for 25 years, sometimes up to 30.
So, how much does a mortgage really cost you in the long run? The average mortgage rate in Portugal is now less than 1%, which is extremely low. In 2013, the mortgage interest was more than 3%. There are also mortgage-related fees that you might need to pay:
- Deed registration: 1%
- Mortgage arrangement: 1%
- Mortgage administration: 1%
- Non-refundable commitment fee: around €600
- Survey and appraisal: €500–€800
- Legal fees (optional): at least €1,000
You’ll also need to gather the following documents to apply for a Portuguese mortgage:
- Current proof of residency
- Proof of income
- Documentation of existing rent, mortgage and debt obligations
- Bank statements (last 60 days)
- Proof of deposit (last 60 days)
- Property details (Contract, property plan, or more)
Property Taxes: How much tax do you pay for buying a house in Portugal?
Beyond admin costs and legal fees, property owners need to pay certain property taxes to the government. You’ll need to calculate each of them, which a Portugal property tax calculator is helpful with. Property owners have to pay three types of taxes:
1. Municipal Property Tax (IMI)
The IMI translates to Imposto Municipal Sobre Imóveis and will be different in each municipality. This money is used to maintain public infrastructures in municipalities. The IMI rates usually range from 0.3% to 0.45%. To calculate the IMI, you multiply the value of the tax asset with the IMI rate. You must pay the IMI every year. For example, if your property is valued at €500,000 and you live in the municipality of Cascais with a rate of 0.34%, then your yearly IMI is €1,700. You can be exempted from the IMI if your annual taxable income of the whole household does not surpass €15,295.
2. Property Purchase Tax (IMT)
The IMT is also known as the Imposto Municipal sobre as Transmissões Onerosas de Imóveis. This tax is paid when a house is bought in Portugal, so it is a one-time payment for buying a house. The rate of the IMT will depend on the type and value of the property, as well as whether this property is a principal or secondary residence. You must pay this before you buy a house. This is how you calculate the IMT = value of the deed or net worth tax (the larger amount) x rate – tax reduction. You won’t have to pay IMT if you buy a house in mainland Portugal and the price doesn’t exceed €92,407. IMT usually will range between 2% to 8%, depending on the case. However, properties acquired by companies located in a “blacklisted jurisdiction” pay 10% for IMT.
3. Tax on Stamps (IS)
You’ll also need to pay an Imposto de Selo, a stamp tax, contracts, loans, documents, and more. The rate also changes depending on the property and task, but it is usually between 0.4% and 0.8%. For example, for a mortgage of five years, the stamp duty tax is 0.6%.
This is uncommon, but it has happened. There have also been instances of people purchasing properties with cryptocurrencies such as Bitcoin, as well as Dogecoin, Ethereum, and Cardano in Portugal as Swiss crypto payment processor FNTX Capital Suisse partners with Portuguese property developer 355 Developments. Others are following in their footsteps as Portugal is becoming one of the most crypto-friendly countries in the world. This is because Portugal is a crypto tax haven. The Portuguese Tax & Customs Authority (PTA) officially announced in 2019 that buying or selling cryptocurrency in Portugal is tax-free. You will not be charged VAT or Personal Income Tax (IRS), as an individual. However, businesses that provide services related to cryptocurrency are taxed on their gains. Contact a tax advisor if you are unsure whether this applies to you.
Take a look at our guide to cryptocurrency in Portugal here.
Step by Step: Buying a House in Portugal
Frequently Asked Questions about Buying a House in Portugal
Does buying a house in Portugal give you residency?
It can give you residence if you apply for a Portugal Golden Visa. To be eligible, you must be a non-EU citizen and have at least €350,000 to €500,000 to spend on a property. Check out our detailed guide on the Portugal Golden Visa.
Can a foreigner buy a house in Portugal?
Yes, there are no restrictions on foreigners wanting to buy a house in Portugal.
Is it safe to buy real estate in Portugal?
Buying real estate in Portugal seems to be a safe investment. The real estate market in Portugal keeps growing but this growth did slightly decline during COVID. Prices are expected to continue to rise exponentially post-covid. Still, make sure to seek financial advice from a professional.
How to buy real estate in Portugal?
The best way to buy real estate is to contact a Portuguese real estate agency for help. You can also check out houses and their prices on Idealista.
What are some good real estate agencies in Portugal?
Where is the best place to buy property in Portugal?
The cheapest place to buy property is in Braga. The most famous places with a strong real estate market are Algarve, Lisbon, Porto, Cascais, as well as Alentejo.
Is there property tax in Portugal?
Yes. There are three types of property tax in Portugal you need to pay:
- Municipal Property Tax (IMI): usually ranges between 0.3% to 0.45% (paid annually)
- Property Purchase Tax (IMT): usually ranges between 2% to 8% (paid once at purchase)
- Tax on Stamps (IS): usually ranges between 0.4% and 0.8% (for contracts, loans, deeds, etc)
Can I buy a house with cryptocurrencies?
This is uncommon. However, it is possible. The Swiss crypto payment processor FNTX Capital Suisse partnered with Portuguese property developer 355 Developments to allow people to purchase properties using crypto. You must find such an entity to be able to do so.