Real Estate Investment in Portugal

Why Portugal?

Situated on the edge of Europe, between America and Africa, and with two autonomous regions that are the Atlantic Ocean's calling card to the world, Portugal occupies a geostrategic position in our globe, which makes it the first choice for most investors.

In the first quarter of 2020, Portugal recorded a property value growth of 10.3%, which put it at the top of the list of capital growth against other destinations. 

However, Real Estate Investment in Portugal involves much more than its geo-strategic location and capital returns. Let's see:

Golden Visa Portugal

Portugal is a member country of the European Union and imposes no restrictions on foreign investment in the national territory. According to Henley's Passport Index, Portugal has the 6th strongest passport in the world, providing visa-free travel to most countries.

Most importantly, Portugal offers a 5-year residence permit for foreign citizens with the possibility, after this period, to apply for permanent Portuguese citizenship. This policy also places Portugal in 6th place worldwide in the ranking of the Golden Visa.

Portugal's value proposition

Portugal's value proposition, that is, the relationship between what it offers and what it charges, is considered one of the best value propositions in the world, highlighting the country's competitive positioning.

According to the National Institute of Statistics, the historic centers of Lisbon and Porto have appreciated 72% since 2016.

Real estate taxes and fees in Portugal

In Portugal, taxes and other legal fees are calculated on the purchase price of the property, and no VAT is charged on the purchase of the property. These expenses are borne by the buyer, including the payment of the registration of the property and the costs of the notary.

The best Real Estate Investment options in Portugal

There are many possibilities for real estate investment in Portugal, some with higher return but higher risk and others with moderate return but lower risk.

Among the numerous possibilities for real estate investment in Portugal, the following stand out:

1- Properties for students

In Portugal, only 12% of the 113,813 students studying away from home have access to government housing, the rest have to look independently for a place to live, in a market where there is not enough supply. Even if all the new residential, tourist, and student buildings were exclusively for students, there would still not be enough space to accommodate these students.

2- Residential properties for rent

Although the search for residential rentals is not the first option of the Portuguese, since they prefer to buy the properties, the rental offers, in Portugal, are not many and many times, the properties are rented in the same day that the announcement of the offer is made.

The most commonly used platforms in Portugal, for advertising property rental offers, are the traditional ones: Imovirtual, Idealista and OLX. These platforms are free and the management of the property is simple, charging only 10% of profit.

Regarding rental property costs, expenses such as water, electricity and gas are at the tenant's expense. As for income tax, this is a flat rate of 28% on income less deductible expenses.

3- Local accommodation

Despite the crisis that hit tourism hard, due to the pandemic situation we are currently experiencing, by 2019 the tourism market, in Portugal, was quite promising, with a revenue growth of 70% since 2011, which made tourism compose 10% of the Portuguese GDP, being a great source of income for the real estate sector.

This type of renting is done through platforms like AirBnB and Booking, which charge a commission between 3% to 15%. 

For those who don't live in Portugal and buy properties for this purpose, there are teams that offer to manage the pricing and maintenance of the spaces, charging between 20% and 30% of the profits to the owner.

Acquisition of real estate in Portugal

One of the biggest advantages of investing in real estate in Portugal has to do with the speed and security with which the acquisition processes take place.

The real estate transaction must undergo a previous process of auditing the legal situation of the property, namely through the analysis of the following data:

• Certificate from the Land Registry Office;
• Caderneta Predial;
• Utilization Authorization;
• Housing Technical File;
• Energy Certificate.

In the case of land acquisition, it is necessary to ascertain the permitted land use, analyze the applicable territorial management instruments and the municipal regulations of the area where it is located, in order to ascertain the feasibility of the urban operation to be carried out.

Conclusion

Over the years, Portugal has proven to be a prime location to invest, build business, and live.

Besides the geostrategic position it occupies, Portugal offers countless advantages for those who live in the territory. These are the characteristics that make the country position itself as a destination of excellence when it comes to Real Estate Investment.