Portugal remains a haven for overseas property buyers. Whether people are looking for a permanent residence, a holiday home or an investment, this market has properties to suit everyone’s requirement.

The main property hot-spot of Portugal remains the Algarve and the region surrounding Lisbon where the majority of foreigners buy their property.

Below a brief guide concerning prices, property taxes and ways to finance an investment.

Property prices

Prime property prices in the Algarve are among the highest of the country, ranging from € 3,400 to € 4,000 per square metre having more than doubled since 1999.

In the Lisbon area, they range from € 2,500 to € 3,100 per square metre.

In addition to size and quality, the key element influencing the price is the location. You will find that, the closer to a major city or beach, the more expensive it will be. Properties on a beach side or on a golf course resort sell at a premium.

After an increase up to 2004, the prices of residential dwellings in Portugal have stagnated, and are actually declining since 2008. The national average price per square metre fell from € 1,245 in June 2006 to below € 1,220 in 2008 according to the National Statistics Institute (INE).

The Lisbon region average price was stagnant in 2007, rose 1.3% in 2006, 1% in 2005 and declined 1.86% in 2004.

Prices in he Algarve have, in recent years, been rising faster than in the rest of Portugal. But in 2007 things turned around, and they rose only 0.13%, after a 6% price increase in 2006. Houses performing better than apartments.

House prices in Portugal are expected to increase during the next five years. The average price per square metre (€ 1,150 € - Q3 2008) is expected to approximate the Spanish average (€ 2,065 Euros - Q3 2008) due to the increase of Spanish investors in Portugal.

Type of properties

The Portuguese real-estate market is extremely varied and the purchaser has a plethora of properties to choose from: from small studios to huge mansions set in hectares of land. There are more and more restoration projects of traditional houses such as “quintas” (farmhouse) or “solares” (manor house).

Plot to build

Before buying a plot of land, make sure that it holds valid planning permission and whether any building restrictions exist which may limit what can be done on the land. Organize a site appraisal of the land and have a surveyor measure it and confirm the boundaries. This will assess the suitability of the land for building. The size of the property and light orientation will also have to be taken into account when selecting a plot.

Apartment

There are many types, sizes and quality of apartments in Portugal.They vary from tiny studios built in the 70’s in a dormitory campus to a luxury complete floor apartment facing the ocean with a view on a golf course located in the Algarve.

Of course prices are quite different as well, they vary from less than € 70.000 for a studio to over a million for a luxury apartment.

The buyer of an apartment becomes a de facto member of the community of owners of the building which is required, by Portuguese law, to have its own set of statutes specifying e. g. which part is owned privately and which part is owned communally, the community regulations and fees, etc. It is therefore highly recommended to analyse these rules as well as the general Portuguese governing law (Lei de Propriedade Horizontal) before making a decision.

Villa

When a property is not a mansion, a “palacete” (palace) or a villa built inside a resort, houses in Portugal are usually built on small plots of 350 – 500 square metres which leave very little space to enjoy a garden and make it impossible to have a swimming pool.

Quality construction which was quite poor until the mid 80’s has increased a great deal since then, due to the introduction of new regulations for new house building. For example, it imposes earthquake-proof structures, double insulated walls and double windows.

Prices vary from 150.000 € for a small 2 bedroom house in the country to well over a few million € in the Lisbon or Algarve area.

Townhouse

Townhouses consist of a row of homes sharing common walls. The townhouse concept is quite new in Portugal and has been a feature of some of the new resorts.

Townhouses include individual ownership of the land but can also have common elements, such as a swimming pool and a garden, which have shared ownership. If integrated into a resort or a condominium, the rules of community property apply.

Prices range from € 100.000 for a studio to over € 400.000 for a 3-4 bedroom house in a luxury resort.

Average prices by type of property

These are national averages price which can vary greatly according to the region, cheaper prices in rural areas, higher in fashionable zones like golf resorts or front beach resorts. Average prices by region are listed below.

 
Bedrooms
0
1
2
3
4
5/6
Studio
€ 80,000
 
 
 
 
 
Apartment
 
€ 110,000
€ 150,000
€ 210,000
€ 270,000
 
Townhouse
 
€ 135,000
€ 150,000
€ 210,000
€ 300,000
 
Detached villa
 
 
€ 250,000
€ 380,000
€ 510,000
€ 750,000

Fees associated to the purchase

Average prices by region

APARTMENTS
Prices in Euros (€)
1-bedroom
2-bedrooms
3-bedrooms
4-bedrooms
Lagos
81,000 117,000 153,000 198,000
Praia da Luz
135,000 162,000 243,000 360,000
Sagres
144,000 180,000 288,000 351,000
Albufeira
90,000 126,000 180,000 207,000
Vilamoura
166,500 234,000 288,000 351,000
Quinta do Lago
315,000 477,000 630,000 810,000
Vale do Lobo
225,000 378,000 711,000 702,000
Faro
108,000 126,000 153,000 225,000
Tavira
99,000 108,000 144,000 171,000
Castro Marim
81,000 126,000 189,000 225,000
Silver Coast
90,000 117,000 144,000 189,000
Coimbra
81,000 90,000 126,000 171,000
Figueira da Foz
90,000 108,000 144,000 225,000
Aveiro
90,000 99,000 117,000 189,000
Lisbon
126,000 171,000 198,000 252,000
Cascais
126,000 162,000 207,000 315,900
Estoril
117,000 162,000 270,000 369,000
Sintra
90,000 108,000 153,000 189,000
Blue Coast
72,000 99,000 126,000 162,000
Vila Nova de Milefontes
90,000 99,000 144,000 180,000
Zambujeira do Mar
117,000 135,000 171,000 243,000
Alqueva Dam
72,000 81,000 108,000 144,000
Douro River
63,000 90,000 162,000 144,000
Porto
81,000 108,000 135,000 252,000
Costa Verde
63,000 99,000 117,000 144,000

 

HOUSES
Prices in Euros (€)
1-bedroom
2-bedrooms
3-bedrooms
4-bedrooms
Lagos
279,000 360,000 558,000 855,000
Praia da Luz
261,000 495,000 558,000 891,000
Sagres
355,500 378,000 450,000 576,000
Albufeira
189,000 315,000 603,000 900,000
Vilamoura
306,000 432,000 495,000 738,000
Quinta do Lago
504,000 630,000 855,000 1,080,000
Vale do Lobo
450,000 540,000 657,000 855,000
Faro
234,000 342,000 450,000 648,000
Tavira
144,000 198,000 252,000 342,000
Castro Marim
279.900 648,000 909,000 1,233,000
Silver Coast
180,000 306,000 423,000 720,000
Coimbra
99,000 198,000 297,000 459,000
Figueira da Foz
180,000 234,000 288,000 297,000
Aveiro
189,000 333,000 459,000 486,000
Lisbon
234,000 252,000 297,000 603,000
Cascais
234,000 513,000 558,000 1,080,000
Estoril
225,000 459,000 477,000 855,000
Sintra
189,000 288,000 432,000 810,000
Blue Coast
162,000 225,000 378,000 612,000
Vila Nova de Milefontes
121,500 198,000 279,000 495,000
Zambujeira do Mar
225,000 378,000 540,000 684,000
Alqueva Dam
180,000 288,000 630,000 702,000
Douro River
144,000 198,000 252,000 342,000
Porto
279,000 648,000 918,000 1,242,000
Costa Verde
396,000 612,000 657,000 1,197,000

Mortgages

Obtaining a mortgage (hipoteca or crédito de habitação) from a Portuguese bank is not a problem anymore even for non-residents or for off-shore companies. Portuguese banks' offers can therefore be compared with others.

Since the payment will be done in Euros, it is advisable to subscribe a loan in that currency else, a speculative dimension is added to the investment.

Euro mortgages interest rates are usually established based on the Euribor (the European inter bank interest rate set by the European Central Bank) plus a negotiable spread of 1% to 2%.

In order to apply for a mortgage from a Portuguese bank, documents such as, proof of monthly income, bank references and bank statements (minimum 3 months), certified copy of the passport, proof of residence, utility bills, Portuguese fiscal number, and property documents. Some banks also require a life insurance covering the purchaser.

Mortgages are granted on a percentage of the property valuation made by the lender’s expert, which may be less than the purchase price. The maximum mortgage in Portugal is usually between 75% and 80% of the valuation price for a maximum term of 25 – 30 years and the term can only last until the borrower reaches the age of 70. However, it happened that some residents were granted mortgages up to 90% for a term of 40 years.

The fees associated to the purchase are not included in the valuation.

Banks

The London branch of Totta & Açores Bank now the Santander-Totta bank has been the first Portuguese bank to grant mortgages to foreigner interested in purchasing properties in Portugal. Now, many other banks have joined them and are offering equivalent services: