A Guide to Buying a Property in Portugal

Overview

The Portuguese Property Market

In recent years, there has been a true construction and real estate boom in some parts of Portugal. Along the coastal regions of Portugal, a great deal of real estate development has taken place. This development has included everything from luxurious housing developments to vacation communities that have attracted visitors and investors from across Europe and indeed much of the world.

Beyond the very fast paced development that has taken place along the coastal regions of Portugal, there has also been a great deal of new construction in some of the more rural areas of the country. Rural Portugal has proven to be a fertile area in which many people from other European nations (and from a good share of other nations from around the world) are taking to constructing second homes, lovely and relaxing retreats tucked away from the hustle and bustle of everyday life.

Investment Property in Portugal

When it comes to investment real estate in Portugal, many foreign nationals have focused their attention on real estate opportunities along the coastal regions in Portugal. By way of example, these foreign nationals are involving themselves in some of the massive residential developments that have been initiated in these coastal regions over the course of the past ten years.

In addition to investing in the residential developments themselves, some of these foreign nationals are also putting their money into those commercial real estate ventures that accompany a burgeoning residential market. For example, these foreign nationals are investing in shopping centers or districts as well as other types of necessary commercial properties.

Residential Real Estate in Portugal - Single Family Properties

As has been referenced, there has been a great deal of activity in the residential real estate market in the coastal regions of Portugal. The trend towards buying homes along the coastal regions of the country has been fast paced for nearly a decade. Most real estate analysts in Portugal believe that this high rate of activity in the coastal Portugal residential real estate market will continue unabated well into the next decade.

In addition to a fast paced market along the coast, residential real estate has also been selling briskly in some of the rural areas in the Portuguese interior.

While high end housing has been the most rapidly selling area of the residential real estate market, in Portugal, when it comes to residential real estate, there really is something for every budget. This is particularly the case in the more major cities in the country. For example, the real estate market in Lisbon is very active and varied -- the old adage that there is something for everyone really holds true.

Residential Real Estate in Portugal - Apartments

As is the case through much of the European Union, the demand for residential apartments is strong in Portugal. Apartment living provides a more carefree and, oftentimes, a less expensive way of living.

Apartments in Lisbon have been selling at a particularly brisk rate. Many foreign nationals have taken to purchasing apartments in Lisbon and in a few of the more major cities in the country. There are three primary reasons who apartments have been selling so briskly in Lisbon and in a few of the other more urban centers in Portugal.

First, with the advent and creation of the European Union, and with the trans-European economic culture that was created by the EU, and ever growing number of foreign nationals have taken to spending at least part of the year in Portugal on business. Apartments provide a practical and affordable housing solution for these business men and women in the 21st century.

Second, many people have taken to purchasing apartments in the urban centers of Portugal for vacation or holiday purposes. As with the business owner of an apartment in an urban center in Portugal, these holiday visitors find apartments an economical and practical means of vacationing in the country. This has proven particularly to be the case with families.

Finally, some foreign nationals have taken to purchasing apartments which they then turn around and rent or lease to other people. Many of these foreign investors have found buying and then leasing apartments in Portugal to be a very solid method of generating a reliable source of income.

Holiday Property in Portugal

The coastal areas of Portugal have become the locations of some of the most sought after real estate in all of Europe. The demand for vacation properties in these areas rivals even the demand for real estate in such prime European travel areas such as the French Riviera.

Many foreign nationals have taken to buying real estate along the coastal regions for vacation or holiday purposes. As mentioned previously, oftentimes these investors are buying vacation properties in Portugal for dual purposes. Of course, they are buying these properties to provide a vacation destination for themselves and their families. In addition, they are making these purchases to allow them an investment income which they obtain by leasing or renting these properties to other holiday travelers.

In addition to the coastal regions of Portugal, many foreign nationals have taken to buying residences in rural communities. Finally, in large, urban areas such as Lisbon, foreign nationals regularly are purchasing apartments which they are utilizing for vacation or holiday purposes.

Mortgage in Portugal

When considering the options for a mortgage on your overseas property there are a couple of choices to consider;

1. Do you consider raising finance on your existing property in the UK to cover the whole cost of your purchase abroad? A good idea if the interest rate in the country in question is a lot higher than it is here in the UK as you will pay a lot less in monthly repayments.
2. Do you secure a mortgage against the property from a local bank in the country of purchase? This can be a wise option especially if the interest rate is lower than our current UK interest rate. Most overseas mortgage / bank lenders will require upto 30% deposit on mortgages. However, you will need to give some thought to how you will service your mortgage payments each month especially if you are not living or earning in that country as you may well lose out on exchanging money each time to cover monthly expenses. Check out our Foreign Currency page to see how you can save money in this example
3. Some Builders and developers may well offer their own mortgage facilities on their properties for sale. This can be beneficial to both parties depending on the logistics of the mortgage or loan facility. Always check and compare with the two options above before making your final descision.

For more details on Mortgages in Portugal visit our Mortgage page in the Portugal section.

Specific steps to buying real estate property in Portugal

As in many countries the world over, the first step in the real estate purchase process is the execution of a preliminary contract for sale. In Portugal, this initial contract is called the contrato de promessa de compra e venda. This particular agreement is a legally binding contract that sets forth the conditions of the sale.

The contrato de promessa de compra e venda is drawn up by a notary. At the time that this contract is executed and signed, the purchaser of the real estate is called upon to place a deposit for the real property that is subject to the transaction. In Portugal, the deposit that normally is paid by a buyer of real estate is between ten and twelve percent. If a seller elects not to follow through with the sale, he or she will forfeit the deposit that has been paid. Of course, there are instances when a buyer is justified in not closing on a contract for the sale of real estate. For example, if a seller cannot provide to the buyer a title free and clear, the buyer then does have the right to walk away from the contract and will not forfeit his or her deposit.

An interesting feature of the preliminary contract in Portugal is the fact that if the buyer decides to walk away from the contract, the buyer is obliged to pay to the seller a penalty in the amount of twice the deposit placed by the buyer in the first instance. Thus, in Portugal, the purchaser of real estate is provided with a level of protection that is found in very few other countries around the world. Indeed, this level of protection really is almost unheard of anywhere else in the world.

Another requirement that is unique to Portugal when it comes to the purchase of real estate is one in which the buyer of real estate is obliged to obtain a "Fiscal Number" from the local Tax Office. This requirement applies to foreign nationals who are interested in buying real estate in Portugal as well as to citizens of that country. The process of applying for and obtaining a Fiscal Number is very simple and does not require a great deal of time. Indeed, the process really involves completing what is in reality a very simple form and submitting it to the local Tax Office where it can be processed in no time whatsoever.

The real estate sales process in Portugal moves at a pretty fast clip. Generally speaking, the signing of the final contract and deed -- which is known as the escitura de compra e venda -- will occur within three to four weeks of the execution of the initial contract for sale. Once this agreement and related documentation is executed, the ownership of the real estate will transfer by operation of the law from the seller to the buyer. Although the buyer will become the legal owner of the real estate at that juncture, there still is a bit more work to do to completely conclude the real estate purchase process.

The final step that a person needs to take when purchasing real estate in Portugal is the payment of the Imposto Municipal Sobre, a tax imposed on real estate transactions in that country. In addition, the buyer will be obliged to register -- either personally or through a lawyer -- the deed with the Land Registry Office.

Overall, there are no added obligations on a foreign national who purchases real estate in Portugal. The rules, regulations and legal schemes that apply to citizens of Portugal apply similarly to foreign nationals who are interested in buying real estate in that country.

A Property in Portugal always recommends using a Solicitor or Lawyer