Buying Property in Portugal – Portuguese Property Buyers Guide

If you are looking to invest in overseas property or simply searching for that second home abroad then buying property in Portugal could be just the ticket. Portugal offers many of those things that people crave: sun, sea, sand, glorious weather, mountainous backdrops, good food and drink and a relaxed and cultured atmosphere that allows people to unwind.

Investment Property Partners overseas property buyers guide covers a number of important issues that you will need to consider if you are considering buying property in Portugal either as an investment or as a second home abroad.

Whether you are looking for a property by the sea with glorious views of the coast, or an inland retreat close to traditional Portuguese towns that ooze character, you certainly won’t be disappointed.

It all sounds great doesn’t it? But don’t be fooled by its Mediterranean charm… Portugal has been in a dire financial state since the start of the last global economic crisis, making it even more important that you fully research your markets, get to grips with the local property laws and run your financial calculations before buying any property there.

Buying Property in Portugal & Property Prices

Of course, just because Portugal has been hit hard by the global economic downturn this does not mean that you should completely disregard it as a place to invest in overseas property – quite the opposite in fact.

If you buy now whilst Portuguese property market and property prices are starting to recover after a very sluggish period you could end up reaping the rewards when things eventually start to pick up.

Just remember however, before buying property in Portugal to do your research, exercise caution and seek professional advice whenever necessary.

Portugal is Going Green!

From a European environmental perspective, Portugal is one of the leaders when it comes to “going green”.

Portugal is already well on its way to becoming a carbon neutral economy with a target of achieving this by 2030… in fact already most of its electricity requirements are seen to by wind power.

The environmental prowess that Portugal will eventually boast is already impacting on the property sector of the country, with many investors and house-builders seeing the future potential of the country.

Portuguese Property Positives

In terms of property investment, and even with the effects of the financial crisis still evident Portugal holds good potential for investors searching for overseas property or that second home abroad.

Like France, it has a relatively straight-forward property buying process and all laws and covenants that need to be followed are fairly transparent and easy to understand, at least the right assistance.

Other big lures for Portugal are the fact that there is currently no inheritance tax, and the low income levies imposed by the government.

Capital Gains Tax on Property

One thing that needs bearing in mind however, is the fact that capital gains tax for non-resident property owners is quite high by European standards, so this is well worth remembering if you are thinking of investing and are starting to budget.

Second Homes, Holiday Homes & Retirement Property

If you are looking for a second home or a retirement property, Portugal could offer exactly what you are looking for.

Make sure you research what properties tend to do well when it comes to resale however, just in case an unexpected emergency crops up where you have to realise your original investment and sell up quickly.

You should also spend time looking at Portugal’s property market to get a good feel for the prices paid, where the property market is heading, what areas are up-and-coming, and what areas prove to be most fruitful from an investment perspective.

The Property Buying Process in Portugal

If you are considering buying property in Portugal you need to understand the typical property buying process before you do anything… you should always make sure that the local estate agents that you opt for are fully registered.

Portugal’s estate agents have to conform to a strict licensing system, you should therefore make sure that the property agent you opt for is registered with the Instituto da Construção e do Imobiliário (INCI) and has a valid government licence.

If in doubt you should check directly with the INCI who will be able to give you further guidance… here →

Choosing a Local Portuguese Lawyer

You should also make sure you get professional and independent legal assistance from a local English speaking Portuguese lawyer so that you know exactly what is going on and can have everything explained to you if you are struggling to understand any local property laws, rules or regulations that are in place.

Your lawyer will also be able to advise you of any potential problems that might arise with your property purchase – these can include land ownership issues, covenants and local regulations amongst other things.

After you have formally appointed a local lawyer to act for you they would usually begin the process of drawing up contracts and would also start the process of inspecting the property title.

Things such as the Portuguese Inland Revenue and the Land Registry will need to be checked to ensure that everything tallies up and the property is fully registered and recognised, ownership details are clearly identified and, more importantly the property does not have any unpaid charges attached to it that could leave the new owners left with a hefty bill.

What is a Promissory Contract?

If your lawyers’ investigations come back positive without revealing any major issues, the next stage of the property purchase process can begin.

Once the fiscal number has been acquired, a promissory contract (Contrato de Promessa de Compra e Venda) which features things such things as the conditions of sale can then be drawn up, and once this has been signed by both parties everyone is then legally obliged to see the property sale through to its completion.

A property completion date can then be agreed and a deposit will be offered – note that the size of the deposit can vary between 10 and 30 per cent of the agreed property price.

What is the Deed of Purchase & Sale?

Once the promissory contract has been signed and the deposit paid, the final stage will see the transaction completed with the finalisation of the Deed of Purchase and Sale.

The Deed of Purchase and Sale will be signed before a notary and officially recorded.

The balance of the property purchase price will also be paid.

Once the property is officially registered in the new owner’s name, everything will then be complete.

What about Fees & VAT when Buying Property in Portugal?

Please never forget that there will be fees payable on top of the price you will pay for the property, so ensure you budget for these.

When buying property in Portugal, especially newly constructed buildings you should bear in mind that unlike the UK, new construction is not exempt from VAT.

Accordingly the VAT may need adding to the cost of construction price if you are investing in an off-plan development or a new build property in Portugal.

Investigating what’s Planned for the Land Surrounding your Property

Finally, before you buy any property you should always take a look at what surrounds your dream acquisition and take into consideration any local planning permissions for new residential developments, roads, factories etc.

Remember, there may currently be undisturbed open land surrounding your property or plot of land that gives a tranquil, undisturbed feel to the location… but what of the future?

For instance, many overseas property investors have fallen into the trap of purchasing their property, whether it be for investment purposes or as a second home abroad, only to then find that there is planning permission on adjoining land for a large new development that will look straight into their newly acquired dream property.

This is an awful situation that can impact both your enjoyment of the property and its future investment value, and one that can certainly be avoided with careful planning.

You would never purchase a property in the UK without checking planning permission for surrounding land, so don’t do it abroad.

Specialist Overseas Property Investment Solutions

As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are an investor searching for overseas property investment opportunities or a second home aboard please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about Portugal… here →

More about buying property in Portugal and local estate agents regulation at the Instituto da Construção e do Imobiliário (INCI)… here →