Real Estate Services

Between 2015 and 2020, the real estate market in Portugal registered a market increase never seen before.

Due to the increase in Portugal’s prestige in terms of investment, tourism, and also the choice as a destination country to live in, the real estate market followed this trend and heated up.

Big companies and investors decided to give this country a chance, so they bought real estate like never before, along with ordinary people just wanting to take advantage of the low real estate prices compared to their already famous neighbors.

This boom in this sector was also a reflection of Portugal’s economic growth, which made Portugal the European star during 2018 and 2019.

Unfortunately, the Covid crisis came.

As what’s happening with almost all European countries, the real estate market has slowed down, as people are spending less money overall, and lockdown measures also made it more difficult to visit properties in person.

Some real estate agents are saying that the price range of real estate has not changed much with the crisis of 2020, but the wave that came in 2021 may change this scenario.

Yes. Basically, you will have to prove the financial means to pay for the rent, by presenting, for example, your income tax receipt, monthly income proof, bank statements and criminal records.

The landlord can also request some additional documents to make sure the tenant will comply with the agreement.

In general, two to four installments are paid in advance and the contractual guarantee can be through a guarantor or a deposit payment. Conditions may vary case to case.

Despite the growth of the real estate market lately, Portugal has many old construction buildings, so here are some important aspects to consider:

• Analyze the need of heating or air conditioning system and double glazing (the most recent buildings already have a heating / cooling system).
• The proximity to schools, hospitals, commerce and public transport system.
• Furniture is also an important item when renting a property. It is common to find fully furnished properties, however, most of them include only the kitchen equipped with basic appliances.

By taking these small precautions, you will be able the perfect property for you.

Depending on the District, the city and the neighborhood in which your choice is concentrated, the price of the property may vary.

Although Portugal is a small country, it also presents considerable variation in terms of property prices, with the most popular areas, such as Lisbon and Porto being the most expensive.

Of course, we cannot go through all areas, all types of apartments to give you a sample of the price, but considering a new 2 bedroom apartment with 150m2 in an area well located within the cities mentioned below, you find this price range:

• Lisbon: Between 650,000€ to 1,200,000€
• Porto: between 450,000€ to 750,000€
• Braga: between 200,000€ to 450,000€
• Faro: between 200,000€ to 600,000€

The biggest Portuguese property search website is Idealista. Take a look by yourself.

In addition to the value of the property, there are other types of costs that the buyer will have to bear, as will be described later.

Anyone can say that buying a property in Portugal is easy and you will not be mistaken.

If you have the money to buy the property and bear related costs (such as bank fees, taxes, etc.), sooner or later you will be the owner.

This is because the procedure for drafting the purchase contract, making and registering the deed, and also the process of obtaining certificates can be done by the real estate broker agency or even by the bank itself.

What will not be done for them? The due diligence (legal analysis) of the property and the seller. This is the most important step in buying the property, no matter where.

The consequences of buying a property that is not “buyable” or buying it from someone who is not the real owner can be a real problem in the future.

In addition, buying a property full of debts can be a headache for the new owner. Are you willing to face the chance of being charged of an amount that has nothing to do with you?

Remember one thing: the main objective of the realtor (and his / her agency) is to sell the property, just as the bank’s intention is to lend money so that the client can buy the property. Their profit comes from the transaction itself.

On the other hand, the lawyer’s main objective is to instruct his / her client to make a good deal by analyzing all the documents to make sure that nothing bad will happen with that transaction in the future.

As mentioned in the previous answer, the main risk will be that of being mislead.

You will be able to complete the purchase procedure, but you will not be sure that you will face a problem related to the property or seller in the future.

Bank’s requirements to concede a real estate finance can vary according to many conditions. Personally, I’ve heard many compliments to Millennium bank for granting credit.

Below, we will mention some popular requirements when it comes to real estate financing.

• Tax Number (NIF): This is a mandatory requirement, no matter which bank you choose. Obtain your NIF must be your first task if you plan to acquire a property.
• Residence Permit: This document proves that you legally reside in Portugal. Most banks require this document to open a credit account for the buyer. In some cases, the passport can also be used, but along with other documents.
• Income in Portugal: It may seem obvious, but the bank needs to be sure that you will be able to pay the monthly installments related to the financing. That is why proof of income (which may be related to an employment contract, self-employed income, company dividends, etc.) is required.
• Income outside Portugal: It may be that the buyer lives outside Portugal and wants to buy a property for when he / she decides to move to this country, or perhaps the acquisition is an investment, as the owner will lease the place. That is why income outside Portugal will be analyzed as the most important document to prove the ability to pay the installments.
• Available funds: Along with the monthly income, the buyer must prove that he / she has sufficient resources to pay the installments if, for example, she / she loses his / her job. The more funds available, the better.
• Guarantees: The bank has to make sure that, in the worst case scenario, it can be paid in any other way by the client’s debt. Thus, some common required guarantees are: create a escrow account, appoint a guarantor, mortgage another property, etc. This is a complicated situation for foreigners, as most guarantees must be located in Portugal.
• Property certificates: These are the documents that must be analyzed by lawyers. The bank will require all documents that proves that the property is ready to be sold by the seller. Obviously, the bank will not risk putting money into a transaction that may not be carried out (which would likely cause money to be lost).
• Property inspection: Finally, there is the inspection of the property. Not all banks do a property inspection to make sure it is physically according with the documents. This is a practice that should always be performed. After all, the bank is putting a lot of money into the business.

These are just some requirements that Portuguese banks usually require to finance a property.

I know you’ve been waiting for that question 🙂 Okay, let’s try to be as clear as possible.

Banks normally charge for the opening of the client bank account. Obviously, all these costs are also taxed.

Along with the bank’s fees, the client will probably have to hire a life insurance, to be applicable if the client comes to die during the payment period.

It is very difficult to measure how much money you are going to spend on these types of costs, but make sure that it will probably be over 2,000€, and some costs will be within the monthly installments.

Along with these costs, we have the most important value to consider: the financing rate.

If we had to specify all the possibilities related to the financing rate, we would be here forever, so let’s get straight to the basics.

The financing term, the amount of the initial payment, the fixed or variable rate, the quality of the guarantees,… all of these can interfere with the financing rate.

Anyway, Portugal financing rate is not high when compared with other European countries.

The most important rate to be aware is the TAEG (Taxa Anual de Encargos Efetiva Global) or the Annual Effective Global Charge Rate. It represents the total cost of the loan to the client and is expressed as a percentage of the amount that is lent by the bank.

The TAEG calculation includes: all loan fee (including bank’s bureaucratic costs), insurance, interest, tax, registration fees (if applicable) and other charges that are associated.

Other important financial costs, such as the bank spread and the TAN are already incorporated in the TAEG, that’s why this is the most important rate to be analyzed.

To get an idea of the TAEG costs, we did a simulation on the Compara Já Portal as follows:

We chose the acquisition of a property worth 200,000€ in which we requested a loan of 90% of its value (i.e. 180,000€) to be paid over a period of 30 years, without presenting guarantees.

Considering that we have a steady job, a monthly income of 2,500€ and monthly expenses of 1,200€, here are the most affordable results:

Of course, this is just a simulation. The more information we share with the banks, the more specific are the values.

If you want to buy a property in Portugal, be aware that you will have to pay taxes.

Below are the taxes that are related to real estate in Portugal:

Municipal Tax related to Property Transactions (IMT): This is a tax that must be paid whenever there is a financial transaction related to the purchase and sale of property.

It must be addressed to the Portugal government prior to the execution of the Deed of Purchase and Sale, and its value varies according to the type of property, location and purpose.

The value will correspond to the result of the following equation: Value of the property (property value or deed value, whichever is greater) multiplied by the rate published by the State, subtracted from the portion to be deducted.

Check out the simulated table for calculating the IMT, as published by the APEMIP portal:

Stamp Tax: This tax must also be paid to the State if the property is acquired through bank financing and corresponds to a rate of 0.8% on the value of the transaction.

This tax is applicable in many other cases, such as opening bank credit and other financial transactions.

Municipal Property Tax (IMI): This is a tax related to the ownership of a property and must be paid annually.

This tax rate varies from 0.3% to 0.8% and is applicable on the property’s value.

Therefore, buying a property worth 475,000€ would incur in the following costs:

• Property: 475,000€
• IMT: 26,040.60€
• Stamp Tax: 3,800€

For each property rent the owner will have to pay Stamp Tax.

This amount corresponds to 10% of the monthly rent.

As mentioned before, the owner needs to pay the annual IMI (Municipal Property Tax), which reflects the multiplication of the tax rate stipulated (by the government) for the current year by the Property Tax Value.

Also, the income obtained through leasing is taxed depending on the duration of the contract:

• Less than 2 years: 28%
• From 2 to 5 years: 26%
• From 5 to 10 years: 23%
• From 10 to 20 years: 14%
• Over 20 years: 10%

In specific situations it is possible to withhold IRS or IRC on the rents paid by the tenant and then make the adjustment in the annual Income Tax Return.

If the property is an apartment or a house located in a closed condominium, you must also include the condominium value as an expense.

The magic answer is: It depends.

I will not lie, most properties in Portugal are old, especially those located near downtown.

Let us emphasize that being old is not the same as being uninhabitable. Some properties are old but are in great condition to receive people, others may need some renovations. Only a few of them are not habitable.

If you leave downtown, you’ll be able to see new buildings prepared for the hot or cold weather, modern, and so on.

Let’s say you chose an old apartment to live in. These are the main concerns I would have:

• what is the energetic certificate of the place?
• how thick is the wall with the neighbors?
• can the construction material keep the winter cold away?
• how is the apartment heater? (yes, it can be really cold in the winter)

Also, a general analysis of the property by an electrician and a plumber may be in good taste.

The realtor will certainly charge you for his / her service, if you used it.

Activities designed to bring the perfect buyer and seller together are not easy to implemented.

Also, other tasks, such as managing paperwork, are usually performed by real estate lawyers.

According to the real estate agency, different costs are associated with their commission.

Overall, the commission can vary between 3% and 5% of the transaction price, making it known that most companies charge the rate of 5% in Portugal.

Therefore, buying a property worth 400,000€ would generate a commission value of around 22,000€ to 25,000€.

It can be. Buying an old apartment near the beach and doing a small renovation can increase the price of the property incredibly.

Most Portuguese (especially the older ones) are not so concerned with aesthetics. Doing a few minor updates can completely change the face of the apartment (and its selling price).

Buying for renting can also be a good idea.

How much can we (monthly) charge for renting a property? The same answer to buy one. It depends.

Consider a 2 bedroom apartment, well located and in good condition in the following cities:

• Lisbon: between 1,000€ to 1,500€
• Porto: between 700 to 1,200€
• Braga: between 500€ to 1,000€
• Faro: between 600€ to 1,100€

Is it a good investment? You have to do the math, but in general, considering the period in which the property is going to be rented, it can give you extra income with (almost) no stress.

Along with all the expenses mentioned for the purchase of the property, the sale of a property will certainly result in capital gains that, as you imagined, will be taxed.

This is a topic that requires some books to start with the basics, there are many law firms that focus only on this type of situation.

But let’s try to keep it simple. Like many other countries, Portugal impose a capital gain tax on the sale of assets in general (depending on the capital origin).

Capital gain related to property selling can be calculated by the difference between the sale value and the acquisition value, with the application of monetary coefficients and added by certain charges and expenses.

Depending on whether you are a resident or not in Portugal, and also if this property is your primary residence, different tax rates will apply.

If you are a resident of Portugal:

• The gains obtained worldwide (including the sale of property or even retirement) are taxed as income.
• Any real estate gains are added to your income for the year and taxed based on income tax rates, which range from 14.5% to 48%.
• Capital gains will be considered at 50% of their value, applying the general rates provided for in the IRS Code.

If you reinvest your income in another main property in Portugal (or anywhere in the EU / EEA that has a tax treaty with Portugal) you may not be taxed for the capital gains.

The new property must be purchased between 24 months prior and 36 months after the date of sale of the property that generated the capital gain.

If you are not resident of Portugal:

• The capital gain from the sale of real estate in Portugal is subject to a tax rate of 28% for individuals and 25% for legal entities.

This is a subject that draws a lot of attention, if you have any specific questions, please let us know.

Yes, if you follow the Golden Visa procedure.

You may get your Resident Permit by acquiring a property in Portugal if you follow the Golden Visa guidelines.

Lucky we already did a FAQ on this topic. Come take a look by clicking here.

To obtain Portuguese Citizenship (and therefore the Portuguese passport), it is necessary to invest in the property and keep the Residence Permit valid for 5 years.

We hope you could understand a little more about the real estate market in Portugal.

Also, you could probably see why it is important to have assistance when purchasing your property in Portugal.

By doing this process yourself you will certainly get tired (of trying to find information about this procedure) and you will also run the risk of being misled.

Here are the activities that this company will provide:

• Search for properties according with the clients requirements.
• After choosing the property, proceed a full legal analysis of the property and the seller’s situation.
• Draw up the purchase and sale contract and deed.
• Register all documents to change the ownership of the property.
• Complementary activities such as opening NIF, bank account and accessory tasks.