Buying a Property in Madeira: Everything You Need to Know

Visualize a fresh beginning in an Atlantic gem. A Portuguese island that combines the splendor of nature, deep-rooted traditions, and an unmatched way of living. Whether you're seeking a confortable apartment or a luxury villa, investing here presents an alluring prospect. Get ready to fall in love with Madeira and make your dream of buying a property there a reality!

Advantages of living on Madeira island

Imagine waking up to a gentle sea breeze, lush greenery, and soothing waves. Madeira, a Portuguese archipelago, offers this reality. Indeed, living on this island has many advantages:

• Breathtaking natural landscapes: From rugged coastlines to verdant mountains, Madeira's scenery delights the eyes.
• Ideal climate: Enjoy year-round mild temperatures, perfect for outdoor activities and alfresco dining.
• Relaxed lifestyle: Savor a stress-free existence, focusing on family, friends, and well-being.
• Welcoming locals: Easily integrate into the friendly community, attending festivals and forming lasting friendships.
• Tax incentives: Investing abroad presents the opportunity for tax benefits, like the Non-Habitual Resident (NHR) program. This enticing incentive can enhance your returns as a foreign investor.
• Cost of living: Madeira, compared to other European locales, offers a relatively affordable cost of living. The island boasts excellent healthcare facilities and modern amenities, ensuring a high quality of life.

Living in Madeira presents an opportunity to embrace a simpler, more fulfilling way of life. Surround yourself with natural beauty, forge deep connections, and savor every moment. Whether seeking a peaceful retirement, family-friendly environment, or remote work location, Madeira offers it all.

Attraction and activities

Madeira offers a multitude of captivating attractions and activities. Purchasing property here opens the door to endless exploration. From traversing the breathtaking levada trails to discovering the vibrant Funchal city center, boredom is non-existent:

• Funchal farmers' market: A colorful feast, sounds, and aromas.
• Monte toboggan rides: An exhilarating descent from Monte to Livramento.
• Whale and dolphin watching: Unforgettable encounters in the Atlantic.
• Porto Santo Island: Golden beaches and crystalline waters await.
• Laurissilva Forest: A UNESCO World Heritage Site showcasing nature's lush beauty.

Pitfalls to avoid when buying a property in Madeira

Realizing your dream of owning property on the stunning island of Madeira requires careful consideration. One potential issue involves the island's microclimates. While Madeira boasts pleasant weather year-round, properties above certain elevations may experience dampness and mold issues. To enjoy the most favorable climate, focus your search below 200-300 meters, particularly along the sunny south coast.

Additionally, construction quality can raise concerns, especially with older properties. Structural and electrical issues may exist, leading to costly repairs. Thorough property inspections are crucial to avoid unexpected surprises.

Navigating the legal landscape while buying property in Madeira can present challenges. Keep an eye out for these common pitfalls:

• Ensuring title deeds accurately reflect the property you're purchasing
• Avoiding liability for the previous owner's debts under Portugal's law
• Dealing with multiple owners due to inheritance laws

Furthermore, exercise caution regarding real estate scams. Collaborate with reputable professionals and trust your instincts if an opportunity seems too good to be true.

By staying informed about these potential pitfalls and taking proactive measures, you can confidently pursue your real estate project in Madeira. If you want a complete overview on what it looks like to buy a property in Portugal, check out our article on this topic.

Madeira real estate market

Current trends and house prices dynamics in Madeira

The real estate market in Madeira island is experiencing substantial growth. As of February 2024, the average cost per square meter on the island reached €2,920, marking a significant +20% increase compared to the previous year. However, prices fluctuate across different municipalities.

Funchal, the capital, commands the highest rates, with an average of €3,215 per square meter. Calheta follows closely at €3,090. Alternatively, Santa Cruz and Câmara de Lobos offer more affordable options, priced at €2,030 and €2,320 respectively. These popular areas blend urban conveniences with natural charm.

Price evolution statistics

Madeira offers an array of property types catering to various preferences and budgetary requirements:

• Apartments: starting from €150,000, making them an attractive choice.
• Villas: Luxurious and spacious, ideal for families or those craving privacy. Prices ranging from €500,000 to several million.
• Traditional houses: Charming and full of character, these unique houses present an opportunity to own a piece of Madeiran heritage, with prices starting at €200,000.

Despite the rising prices, Madeira retains its appeal as an investment destination in Portugal. Whether seeking a cozy apartment or a villa, Madeira's diverse property market caters to various preferences.

Best place to buy property in Madeira

When it comes to buying property in Madeira, location is key. The island offers a diverse range of areas, each with its unique charm and appeal. Here are some of the best places to consider for your Madeira property investment:

• Funchal, the lively capital, boasts stunning views, rich cultural heritage, and modern amenities. Perfect for urbanites seeking convenient airport access.
• Calheta is a nature lover's haven with picturesque villages and beautiful landscapes. Enjoy the island's sole artificial sandy beach.
• Porto Santo, a tranquil island paradise, is a short ferry ride away. With its golden beaches and relaxed atmosphere, it's ideal for those seeking serenity.

Step-by-Step process to buy a property in Madeira

Securing property ownership in the Portuguese island involves a methodical journey, and comprehending the procedure is crucial for a seamless transaction. This step-by-step guide will assist you in navigating the property acquisition process in Madeira.

Step 1: Obtain a Portuguese Tax Number (NIF)

Prior to initiating your property search, you must obtain a Portuguese Tax Identification Number, termed as NIF (Número de Identificação Fiscal). This is an indispensable prerequisite for all financial transactions in Portugal, including property purchases. You can apply for a NIF at any local tax office in Madeira or through a legal representative. The process is relatively straightforward and can be completed pretty quickly.

Step 2: Engage a real estate lawyer

Hiring a lawyer is not a prerequisite, but it is highly recommended. The Portuguese legal landscape is complex, and this will help you avoid many problems. Whether it's checking property documentation, preparing contracts, or facilitating certain processes, in our opinion it's the key to a successful acquisition.

Step 3: Property search and offer

Explore online listings or collaborate with local real estate agent. Upon identifying a suitable property aligning with your preferences, schedule an in-person viewing to experience it firsthand. We recommend choosing a reputable professional who knows the local market inside out. This will save you precious time.

When you’ve found your dream home, you'll be able to make an offer and initiate negotiations with the seller's representatives. Your real estate agent will assist you in negotiations.

Step 4: Conducting Due Diligence

Prior to sign the promissory contract, your lawyer will undertake a comprehensive investigation into the property. The process entails:

• Checking the property's legal status and ownership.
• Verifying the absence of outstanding debts or financial obligations tied to the property.
• Ensuring all necessary permits and licenses for lawful operation are in place
• Conducting a meticulous on-site inspection to identify any potential issues

Step 5: Signing the CPCV

Upon mutual agreement, you'll formalize the promissory contract, known as Contrato de Promessa de Compra e Venda (CPCV) in Portugal. Normally, you provide between 10 and 30% of the total cost as an initial deposit, held pending final deed. Don't forget to study the clauses to be added to the CPCV with your lawyer in order to protect your interests, especially if you take out a mortgage!

Step 6: Signing the final deed and completing the purchase

The final step involves signing the final deed, officially called Escritura. A notary oversees this event, verifying the identities of everyone involved and ensuring the transaction follows legal requirements. At this point, you'll pay the remaining balance of the purchase price and any applicable taxes or fees. Congratulations! You are now the proud owner of property in this beautiful island.

Buying a property in Madeira can be a straightforward process if you follow these steps and work with trusted professionals. Remember to take your time, conduct thorough research, and seek expert advice to ensure a successful purchase.

Costs and taxes associated with buying a house in Madeira

Apart from your individual investment in the project, you will be responsible for tax obligations on the signing day. Below is further information on this matter.

IMT : Property purchase Tax

IMT = Imposto Municipal Sobre as Transmissões Onerosas de Imóveis. Essentially, this refers to the local tax imposed on property deals, influenced by factors such as the property's location, type, residence nature, and transaction worth. The tax amount is determined based on a graduated system, details of which can be accessed through this link: https://www.apemip.pt/simulador-de-imt-e-is/

IS : Stamp duty

IS = Imposto do Selo. The Portuguese government imposes a tax on various transactions, commonly referred to as stamp duty or IS. In the case of a purchase, IS typically amounts to 0.8% of the purchase price.

ISUC : Stamp duty on mortgage

ISUC = Imposto do Selo sobre Utilização de Crédito. Concerning financing, a secondary stamp duty of 0.6% of the financed amount is imposed.

IMI : Municipal Property Tax

IMI = Imposto Municipal sobre Imóveis. In Portugal, property owners are obligated to pay an annual tax calculated based on the property's "Patrimonial Value" or Taxable Asset Value. This value is influenced by factors such as the property's location, condition, quality, size, and year of construction. The IMI rate, which falls typically between 0.3% and 0.5% for residential properties, is established individually by each municipality and subject to annual fluctuations. Various criteria are taken into account during the IMI calculation to determine a reasonable tax amount for property owners throughout the country.

Property purchase costs

• Lawyer : Caution is advised in this context. Some lawyers may propose a flat rate or a percentage-based fee structure. It is crucial to establish mutual agreement with your legal representative prior to commencing any proceedings.
• Bank and notary fees : Around €2,000 pertain to bank processing and notary fees, involving the signing process at the notary's office (comprising notary fees and land registry costs).

For more information about taxation, read our article on capital gains tax in Portugal.

Financing Your Madeira Property Purchase

If you are a non-native buyer, you might have questions about the choices you have and how to secure the best deal. Here, we will discuss the mortgage alternatives open to non-residents and offer advice on how to navigate the process.

Mortgage options for foreign buyers

Portuguese banks provide mortgage options to individuals who are not residents, enabling overseas buyers to fund their acquisition of property in Madeira. Several top banks offer loans to non-residents: Novo Banco, Caixa Geral de Depósitos, Banco BPI, Bankinter.

It's very difficult to obtain 100% financing in Portugal. Usually, they can offer loan-to-value ratios ranging from 70% to 90%. The specific percentage offered depends on your financial and residency status, and the price of the house being financed.

Here are the typical mortgage conditions for foreign buyers in Portugal:

• Loan terms up to 40 years
• Maximum age up to 75 years old (80 years old under certain conditions)
• Fixed, mixed or variable interest rates
• Mortgage insurance required

Introducing Cafimo: Your partner for real estate financing in Madeira

Dealing with the mortgage process abroad can seem difficult. Cafimo excels as mortgage broker by guiding international buyers through securing financing for property purchases in Madeira.

Drawing upon vast experience and deep knowledge of Portugal's mortgage landscape, Cafimo assists you in:

• Exploring top Portuguese banks to identify the best mortgage deals for you.
• Negotiating and securing advantageous conditions and competitive rates.
• Gathering and submitting all required documentation
• Simplify the entire financing process by taking care of everything

Connect with Cafimo for tailored guidance on selecting the most appropriate mortgage option that aligns with your individual requirements.