Portugal real estate investment: 2024 Outlook

Investing in a land of sunshine and opportunity has never been more attractive. This captivating country, nestled along the Atlantic coast, boasts a rich history, dynamic culture and booming economy that has attracted the attention of discerning investors from around the world. This destination has established itself as a prime location for those seeking to diversify their portfolios and capitalize on the growing demand for high-end properties. Follow the experts for your real estate investment in Portugal.

 

7 Reasons to invest in Portugal real estate

Are you seeking a cost-effective, stable and really nice living environment? You can do all of the above by investing in Portugal’s thriving real estate market. This country is a popular destination for astute investors, and it’s easy to see why. Let’s take a look at the top seven reasons why one should invest their money into Portuguese property.

 

1. Unbeatable prices

The country’s real estate prices are attractive compared to other popular European countries. In Lisbon, you can find spacious apartments and charming villas in Algarve for a fraction of the cost of what it would be in places like London or Paris. Making an investment in this beautiful country will allow you to get more value for your money and own a piece of paradise!

 

2. Rock-solid stability

Portugal’s got the whole package: an attractive and stable political system and a dynamite economy. Other countries in western Europe can’t always say the same. Portugal’s managed to keep the peace within its borders, and even though it’s had to endure some tumultuous times, it’s always been able to bounce back. In fact, its ability to do so is what actually has foreigners investing here. If you buy property in Portugal, rest assured knowing that your asset is safe in the hands of one of the most secure markets around.

 

3. Quality of life that can’t be beat

We all want to live in a beautiful country that has great beaches, very good wine, and 300 days of sunshine every year right? Portugal is one of the best countries for quality life according to many. It’s friendly locals, laid-back lifestyle and food scene make it an amazing place to be. If you were to own property there, just imagine the good times you’d have! According to Internations, Portugal ranks 10th among the best countries for expats.

 

4.Tax benefits

Portugal offers a lot of tax incentives for foreign investors. The Non-Habitual Resident (NHR) program allows you to take pleasure in minimized tax rates on your income from around the globe for as much as 10 years. Additionally, there is no wealth tax or inheritance tax in Portugal, making it an intelligent choice for protecting your assets.

 

5. Portugal speaks English

There’s a high level of English proficiency in Portugal, especially in the tourist areas and big cities. That means you’ll have no problem finding locals and others that can help you through the process of buying property and settling into your new digs.

 

6. Booming rental yield

Portugal’s tourism industry is going through the roof, which has led to a boom in short-term rentals. By investing in property in a popular area, you could get a steady flow of money from vacationers looking for a place to stay. And with remote working becoming more prevalent, people are flocking to big Portuguese cities and coastal towns in search of long-term rentals. For example, a 2-bedroom apartment in the center of Lisbon could cost you between €300,000 and €350,000 to buy, and you could be renting it for between €1,400 and €1,500/month in 2024. A very attractive gross yield of 5 to 6%.

 

7. Perfect weather

If there’s one thing Portugal does right, it’s weather. The country has mild temperatures all year round, plenty of sun and very little rain. Whether you’re lounging on the beach or walking around historic cities, Portugal’s climate just adds another reason why owning property here is so great.

 

Real estate dynamic : before, now and the future

Portuguese property market has had a pretty wild ride these past few decades. What used to be a dusty, underappreciated corner of the continent has since become a haven for international investors looking to make their mark.

 

Before the boom: A hidden gem

Just a while ago, Portugal’s real estate market was like an exclusive club. Prices were low, demand was quiet, and investors couldn’t have cared less about the potential for growth. As time went on, many beautiful homes started being abandoned until someone came along with a vision. It was always a buyer’s market in Portugal, but not many people outside of the country were able to see that.

 

Portugal’s rise to fame

But then a big shift occurred. The world started to discover the charm Portugal holds. The country’s beautiful beaches, lively culture, and cheap cost of living began to catch international eyes. Wise investors saw an opportunity and they took it, the market heated up. Prices rose and new projects started to pop up.

 

The current landscape: A very active market

Skip a few years and you’ll see that Portugal’s real estate market is barely recognizable. Demand has surged, mainly in popular areas like Lisbon and Algarve, and prices have gone through the roof. Foreign buyers have been gobbling up properties thanks to the country’s Golden Visa program and alluring tax incentives.

 

The market isn’t only being fueled by investors from around the world though. Portugal’s economy has been on an upward trend, and local buyers are also getting involved. This means that the market is now diverse and dynamic, with opportunities for all types of investors.

 

Looking ahead: The future of Portugal real estate investment

What comes next for Portugal’s real estate market? The future is a tricky subject, but there are some trends that seem likely to play a role:

• Growth with roots: While prices have shot up recently, experts say the pace will slow down to something more sustainable.
• Spots on the rise: As Lisbon and the Algarve heat up, investors and buyers are starting to look elsewhere, such as at the Silver Coast, or even at islands like Azores.
• Greener and leaner living: With everyone worried about climate change now, properties with eco-friendly energy solutions are going to see an increase in demand.
• Rules of the game: Changes are coming to policies like Golden Visa and NHR. It’s unclear just how they’ll affect things yet as it is quite recent.

 

One thing is for sure, Portugal real estate is not going away anytime soon! This small but mighty country has so much to offer that investors from all over the world will continue to flock here. They don’t call this place a hidden gem for nothing.

 

Of course, as with any investment opportunity, there are risks to consider. But with the right mindset and some good research on your side, you’ll find that Portugal has a lot of potential opportunities when it comes to property investment. So whether you’re looking for a vacation home or retirement paradise, there’s definitely something out there for everyone in this market. As a mortgage broker, CAFIMO can help you with your project in Portugal.

 

Are Portugal property prices falling?

Not really. As said before, property prices have been steadily rising in Portugal for some time now, but there’s nothing to suggest they will suddenly go down. In fact, the market remains strong and stable, which is what makes it such an attractive prospect for smart investors.

 

First thing’s first: Portugal’s real estate market has experienced a steady growth, not a sudden increase. That means that the price of homes has slowly gone up at a sustainable rate that meets real demand from both foreign and local buyers. This is different from other housing markets which saw rapid inflation before everything came crumbling down to the ground. Portugal’s growth is way more organic and dependable than that.

 

So if it’s not supply and demand that’s driving these prices up then what is? Many people have been asking this question and here are four answers:

1. Portugal is slowly becoming one of the strongest European economies out there
2. The country has also been offering attractive tax incentives for foreign investment
3. Their high quality of life and stunning natural beauty only make more good reasons to live there
4. And finally their thriving tourism industry makes purchasing properties like AirBnb or hotels for commercial purposes very appealing

 

Where to buy in Portugal?

The location you choose matters a lot when trying to turn a profit in real estate in Portugal. Lisbon, the country’s capital, will give you an ideal blend of traditional and modern architecture and life, but it’ll cost you. Prices per square meter are high there.

 

Porto will also provide you with this ideal blend, but its authenticity and culture come at a cheaper price than in Lisbon. 

 

The coastal regions offer stunning beaches and great weather, which attracts visitors from everywhere: Albufeira, Faro, Portimão.

 

Buying real estate in Madeira and the Azores come with natural beauty while the Alentejo region is known for its cuisine and vineyards; all three have plenty of potential for tourism and relaxation.

 

Economically strong areas that have appealing tourist spots and great quality of life are your best bet for investment. Portugal is full of opportunities that could be around any corner.

 

Focus on resident permit in Portugal and citizenship

Different types of residency permits exist for those wishing to settle down and live in the best places in Portugal. The Golden Visa was once the most popular, but this is no longer the case. Here’s a quick overview.

 

Golven Visa

Portugal’s Golden Visa program is still active, but it instituted some major changes in October 2023. Buying real estate is no long­er a valid way to obt­ain a Golden Visa. This includes properties worth €500k or more, rehabilitating property, or investing in real estate funds. However, there are still other options:

• Venture capital/private equity funds: €500k
• Donation for research activities: €500k
• Donation for cultural heritage: €250k
• Creation of company with 10 jobs or an investment of €500k + 5 jobs

 

These changes don’t aff­ect previous holders or applica­nts who had already made their investments befo­re the new rules were put in place.

In January 2024 Portugal anno­unced that the waiti­ng time for the residency application can now be counte­d toward the five years needed for nationalit­y eligibility. This significantly reduced its timeline.

Portugal’s Golden V­isa program will provide foreign investors alternative ways to obtain residenc­y and investment fun­ds are expected to gain traction. Although real estate purchase is no longer viable, its ma­in advantages stay intact : visa-free travel within Schengen area, pathway to citizenship and inclusion of family members.

 

D2 Visa

The D2 visa was set up for entreprene­urs, freelancers, and inde­pendent service­ providers trying to find residenc­y in Portugal. To be eligible, candidates must prove that they have esta­blished a company within Portugue­se territory or that they have enough money to do so. A structured bu­siness plan that explains the economic, social and cultura­l impact of the proposed ve­nture is required. Notably, there is no minimum investme­nt amount required.

Holders of this visa are issued with a Portugue­se residence permi­t which is valid for one ye­ar initially and can be renewed afterw­ards. They will become eligible for citizenshi­p after five continuous years of residence. The D2 visa offers an alte­rnative route to the Golden Visa program for those who genuinely want to live in Portugal and work there professionally.

 

D7 Visa

Securing permanent residence in Portugal is possible for non-EU citizens with the D7 visa, also known as the passive income or retirement visa. This particular visa is designed for those whose main source of income comes from investments rather than salaries.

Passive income sources that are considered qualifying include pensions, rental earnings, remote employment, and intellectual property proceeds. However, you should be aware that salaries aren’t included.

 

An individual who applies must have a minimum annual passive income of €9,870. If they want to bring their spouse along on the journey then they will need an additional 50% of their funds and 30% for each child.

The D7 visa grants its holder a 1-year Portuguese residence permit which can be renewed every two years after that. After living there for five years straight, holders can apply for permanent residency or citizenship if they so choose. Additionally, this type of visa allows the family of the primary applicant to move to Portugal as well by letting their spouse, dependents and parents obtain residence permits.

 

Taxes on Portuguese real estate investment

Purchase taxes

IMT : Property purchase Tax

The IMT is a municipal tax on real estate transactions. It varies according to: location, type of property, type of residence and transaction value. It is calculated using a progressive scale, you can check for it at this link: https://www.apemip.pt/simulador-de-imt-e-is/

IS : Stamp duty

This is a tax that the Portuguese state applies to various deeds. For an acquisition, IS is 0.8% of the purchase price.

If you take out a mortgage for your investment in Portugal, it applies a second charge, known as ISUC. This has a rate equivalent to 0.6% of the financed amount.

 

Owner taxes

IMI : Municipal Property Tax

Property owners are required to pay this annual tax based on the “Patrimonial Value” or Taxable Asset Value of their property. The value itself is determined by multiple factors, such as location, condition, quality, size, and construction year. Every municipality in Portugal sets its own IMI rate each year, typically 0.3% to 0.5% for residential properties. Yet the percentage can fluctuate as time moves forward.

 

Sale taxes

Capital Gains Tax

Portuguese residents are taxed on 50% of capital gains. Then, the escalating personal income tax scale is applied. It can fall between 14.5% and 48%. Unless the property was your primary home and you decide to use the gains for another principal residence within 2 years; in which case you might not have to pay anything.