PORTUGALXPERT PROPERTY GUIDE
Your Guide for Property Purchase in Portugal
Invest in the Portuguese Real Estate market with guidance and expertise
ONE STOP SHOP APPROACH
Property Purchase Guide
Our Guide for Property Purchase in Portugal guide is designed to streamline your journey from the initial decision-making process to post-purchase support. We'll cover essential topics such as the initial meeting, understanding the financial aspects, navigating the property search, securing a mortgage, closing the deal, and our ongoing after-care services. Each section is elaborated to ensure you are well-informed and prepared at every step of buying property in Portugal. Whether you're a first-time buyer or an experienced investor, whether you intend to be overseas or physically present in Portugal, our guide is here to assist you in making a successful and informed property investment.
1. Initial Meeting
With Portugalxpert, the property purchase experience starts with a discovery call to understand your needs and goals. We'll outline the purchase timeline and together, we'll develop a strategy tailored to your property objectives in Portugal. This stage is crucial for setting the right foundation and ensuring a smooth buying process.
Discovery call
The property purchasing process with Portugalxpert begins with a discovery call. This is a chance for us to understand your specific needs, financial situation, and long-term objectives. It's a conversation where we listen to what you envision for property investment and life in Portugal and start mapping out potential paths to achieve it.
Timeline
After establishing your needs, we'll discuss the timeline for your property investment. Understanding the typical duration for property searches, purchases, mortgage, and any legalities involved helps set expectations and plan effectively. This timeline will be tailored to suit your schedule and circumstances, ensuring a smooth process.
Strategy
Crafting a personalized strategy is crucial. Based on the insights gained from our initial discussions and the established timeline, we will develop a tailored plan that addresses your goals. Whether you're looking for an investment property, a second home, or a permanent residence, our strategy will focus on finding the best options and making informed decisions.
2. Requirements
Next, we cover the requirements to purchase property in Portugal. From obtaining your Portuguese fiscal number (NIF) to setting up a local bank account and deciding on legal representation, we'll walk you through each requirement. This section aims to simplify and clarify what's needed to move forward.
NIF (fiscal number)
To buy property, secure mortgages, and conduct other financial transactions in Portugal, you'll need a Portuguese fiscal number, known as a NIF (Número de Identificação Fiscal). Recognizing the importance of this, we have partnered with Bordr, a service that streamlines the process of obtaining a NIF for our clients.
Bank Account
While not necessary to initiate the property buying process, having a local bank account is crucial for completing property-related financial transactions, particularly if you are planning to secure a mortgage. This account is typically set up with the bank that will be providing the mortgage later on.
Legal Representative
In many cases, it's advisable to appoint a legal representative through a Power of Attorney (POA). This legal empowerment allows a lawyer to manage all legal matters related to your property transaction, including handling the mortgage process, signing property contracts, and conducting due diligence. We partnered with an experienced lawyer that assists all our clients.
3. Finances
In the Finances section, we discuss the essential financial considerations for buying property in Portugal. From establishing your budget and understanding financing options to detailing the associated purchasing costs, this section prepares you for the financial aspects to avoid surprises on the way.
Budget
Understanding your financial resources is the first step. We analyze your property budget in detail, considering your income and real estate objectives. This helps us determine whether your budget aligns with the property types and locations you are interested in as well as setting up our property search strategy.
Capital Structure
Next, we discuss your financing approach, evaluating how much of your investment will be in cash (equity) versus borrowed (mortgage). A preliminary assessment helps us understand the viability of assuming a certain level of debt based on your financial circumstances and the market credit conditions. In this stage, we provide mortgage and financing advice since we are certified Mortgage Brokers at Knowpedia.
Expenses
We provide a thorough breakdown of all the costs involved in the property purchase and financing process. These include the IMT (property transfer tax) that ranges from 0% to 7.5% based on property value, stamp duty of 0.4%-0.8% of property price based on the nature and value of the property, notary and registration fees that are around 1000€, lawyer fees which usually range from 1-2% of the property price. Our partner typically offers a flat fee option.
4. Property Search
Here, we simplify the process of finding your ideal property in Portugal. Our approach includes thorough market research, providing curated property listings that meet your specific needs, and arranging viewings - both in-person and virtually. This section ensures a smooth and efficient search, tailored to your preferences and requirements.
Market Research
At Portugalxpert, we conduct extensive market research using advanced tools and establish connections with local agents to access both listed and off-market properties. We cover every location in Portugal, ensuring you have a comprehensive view of available options that meet your criteria.
Curated Listings
Enjoy a selection of properties finely tuned to your preferences - property type, location, size, value, investment strategy, etc. Our goal is to present you with listings that best match your criteria, simplifying your search process.
Property Viewings
We act as your sole point of contact, managing communications with sellers' agents and organizing property viewings. Whether you’re able to be present in Portugal or not, we offer virtual tours to accommodate your needs. During viewings, we conduct preliminary inspections and ask critical questions to ensure you have all the necessary information before proceeding with any negotiations.
5. Mortgage
At Portugalxpert, we specialize in securing mortgages for our international clients, leveraging our experience and strong banking relationships. This section will guide you through obtaining a mortgage in Portugal, from initial simulations to the final approval, ensuring a smooth process tailored to your financial needs.
Mortgage Simulations
We assist you in initiating the financing process by collaborating with financial institutions known for their tailored acquisition mortgages for private individuals. We begin by evaluating your financing needs and strategy, then facilitate communication with multiple reputable banks to obtain mortgage simulations.
Proposal Analysis
Our team carefully analyzes the various mortgage offers provided by banks. We guide you through each proposal, helping you make an informed decision by choosing the option with the most favorable terms. Whether you have previous mortgage knowledge or not, we make sure you understand the process and the way banks think and decide.
Document Submission
Once you have selected the best mortgage option and gathered all necessary documents, we manage the submission of your application to the chosen bank, which will then proceed to approve or reject your mortgage request. Remember that this process if free, we receive a commission from the selected bank, ensuring a completitly impartial advice.
6. Deal Closing
We now walk you through the final steps to complete the property purchase. From signing the Promissory Contract to conducting due diligence and finalizing the mortgage. We ensure all legal formalities are carefully managed, leading up to the definitive step of signing the Final Deed.
Promissory Contracts
A Promissory Agreement (Contrato de Promessa de Compra e Venda or CPCV) is a crucial, but not mandatory, document that formally outlines the terms and conditions of the property sale. It serves as a legally commitment between the buyer and seller and provides a layer of protection for both parties.
Due Diligence
This essential step involves thorough property inspections and finalizing details such as mortgage agreements. It's a period provided by the promissory agreement to ensure that all aspects of the property and its ownership are as expected, safeguarding your investment.
Mortgage Check
The mortgage approval process can take several weeks to complete and its conclusion overlaps other steps in the purchasing process. After the approval, we remain actively engaged in the process, providing consistent follow-up until the final legal formalities are concluded, and ensuring deadlines are met before the deed.
Final Deed
The signing of the Final Deed is a mandatory and definitive step in the property purchase process. We’ll be by your side, ensuring that all necessary parties are present, and if you are unable to attend, a lawyer can represent you to finalize this crucial agreement.
7. After-care
Completing your property purchase isn't the end of our journey. At Portugalxpert, we continue to support and assist you long after the deal is closed. Whether you need help with renovations, property management, or optimizing your mortgage conditions, our team is here to provide ongoing assistance. Our commitment highlights our dedication to exceeding your expectations.
Renovation Management
If your new property needs an upgrade or major renovation, rely on our renovation guidance and project management services. We're here to help with everything from minor updates to complete overhauls. This service is available in select locations with applicable fees.
Property Management
In certain areas, we offer property management services for both medium and long-term rentals. Let our team handle the day-to-day management of your property, ensuring it's well-maintained and generating income, even when you're away. We have a vast experience in property management in Lisbon and surroundings and in the Algarve.
Mortgage Review
Post-purchase, we continue to support you by reviewing your mortgage conditions against current market conditions. If better options arise, we can assist in transferring your mortgage to another bank, usually at no cost as the new bank often covers these expenses. This service is provided for free since it is commission based.
Help us find your Ideal Property
FAQs
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The Portuguese property market has witnessed a significant transformation in recent years. Here's a brief overview:
Post-2014 Revival: After facing challenges for several years, the property market started witnessing an upswing from 2014. This shift coincided with the country's economic recovery, bolstered by investments in infrastructure and policies promoting foreign investment.
Attracting Foreign Investment: Initiatives such as the Golden Visa program and the Non-Habitual Resident tax regime played pivotal roles in making Portugal an attractive destination for international investors and retirees.
Modern Day Scenario: Today, the Portuguese property market is flourishing, driven by both local and international demand.
Tech Hub Status: In recent times, Portugal, especially cities like Lisbon, has evolved into a recognized tech hub, which has attracted international professionals and further fueled the property market.
Supply vs. Demand: The high demand for properties, in contrast to a limited supply, particularly in sought-after areas like historic neighborhoods in Lisbon, has tilted the market in favor of sellers. This imbalance often results in competitive bidding situations for prime properties.
Understanding this evolution provides valuable context for potential investors and homeowners looking to engage with the Portuguese property market.
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When considering purchasing property in Portugal as a foreigner, here are the key points to note:
Type of Housing: Portugal offers a diverse range of properties, including land plots, apartments, houses, townhouses, condos, and luxury villas.
Location and Pricing: The property's location heavily influences its price. City centers like Lisbon and Porto, as well as oceanfront regions like Cascais, Lisbon South Bay, and the Algarve, tend to have pricier properties. Your budget will largely depend on the exact location and your housing preferences.
Foreigner Restrictions: There are no specific restrictions imposed on foreigners wishing to buy property in Portugal.
VAT Identification Number: One essential requirement for foreigners is obtaining a VAT identification number, known locally as the NIF (Número de Identificação Fiscal or Número de Contribuinte). This can be acquired by either opening a bank account in Portugal or visiting a tax office in the country.
Keeping these factors in mind will help you navigate the process of finding your dream home in Portugal more efficiently.
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Portuguese properties are renowned for their diverse architectural styles, which vary from urban to rural areas. Here are the notable characteristics:
Urban Architecture: In metropolitan areas, especially in cities like Lisbon and Porto, there is a fusion of historic edifices and contemporary structures. Notably, the Baixa district in Lisbon stands out for its Pombaline-style buildings. These are recognized for:
- A structured, grid-like street layout.
- Buildings equipped with pioneering anti-seismic construction features.
Rural Architecture: Venturing into the countryside, the architectural scene shifts towards more traditional designs. The characteristics of these properties include:
- Traditional Portuguese villas and farmhouses that often showcase the quintessential aspects of regional architecture.
- In regions like Alentejo, one can spot white-washed farmhouses set amidst expansive vineyards and olive groves, offering a serene and authentic Portuguese countryside experience.
This blend of historic charm and modern innovation in architecture makes Portuguese properties uniquely attractive to both residents and investors.
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Since 2015, Portugal's housing market has been following a distinct trajectory in comparison to the broader EU trends. Here's a concise overview of the developments:
General Trend: Portugal saw a minor setback with a 5.9% decline in housing prices in 2020. However, between May 2022 and May 2023, there was a notable increase of 6.5% in housing prices, as reported by Idealista.
Urban Centers Surge: Major Portuguese cities like Lisbon and Porto experienced significant price hikes. Specifically, from April 2022 to April 2023, some areas observed a staggering 10-15% annual increase in housing prices.
Lisbon vs. Countryside: A property in Lisbon, the capital city, now costs about 340% more than a comparable property located in rural Portugal.
Porto's Stance: As the second-largest city in Portugal, Porto also observed a surge in housing prices, which now stand approximately 170% above the country's average.
Affordability Metric: An interesting perspective on affordability can be gauged by the fact that an average Portuguese home is priced at roughly 25 times the annual GDP per capita. In Lisbon, where about 27% of the country's population lives and enjoys slightly higher average salaries, this ratio is even more accentuated.
The data underscores a clear escalation in housing prices in Portugal's urban areas, highlighting the challenges and opportunities present in the real estate sector.
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Buying or owning property in Portugal involves multiple tax considerations. Here are the main property-related taxes:
IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) - Property Purchase Tax:
Purpose: It's levied on transfers of property rights over immovable assets.
- Application: Applies to all types of properties such as land, houses, apartments, and commercial properties.
- Rate: Variable, based on the property's fiscal value. For a primary residence, it can range from 0% to 8%.
IS (Imposto de Selo) - Stamp Duty:
- Purpose: A consumption tax for transactions not covered by VAT, including real estate transactions.
- Application: Applies to deeds, contracts, bank mortgages, loans, and titles related to real estate.
- Rate: Typically between 0.4% and 0.8%, varying by the nature and value of the property.
IMI (Imposto Municipal Sobre Imóveis) - Municipal Property Tax:
- Purpose: Annual property tax funding city councils.
- Calculation: Determined by applying a rate to the property's VPT (taxable property value). The rate varies by the property's age, its municipality, and property type.
AIMI (Adicional ao Imposto Municipal sobre Imóveis) - Wealth Tax:
- Purpose: Introduced in 2017, it's an additional tax on properties and construction land exceeding a certain VPT.
- Application: It's based on the sum of the VPT of all qualified properties held by a taxpayer on January 1 of each year.
IRS or IRC - Property Income Taxes:
- Purpose: Taxation on income derived from Portuguese properties, such as rental income or sale proceeds.
Mais-Valias - Capital Gains Tax:
- Purpose: Tax on profit made from selling a property.
- Calculation: It's the difference between the purchase and selling price. The tax owed depends on your residency status, how you hold the asset, and if it's your primary residence.
- Criteria: The tax amount varies based on one's residency status, the asset's ownership nature, and whether it's their primary residence.
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Hiring a real estate agent can be an advantageous decision when looking to rent a property in Portugal. They bring their professional expertise to the table, navigating through the market dynamics and simplifying the rental process for you. Here are some ways an agent can help:
Finding a Property
Real estate agents have extensive networks and access to properties that might not be openly listed on the market. They can help you find a property that fits your specific needs and preferences, saving you a lot of time and energy.
Arranging Viewings
One of the most time-consuming aspects of the rental process is coordinating and attending property viewings. An agent can handle this for you, arranging viewings that fit your schedule and providing valuable insights during the viewings.
Price Negotiation
Great real estate agents are experienced negotiators. They can help ensure that you're getting a fair price for the rental property, and they can assist you in negotiating terms that work in your favor.
Legal Support
Navigating the legal complexities of a rental contract can be daunting. Real estate agents can provide guidance and help ensure the contract is in your best interest. Some might include legal support in their service, but always clarify this at the beginning of the process.
Leg Work
A good agent is likely to do much more than just find a property and negotiate the price. They might also help with utilities, telecoms, and other logistics. They'll provide advice and support throughout the rental process, simplifying things for you.
Fees
Keep in mind that most real estate agents will charge at least one month's rent plus VAT for their services and sometimes even a fee. While this might seem like an additional expense, one should consider the time, stress, and potential pitfalls they can help to avoid.