The cost of renting a property in Portugal has risen over the last year, proving good news for those hoping to buy-to-let.
Research by the National Institute of Statistics (INE) Housing Rent Statistics, which sampled 20,568 new rental contracts in Portugal, revealed that in the second quarter of 2021 the average price of a rental contract reached €6.03 per square metre. This was an increase of 11.5% compared to the same time the year before.
The INE predicts that rental prices will continue to rise into 2022, potentially by around 0.43%.
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Which areas have the highest rents?
Unsurprisingly, the areas with the most expensive rent tend to be the tourist hotspots. Renting in the Metropolitan Area of Lisbon costs an average of €8.82 per square metre, whereas in Porto you’d be looking at an average of €6.40 per square metre.
The Algarve is sandwiched in the middle with average rents of €6.96 per square metre. The Autonomous Region of Madeira is €6.32 per square metre.
In comparison, the cheapest places to rent are Terras de Trás-os-Montes (€2.79 per square metre) and Alto Alentejo (€2.80 per square metre).
Where can you make the best rental yields?
Although you can charge higher rents in the areas of Lisbon, Porto and the Algarve, the initial cost of purchasing the property would also be higher.
Property prices in these areas are being affected in the short-term by increased demand in the run-up to the changing golden visa rules. Investors are rushing to buy property in these areas before they become excluded from the scheme in January 2022.
Nonetheless, when compared to other popular European cities, Lisbon and Porto are still very affordable. The latest RICS/Ci Portuguese housing market survey revealed that Lisbon is the second-cheapest city in Western Europe to purchase property. Average property prices in the capital are €227,750, compared to €620,000 in Paris and €581,000 in London.
To really maximise your rental yield, however, look to the commuter towns of Caldas de Rainha, Bombaral and Torres Vedras, which are all within close proximity of Lisbon.
For advice on how to raise money to buy a home in Portugal, read our guide, How to pay for a Portuguese property.
Long-term vs short-term renting
Many foreign buyers opt to rent out their properties on a short-term basis. In normal times, the Airbnb market is booming in Lisbon and the Algarve, and with travel restrictions easing, the market is likely to pick back up again.
However, this growing Airbnb trend has resulted in a scarcity of longer-term rental properties. Therefore, if you choose to rent out your property long-term, you shouldn’t have any trouble finding a tenant.
Another option is to do an off-season long-term rental. This is a popular option and involves renting your property out on a monthly basis from October to April, which tends to be Portugal’s quieter time. This is a great way to maximise your annual rental income by utilising Airbnb in the summer months and off-season trade in the winter months.
For more information on rentals in Portugal, read our article ‘Renting out your property in Portugal’.