Portugal is fast becoming a popular choice for investors. Offering an attractive Golden Visa scheme and plenty of rental opportunity, it’s easy to see why.
Filippo Simonato, Business Development Manager at JLL answers the most common questions prospective buyers have about investing in Portugal.
Why is Portugal so popular for expats and investment?
Portugal offers safety and security. It is the third most safe and peaceful country in the world, according to the Global Peace Index.
Many of those who invest in Portugal do so for their children because the quality of education is excellent. Lots of international students come to Portugal, and as most Portuguese people speak English, it’s very easy to study here. Additionally, the cost of education is much lower in comparison to other destinations such as the US or the UK.
The quality of life is fantastic and it’s a very welcoming country. It has been voted many years in a row as the best country in Europe for expats to live in.
If you’re thinking of joining the thousands of expats in Portugal, don’t spend any money on your move abroad until you’ve read The Currency Guide to Emigration. It’s completely free to download.
Are international businesses investing in Portugal?
Many big companies are investing heavily in Portugal. We recently helped Adidas open an office for 800 people in Porto, and Amazon is scheduled to open their Amazon Portugal operation very soon.
It certainly is becoming a credible destination for international investors.
What is the housing market looking like?
Portugal’s housing market has grown tremendously, with sales increasing between 2019 and 2020 despite the pandemic. Loans with a low interest rate have become more easily available recently, so it’s a great incentive to invest. At the same time, property prices are significantly lower than other comparable destinations worldwide and in Europe, averaging €10,000 per square metre in Lisbon.
Who are the main international buyers and what type of property are they buying?
International investors now represent around 57% of our buyers. We sold to 47 nationalities and the top three were China, France and Brazil. However, UK nationals were one of the highest growths in terms of new purchase and new clients.
The typical investment is around €250,000 to €1 million. 65%-70% of the purchases are two and three bedroomed units.
What do you need to know about purchasing a property in Portugal?
Can I get a Portuguese mortgage?
Yes. Non-residents are eligible to get a mortgage up to 70% of the property value in order to invest in Portugal.
If you want to apply for the Golden Visa, you must bring your own equity. You need to bring cash from an account abroad, so this may mean getting a mortgage in the UK. Once you’ve completed the equity requirement for the investment, you can ask a local bank here in Portugal to co-invest with you, with a mortgage, that can be up to 70% of the property value.
Choosing the right mortgage is vital to the success of your property purchase. Get in touch today with our trusted partners – they have over 20 years’ experience helping people like you to get the best mortgage possible.
What costs should I be aware of?
Acquisition costs: These are triggered only at the deed i.e. only when the apartment is completed. The total closing costs are about 7% to 8%, according to the value of the property.
Letting costs: You will only be taxed for the income produced in Portugal. This can be between 5% and 28%, according to the type of investment. A legal adviser will help you to find the best way to set up your investment in Portugal in order to minimise the tax exposure.
Disposal costs: In Portugal you have a freehold status, so the property will be yours forever. You will not pay inheritance tax when you transfer the property to future generations. However, if you sell a property and you are gaining a capital gain, you will have to pay 28% on the profit.
Holding costs: You must pay a yearly tax of around 0.3% to 0.45% of the tax registration value of the property. This is normally 50% of the market value, so it’s a very low cost. This equates to a few hundred euros per month for most properties around the €500,000 investment.
How to purchase a home in Portugal
●You can start the process virtually and agents can virtual tours so you can see the property and the neighbourhood before coming to Portugal.
●A lawyer can then sign a power of attorney and start all of the legal steps required to purchase the property, and to start the Golden Visa (if required) remotely.
●Then you normally have to reserve your property, which costs between €5,000 to €15,000, according to the value of the property. This shows that you want to commit to buy the property and takes it off the market for around four weeks.
●Next speak with your lawyer and check the reservation and sales contract, and make sure all of the documents are clear and that everything is legally sound and transparent.
●When a property is under construction, you will just sign the exchange. You will do the deed only when the property is fully available for handover. Normally, you will pay an amount at the beginning, then according to construction progress, you will pay step-by-step.
●If the property is completed, you will sign and exchange, and then normally between one and two months after, you will sign the deed.
We can put you in touch with an Independent Financial Advisor, who can help you with all budgetary aspects of your purchase – so that everything goes as smoothly as possible.
Where should I look to purchase property in Portugal?
The seaside areas are always popular and are great for holidaymakers. The Alentejan and the Algarve, in my opinion, hold the best beaches, food and scenery in Portugal.
If you are looking for capital gain, consider Porto and Sesimbra as I expect their property value to rise significantly.
There are several new developments under construction in the Algarve and Lisbon.
Rental market in Portugal
Who would likely be my tenant?
Most renters are Portuguese but 47% are international. The top three international renters are Brazilian, French and UK citizens.
Recent data reveals that one in every three European students and young professionals plan to spend between six months and two years in a different country, and Portugal tends to be in their top three.
What sort of properties are they renting?
Two- and three-bedrooms apartments, but we are seeing an increase in rentals for larger spaces. Of course, one-bedroom studios are still in demand, and around 13% of renters are looking for four-bedrooms properties. International renters tend to be the ones renting the larger and more premium apartments, spending between €1,000 and €2,500 a month.
How can I maximise my property’s rental potential?
Many renters are looking for a vibrant neighbourhood, so location is very important! The pandemic has resulted in more second home searches, so look for properties in beautiful locations by the beach or by a forest, where people can spend multiple months during the year.
Having a nice common area in the property is also preferable, as well as being located near green space.
Good architecture and design elements, such as sustainability and ecology, are other attractive features.
Is there a strong market for holiday home rentals?
Absolutely. Portuguese tourism has increased tenfold from 2012. Typically, you will be able earn 4%-6% per year on the money you invest, which is a good return. In some cases, this can reach 10%. On top of that, there is opportunity for a huge capital gain on your investment.
Want a holiday home but worried about the cost? Why not pool finances and buy with family? Explore our guide, Buying Abroad with Family.
The Golden Visa
What are the current requirements for the Golden Visa?
At present, you will be eligible to apply for the Golden Visa if you invest a substantial amount into Portugal. The most common way is through purchasing a property worth €500,000 or more (this can be €350,000 for buildings that are more than 30 years old and are in rehabilitation areas).
What rights will the Golden Visa give me?
The Golden Visa allows you to become a European citizen. You will be given a residence card for five years which will give you all the same rights as a European citizen, allowing you to work, study and circulate freely through the Schengen area. You will also have access to the same healthcare facilities as an EU citizen.
The residency card must be renewed every two years. At the fifth year, you have two choices: either apply for permanent residency and citizenship to get a Portuguese passport or continue renewing the Golden Visa card every two years.
You do not need to reside in Portugal; you just need to spend a minimum of seven days per year in the country.
For more information on the Golden Visa, read our article ‘Portugal’s Golden Visa: invest your way to residency’.
Does my partner/family need their own Golden Visa?
No. With one investment, and therefore one Golden Visa, you can bring along dependent family members who can benefit from all the same rights.
Is the Golden Visa being phased out?
In December last year, the Portuguese Government approved a low phasing out of the Golden Visa. It was originally announced that after June 2021, those who invest in populous areas like Lisbon, Porto, the Algarve, and some coastal areas will no longer be able to obtain the Golden Visa. Luckily, these changes will now not come into force until January 2022!
So, you now have until the end of this year to make your investment and take advantage of this desirable visa.
Until then it’s still possible to apply for the Golden Visa with the current regulations; anyone who is interested in EU citizenship should move very fast because after 2021 there will be some restrictions on where you can qualify for the Golden Visa. We may also see an increase on the amount needed for the Golden Visa.
How do I apply for a Golden Visa?
1. Choose a law firm to represent you. They can help you with the whole application.
A bad lawyer can cause numerous issues – but a good one’s worth their weight in gold. Get in touch with one of our carefully selected legal partners today
2.Start the application online and make sure you have all the necessary documentation for yourself and any dependents. This includes your criminal record, birth certificate and marriage certificate. Ensure these documents are translated into Portuguese.
3.Get a Portuguese tax identification number (NIF) and open a Portuguese bank account to make your investment.
4.Normally, after three to six months of the online application being submitted, you will be invited to Portugal to collect your biometric data and to have a first interview.
5.Receive your Golden Visa card.
6.Every two years you will have to come back to Portugal to present updated documents, have an in-person interview, and to collect your biometric data for visa renewal.
Our currency partner Smart Currency Exchange has an office in Vilamoura. They’re the experts on property transactions, so do read their guide, The Property Buyer’s Guide to Currency.