It is great to see that you are taking your first steps towards buying property in Portugal. Over the years, Portugal has become more and more popular as a second home choice for many foreign nationals. The Algarve, in particular, has seen a surge of investors from all over the world and it is easy to understand why.
What’s the attraction?
One of the first attractions is the price as even for a country in constant growth, prices are still very competitive and the cost of living in Portugal is also very reasonable – compared to the rest of Europe.
Next on the list of benefits must be the weather. The Algarve, in particular, enjoys over 300 days of glorious sunshine throughout the year. This allows holidaymakers to book their visit with very few date restrictions and enjoy all the wonderful things that the Algarve has to offer – and there are many!
Let’s start off with our amazing Algarvian coastline – circa 200km of natural beauty offering grottoes, beaches and nature reserves that will take your breath away.
Moving inland, you can admire the amazing culture and centuries of history that is evident in our towns and cities across the region. With so many charming places to visit and discover, the hardest part will be choosing where to go next.
For those who enjoy culinary experiences, you will not be disappointed in the plethora of gastronomic delights and award-winning wines on offer. Let’s also not forget the lovely art galleries and museums dotted around and tucked away in many of the untouched historic parts of our towns and cities.
For the sports enthusiast, we have many opportunities to enjoy tennis or some of the best golf in the world. So, when you take all the above into account, as well as the many other attractions such as water parks, adrenaline activities and boat tours, there is something for everyone in the Algarve.
Knowledge is power
Although there are no restrictions in Portugal when it comes to buying a home as a foreigner, property acquisition in a foreign country can be a daunting prospect if you don’t know the right steps to take.
Every country has its own systems and methods of doing things – some of which can be pretty straightforward and others quite complex. In many countries, such as the United Kingdom, you simply hand everything over to the solicitor and estate agent who will take care of everything for you.
However, in other countries, you may have to be a bit more hands-on with the purchase of your property. Therefore, knowing the right steps, what is expected of you and how to proceed with your ‘tasks’ is very important as this will make the process a lot less stressful.
When buying a property in Portugal, you have a mix of both. Yes, you can hand everything over to a legal representative who will take care of the purchase process for you but, you will also have to take steps to gather certain documents and take care of some things personally.
But don’t worry, it’s not too complicated and we will guide you through the main points so that you have a general overview of the process.
The Benefits
First, let’s highlight some of the financial benefits of buying in Portugal. Foreign investors from non-E.U. countries who can invest over €500,000 in the purchase of real estate can benefit from the Golden Visa scheme and obtain a fully valid residency permit in Portugal.
Under this scheme, homeowners don’t need a separate visa to enter Portugal or travel around Europe and may live and work in Portugal – even if their residency is with another country.
This benefit is also extended to family members and after five years, permanent residency is granted and rights to full citizenship after six years.
There is also the added benefit of personal income tax being capped at a fixed rate of 20% for non-native residents for a period of ten years and no double taxation for pension or employment income abroad.
Finding an Agent
Now, although you may be eager to start the ball rolling in order to take advantage of the amazing personal and financial benefits available to you, it is important to do some research first.
Unfortunately, in this day and age, there are many scammers operating and it is very easy to be taken in by these. Therefore, it is important to make sure your chosen realtor is registered with the Associação de Mediadores Imobiliários and that they have a valid licence number.
As Your Luxury Property is a well-established and reputable real estate agency that is duly registered in Portugal, you can rest assured that you are in safe and capable hands.
We deal exclusively with luxury property sales in the Algarve and have a team of experts who are on hand to guide you through the purchase process. We may not be the biggest real estate agency… But, for you, we’ll be the best one.
Finance
Now that you have found your agent, you need to get ready to start your property search. As the purchase process can sometimes be as quick as a few weeks, it is prudent to be prepared.
This means you will need to get a fiscal number which you can easily obtain through the local tax office or have one issued when you open a local bank account.
Then, if you need to get a mortgage for the purchase, it is best to get an agreement in principle before you go too far into your property search as this will give you a better idea of the price bracket you are looking at. It is not very difficult to get credit from a Portuguese bank though there is some bureaucracy involved and you will need to provide documents to prove your income.
If you are taking out a mortgage, once you have found your new home, you will need to return to the bank and choose the mortgage product that works best for you and make your formal application. You will need to gather all the necessary paperwork and visit the bank in person.
There will be application fees which vary from bank to bank so it is advisable that you ensure you are aware of these early in the process.
Although most staff in banks nowadays speak English, if this is something you need, it is best to also check with your chosen bank to ensure they can help in this area.
Costs
As with buying a property anywhere in the world, there are the inevitable costs involved. Here are a few of the costs you should expect:
- Property transfer tax (Imposto Municipal sobre Transmissões – IMT): This is calculated on a sliding scale depending on the cost of the home. It ranges from 1% to 8% of the purchase price. If the property is a second home, the rate will be at the higher end of the scale and if you are a non-resident living in a tax haven, this could go up to 10% of the property value.
- Stamp Duty (Imposto de Selo) for the property purchase is charged at 0.8% of the purchase price. If you are getting a mortgage, there is an additional duty to pay dependent on the payment terms. If your payment terms are over 5 years, you will pay 0.6% of the credit amount. If the payment terms are less than 5 years, this goes down to 0.5%.
- Notary and land registry fees are usually combined and can range from 0.2% to 2% of the property cost.
- It is standard to have 10% to 20% cash ready to go into contract (Contrato Promessa de Compra e Venda). If you’re transferring a large amount of money across currencies, it’s important you get the best deal available so you will need to do your research on the best method.
- 3% wealth tax is payable on properties over €600,000
Legalities and Representation
Although it is not essential to have legal representation in order to buy a property in Portugal, it is advisable to appoint someone if you are a foreign national as the process can sometimes be quite time consuming and complex.
A ‘solicitador’ is a conveying specialist, and an ‘advogado’ is a qualified lawyer. In most cases, an advogado, although more expensive, will be the better choice when arranging your house purchase.
Estate Agents in Portugal generally work on behalf of the seller and their fees (between 3% and 5% of the property price) are covered by the seller.
The notário (notary) works as a middleman on behalf of the state and plays a very important part in the entire process. They will check the Land Registry (Conservatória de Registo Predial) and Inland Revenue (Repartição de Finanças) to make sure the property can be legally sold and for any restrictions on its use. The purchase/sale contracts are signed by all parties and witnessed by the notário.
To Summarise…
Now that you have a general overview of the process, costs, people involved, benefits and pitfalls, you are ready to buy a house in Portugal. Here is a guideline summary of the main steps to take:
1. Get a Fiscal Number and an offer in principle (if applicable) from your bank
2. Get legal representation (know how much it can help)
3. Book an appointment with one of our experienced real estate specialists to arrange some viewings
4. Once you have found your perfect property, advise your legal representative so that they can gather all the necessary information from you and start the ball rolling
5. Sit back and let the professionals guide you through the process
Please note that all the above information is intended as a guide and is correct at the time of publishing. This is subject to alterations and we advise that you double-check this information when you are at the research stage of your purchase process.
We look forward to your contact and to helping you on this new and exciting journey!
