Whether your goal is a less expensive retirement, a life of living and working abroad, or the acquisition of investment property, it would be hard to find fault with anyone thinking of moving to Portugal. Despite the fact that its coastline borders the north Atlantic Ocean, its summers are hot and its winters are moderate, with temperatures rarely falling below 50 degrees Fahrenheit (10 degrees Celsius).
Sadly, the famous Portuguese “Golden Visa,” which provides a fast-tracked, 5-year path to citizenship and allows visa holders to freely travel across the borders of 27 European countries, is no longer offered to investors in residential or commercial real estate. Even so, there are several reasons to consider buying a home in Portugal other than the climate.
For one thing the overall cost of living is considerably less than it is in the United States. For example, according to Global Citizen Solutions, a self-styled “migration consultancy firm,” the cost of living including rent is 53% lower in Lisbon than in Washington, D.C. Whether it’s rent, groceries, transportation, healthcare, or any number of other categories, the cost of living in Portugal is less.
According to Numbero, the crowd-sourced database on cities and countries worldwide, it’s also less expensive to live in Portugal than in many other western European countries, including Spain, Italy, France, Germany, Belgium, Denmark, the United Kingdom, and Sweden. With the exception of Spain, the cost of living differential is substantial in every case.
Transportation is also world-class. Roughly the size of Indiana, Portugal has three international airports. Run by the national railroad company, Comboios de Portugal, the train system throughout the country is extensive. Public transportation in its cities is speedy, regular, and inexpensive, making ownership of a car optional.
For investors looking for rental properties, the Algarve region is the southernmost area in Portugal and offers a beach lifestyle in towns like Faro, Lagos, and Albufeira. Lisbon and Porto offer a distinctly urban lifestyle with an abundance of students, remote workers, and young professionals forming the backbone of the long-term rental population.
Having said all that, the good news is somewhat relative. While the cost of living in general and the cost of real estate in particular is lower in Portugal than elsewhere in Europe and the United States, Portugal has been experiencing a sharp, steady rise in housing prices driven largely by foreign buyers. As the graphic below indicates, prices have surged over the past decade and particularly in the past five years.
So what will I need, or should I have, to buy a home in Portugal?
While there are no restrictions on foreigners purchasing real estate in Portugal, there are a few things that are required at various stages of the process:
- The first step is to acquire a Portuguese NIF Number, or individual tax identification number, that is necessary to open a bank account and conduct various financial transactions;
- A valid photo ID such as your passport;
- A Promissory Contract (Contrato Promessa de Compra e Venda) outlining the terms and conditions of the sale;
- A 10% down payment
- Money for the Duty Stamp, which is a tax levied on all property transfers;
- An energy certificate provided by the seller that outlines the energy efficiency of the home; and
- The land registry certificate detailing the property’s location, boundaries, and current owner.
Although it is not required, you should open and fund a bank account so as to avoid problems with currency fluctuations. You should also hire a good attorney to make certain your documents are in order and that the deed and title have no encumbrances. The contract and deed will be written in Portuguese, so if you do not speak and read the language fluently your lawyer will be indispensable in explaining the document. The settlement will also be conducted in Portuguese.
You would be advised to have a local realtor who frequently helps people from the United States purchase properties. The buyer’s agent fee can be paid either by the seller or the buyer, with listing agents generally charging between 5% and 6% for their services and often sharing some portion of that compensation with the buyer’s agent. Compensation is subject to a 20% Value Added Tax, and most agents pass that expense along to their clients.
So, what kind of houses are available for purchase?
For starters, consider vacant or abandoned homes. In June 2023, Portugal Homes, an investment consulting firm specializing in real estate and residency through investment, estimated that there were more than 700,000 vacant or abandoned homes in the country. While not nearly all of these are for sale, thousands are, and many require substantial work to be habitable.
A brief survey of different Portuguese real estate websites suggests that these renovation projects involve a wide spectrum of work from land on which there are literal ruins that need a total rebuild to homes with sound exteriors that need interior renovations both big and small.
Some rural properties on the “ruin” end of the spectrum are selling for as little as $12,000 to $30,000, and if they are “off grid,” meaning that they have no electricity and in some cases no reliable water supply, the cost can be as little as $4,000. For those who have both a vision and from $200,000 to $400,000 to invest, these renovation projects can be incredibly rewarding.
However, if the idea of hiring architects, structural engineers, and builders while spending months to move in does not fill you with joy, there are a host of lifestyle options from which to choose. As noted previously, the Algarve region is popular with both the beach and golf course crowd. A new, two bedroom, two bathroom apartment in Fuseta, Algarve is currently selling for the equivalent of $307,500, while a new construction four bedroom, five bathroom villa in Lagos, Algarve is listed for just under $24 million. Perhaps not surprisingly, one can pay whatever one can afford within an area 125 miles across and 30 miles wide.
The Lisboa region, centered around the capital city of Lisbon, is no different. In Lisbon, the price per square meter rose 30% according to data from the Instituto Nacional De Estatistica, the Portuguese Government’s official statistical resource. Also known familiarly as Statistics Portugal, the agency puts the rise at 58% for the Lisboa region as a whole.
Checking the active listings, I found properties ranging from a 10’x12’ basement studio selling for $34,500 to a 16,300 square foot, 15 bedroom, 12 bath apartment listed for more than $17 million. In all, I found more than 500 listings in Lisbon listed for more than $1 million, including 200 listed for more than $6 million.
The chart below shows the price increase over the past five years in 15 cities popular for residential purchase and investment. The chart is derived from data supplied by Statistics Portugal. The original data expressed median sales prices in Euros per square meter. I have converted them to Dollars per square foot using the currency conversion rate on March 29, 2024. All figures are rounded to the nearest dollar.
So if you’re thinking Portugal might be the place for you for at least the medium-term, develop a plan, establish a budget, do your research to find the city that’s right for you, and surround yourself with a team of experts. Living abroad can be a glorious experience.
