Guide to buying property in Portugal

Buying a home in Portugal is the dream for many expats, drawn to the beautiful country by its sunny climate and friendly culture.

This makes Portugal an ideal place to invest in property, but the buying process is a little different from other countries.

Read our detailed guide to buying a house in Portugal as a foreigner to find out everything you need to know.

Property prices in Portugal

According to data gathered by Statista, residential properties in Portugal are some of the cheapest in western Europe.

This makes Portugal a more desirable country for property investment than its neighbour Spain and other warm countries like Italy, Malta, and Turkey.

As in any country, the cost of buying property in Portugal varies according to size, quality, and location.

Properties in highly desirable coastal areas like the Algarve tend to be the most expensive, and villas are usually more expensive than apartments.

Here are the average prices of properties in several districts of the main cities in Portugal according to Get Golden Visa:

The closer it is to an urban centre, beachfront, or attractive development like a golf course, the more the property will cost.

And the more luxury amenities the property has, such as private parking or a pool, the higher the property taxes will be.

When you’re looking for a property in Portugal, you’ll need to be familiar with the names for different types of properties.

• Casa/moradia - detached house or villa (usually with a back yard or patio)
• Casa geminada - semi-detached house
• Condomínios - apartment unit in a development with shared common areas
• Quintas - rustic house or farm house
• T0 - studio apartment
• T1 - one-bedroom apartment
• T2 - two-bedroom apartment
• T3 - three-bedroom apartment

Here are the prices you can expect for different property types in the most desirable areas according to international financial company Wise:

House prices in Portugal will be cheaper in less ‘fashionable’ areas close to main cities, with rural areas further inland being the cheapest place to buy property in Portugal.

There’s also restoration costs to consider, as purchasing a new-build will be cheaper than restoring an older property even if the building cost less to buy.

Resale properties are a great quality investment as you can see exactly what you’re getting and save on utility installation costs.

Another option is to buy land in Portugal (terreno) to build your own property, as rural plots of land can be extremely cheap - though the complete process of building a house won’t be.

When you’ve found a property you want to purchase, you’ll need to know how to move on with the property buying process.

The property buying process in Portugal

Whether you want to buy a permanent property or a holiday home in Portugal, you don’t have to worry about purchase restrictions for foreigners.

Anyone from any country can buy property in Portugal as long as they get a Portuguese tax number and follow the legal process.

Buying property in Portugal tends to be much easier if you hire a local lawyer who speaks the language to help you manage the legal documents.

Required documents

All non-residents must get a tax identity number or NIF (Número de Identificação Fiscal) to be able to buy property in Portugal.

These are available for a small fee from any local government finance office (Repartição de Finanças) when you provide proof of identification, such as your passport.

The tax office will ask for an address in Portugal to send your fiscal card (Cartão de Contribuinte) to, so most people will have their estate agent or solicitor manage this.

Once you have your tax number, you’ll be able to open a Portuguese bank account.

You’ll need a bank account in Portugal to get a mortgage if you plan to finance a property purchase this way, as well as for international money transfers and setting up local insurance and utility payments.

Again, if you have a representative like a lawyer, they can help you to choose a bank and set up an account as well as apply for a mortgage.

Financing (securing a mortgage)

Interest rates are low in Portugal and Portuguese banks are fine with offering mortgages to foreigners. 

However, non-residents are usually only offered around 60-70% of the value of the property - this will go up to around 80% if you’ll become a Portuguese resident in the near future.

Non-residents also tend to get shorter mortgages of 25 years with a higher deposit of 30%, compared to 30 years with a 20% deposit for residents according to Expatica.

It’s best to sort out a mortgage as early as possible in the process so you know what you can afford.

A solicitor can help you with this, including choosing between a variable or fixed-rate mortgage.

To qualify for a mortgage, you’ll need to provide evidence of your income, including:

• Salary
• Investments
• Pension
• Dividends
• Rental

The bank will also need to know about your employment history and any existing debts.

You can supply copies of payslips, bank statements, tax returns, and your credit report to satisfy these requirements.

Additionally, you’ll need to supply your ID, proof of address, and a floor plan of the property you intend to buy.

The bank will determine the property’s loan value then make you an offer if your application is successful. 

Portuguese banks also require you to get home insurance and life insurance if you want a mortgage loan.

Promissory contract (reservation)

There’s usually some room for bargaining, so negotiate with the seller until you find an agreeable price for both of you.

When you’ve settled on a price, you’ll sign a notarised promissory contract to reserve the property (known as a CPCV, or Contrato de Promessa de Compra e Venda).

This is a legally binding document which comes with financial penalties for withdrawal - in which case, the buyer forfeits their deposit or the seller has to pay double the deposit value back to the buyer.

Once both parties sign the promissory contract, the seller will take the property off the market while you finalise your financing, and you’ll make a down payment of 10-30% of its value.

This deposit or reservation tends to be around 6,000€ - 20,000€ depending on the property value. 

Your lawyer will carry out checks on the property within 15-30 days of signing this contract to make sure everything in it is accurate.

These details include:

• Identity of the seller
• Identity of the buyer
• Agreed property price
• Payment terms
• Details of the property and attached land area
• Inventory (e.g. included furniture or memberships)
• Registration and tax numbers
• Absence of outstanding debts
• Valid building permits and utility connections
• Energy efficiency certification
• Exchange date
• Intended completion date
• Conditional clauses (e.g. adverse construction)

It’s important to have a solicitor complete these checks, as you’ll become legally responsible for any of the previous owner’s taxes or community fees attached to the property once you buy it.

Once everything is verified and the deposit has been paid, you can move onto the next stage of the buying process.

Please note that buying an off-plan property which hasn’t been built yet or is currently being constructed will have a different payment process.

Completion (closing the sale)

Generally around 1-2 months after signing the promissory contract, you’ll sign the final deed of sale and transfer legal ownership of the property.

You should always perform a final check of the property before completion to make sure it’s still in the same condition as when you signed the promissory contract.

Upon both you and the seller signing the Escritura Publica de Compra e Venda in the presence of a notary, you’ll pay the remaining balance of the property value and the buyer will hand over the keys to the property.

The notary will check all the documents are valid and the property taxes are paid up to date, then provide certified copies of the transaction.

Payment and registration

Any final balance, minus deposits and mortgages, must be paid by secure bank transfer or banker’s draft so the notary can confirm it.

You can withhold the payment if your pre-completion property inspection reveals a last-minute issue that needs resolving first.

If everything has gone as planned then you can make the payment, sign the Escritura, and submit your notarised copies to the local government offices as soon as possible.

Unless your notary has confirmed they’ll do it for you, your lawyer or yourself needs to register you as the new property owner with the land registry (Conservatória do registo predial) and the tax office (Repartição de finanças).

You’ll also need to transfer any existing utility contracts to your name and bank account from the completion date.

Taxes and fees for properties in Portugal

There are many individual fees involved in the total cost of buying a property which add extra costs to the purchase price.

The taxes and fees you can expect to pay on your property include:

• Lawyer fees (1%-2% or hourly rate)

• Notary fees (0.2%-0.5% including deed registration fee)

• Estate agent fees (generally 5% + VAT, payable by the seller)

• Surveyor fees (if hired to inspect the property)

• Mortgage fees (1%-2% for valuation and administration)

• IMT transfer tax (0%-10% depending on property value)
• Stamp duty (fixed flat rate of 0.8%)
• Utility fees (if connections aren’t included)

All these fees and taxes might seem overwhelming at first, but bear in mind that each of them is only a small percentage, which add up to around 10%-15% of the property purchase price altogether.

Once you’ve bought the property, there are some other ongoing fees you’ll have to pay as the legal owner:

• IMI or municipal property tax (0.3%-0.8% depending on district)
• IRS or income tax (including rental income for non-residents)
• AIMI or wealth tax (0.4%-1% if the property value is above 600,000€)
• Community fees (if the property is part of a development with shared areas)
• Home insurance and utility bills

If you sell the property in the future for more than you bought it for, you’ll be subject to a capital gains tax, and if your children inherit the property after you pass away then they might have to pay inheritance tax - just like in the UK.

You can find out more about real estate taxes in Portugal here.

If you’re interested in tax concessions, look into Portugal’s non-habitual residency scheme or the Golden Visa to see whether you’ll be eligible.

Things to watch out for when buying property in Portugal

Buying real estate in Portugal is a big decision, and there are potential pitfalls to be wary of just like property investment in any other country.

The language barrier can makes it easier to get into trouble with illegitimate vendors, so don’t risk ending up with issues like:

• Properties without legal registration or planning permission
• Untrustworthy builders, developers, or contractors 
• Construction faults (e.g. plumbing, electrical wiring, flooring, facades)
• Overcharging by dishonest sellers
• Inheriting outstanding bills from the previous owner

This is why it’s so important to involve an expert estate agent and solicitor who are familiar with the language and Portuguese law and can steer you clear. 

Get in touch with Ideal Homes Portugal and we’ll guide you through the buying process, from finding the perfect place to completing the sale.