Buying property in Portugal as a foreigner

With an attractive climate, beautiful coast and friendly communities, Portugal is a top destination for expats looking to relocate, either for work or retirement. Many choose Portugal's capital Lisbon, which is also the largest city in the country. With just over half a million residents, it's a manageable size, but with the amenities you might expect from a European capital. Other popular expat destinations include the slightly smaller cities of Porto and Amadora, and the coastal towns and villages of the Algarve. In fact, Portugal has something to offer any foreigner looking for a new life - whether that's vibrant city living or a quiet rural retreat.

If you're planning on moving to Portugal you'll need to find a place to live. Around 75% of people own their own homes in Portugal, which is 10% higher than the average homeownership rates in the UK or USA. There are no restrictions to buying a home in Portugal as a foreigner, and the real estate sector is well developed.

Many foreigners have settled in Portugal - or invested in a second home here - already. If you’re thinking of doing the same, then you’ll need to know a bit about how the process of buying a home in Portugal as an expat will work. Here’s a quick guide.

What’s the property market like in Portugal?

Property in Portugal at the moment is a hot investment. The average value of homes dropped dramatically during Portugal’s economic woes, losing around 11% between 2011 and 2012. However, after bottoming out in 2012, the market has recovered well, reaching positive territory again in 2013, and showing more stable signs of growth from 2015 onwards.

The Portuguese housing market, as elsewhere in the world, reflects the economy closely - and this ongoing growth mirrors Portugal’s recent economic recovery. In the year to October 2016, property prices in all of Portugal’s 24 urban areas showed growth, and the Lisbon metropolitan grew around 2.6% year on year. Some areas are growing significantly faster, however, with Santa Maria da Feira hitting an astonishing 12.2% growth in the same period. Of course, where there are winners, there are also losers, and some towns showed much lower growth. Guimaraes (0.9%) and Coimbra both came in with price growth under 1%, showing it pays to choose your location wisely.

Can foreigners buy property in Portugal?

There are no special requirements nor paperwork for foreigners wishing to buy property in Portugal, so you shouldn’t have any issues. In fact, if you buy a home in Portugal as a third country national, you might be entitled to a ‘golden visa’ which gives up to five years residency, if the property is bought for over €500,000.

What’s the approximate cost of different properties in Portugal?

If you’re thinking of buying a property in Portugal, the price you pay will be influenced significantly by where you want to live. The capital and the Algarve coastal areas are the most popular places for expats looking to settle in Portugal. Across many types of property, the prices are fairly similar in these two areas, but as large apartments are at a premium in the capital city, these tend to be more expensive than along the coast.

How can I find a property in Portugal?

Property agencies and agents

There are several avenues you can take to find a property in Portugal:

• Through an agent ( imobiliaria )
• Through an online portal which puts sellers in touch with buyers directly
• Through word of mouth.

An estate agent, if used, generally works on behalf of the seller. The estate agent fees are likely to be between 3% and 5% of the price of the property, and will be covered by the seller.

Avoiding scams and pitfalls

To avoid scams and pitfalls, make sure your chosen realtor is properly registered. All agents have to be registered with the proper body (known as the Associacao de Mediadores Imobiliarios) and hold a licence number. Check out your agent’s credentials by talking to the Instituto da Construção e do Imobiliario (the body responsible for construction and realty).

When it comes to finding your own independent solicitor it’s also important to do your research carefully. You should know that there are both professionals known as a* solicitador* and an advogado in Portugal. 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. Don’t feel you have to take the recommendation of your broker or the seller - your lawyer will work for you, so you must find someone who you’re comfortable with.

Property websites in Portugal

The best way to get a head start on finding a place to buy in Portugal is to look online. There are both national and smaller local agencies, so it's worth checking out local realtors too. Great national websites to find a house or apartment to buy include:

• Century 21: This site has English language ads, and can be accessed simply using their app
• Rightmove: UK based site offering property intended for the expat market - prices reflect this
• ERA: Search using the detailed form, and find your perfect home. Portuguese only.

How do I choose the right property?

Property types

You'll have a wide choice of apartments, houses or even land if you want to build your dream home in Portugal yourself. Naturally, you'll find more flats available in built up areas and cities, with houses and villas more readily available in newer developments in the suburbs, and in towns and villages.

The recent rise in house prices has fuelled new construction in the cities and the coastal areas along with Algarve in particular, and you'll find a good mix of older properties and new build condos here.

Condition of the property

It’s a smart idea, though not required by law, to get a survey done on any property you choose, before you commit to buying it. Older houses in particular can have hidden problems which are costly to fix. Your solicitor can help you find a registered surveyor.

Other things to look out for

You must have a fiscal number (Numero de Contribuinte) to purchase a property in Portugal. You can get this through the local tax office or it's issued when you open a local bank account.

What are the steps to buying a property as a foreigner?

Buying a property in Portugal isn’t too dissimilar to buying a home elsewhere in Europe or North America. You’ll need to:

• Decide which mortgages might suit you, and get an offer in principle so you have a budget in mind
• Find the property you want to buy
• Engage an independent solicitor to help check contracts and make sure the property is surveyed
• Make an offer the seller agrees to
• Go back to the bank and finalise the mortgage
• Sign the Contrato de Promessa de Compra e Venda (sale contract) with the notary
• Pay your deposit and agree a completion date with the seller
• You're now liable for property transfer tax ( Imposto Municipal sobre Transmissões ) known as IMT. The amount you pay depends on the price of the property and your circumstances.
• The last step is to sign the Escritura Publica de Compra e Venda (Deed of Purchase and Sale) and have the property registered in your name.

What are the legal requirements to buying a property in Portugal?

The notary works as a middleman on behalf of the state, and has an extremely important role in house sales in Portugal. He’ll check the Land Registry (Conservatória de Registo Predial) and Inland Revenue (Repartição de Finanças) to make sure the property can be legally sold and check for any restrictions on its use. You'll then sign the contracts with the seller, witnessed by the notary.

How do I get a bank loan/mortgage?

Portugal has a sophisticated banking system with plenty of choice in local and international banks. The largest banks include Santander, Novo Banco, BBVA and Bankinter. You might recognise the brands as many have a global presence. For example, global banking giant Santander has a Portuguese operation, offering many of the same accounts and deals that you can get elsewhere in the world. If you have an account with them already, you may find it easier to switch to their local business in Portugal.

How do deposits, down payments, mortgages and bank loans work?

Choosing a bank

When you have chosen the mortgage product that works best for you, you’ll need to make your application. As in most places, this’ll mean that you have to arrange a stack of paperwork and visit the bank in person to get approval. In many cases you’ll have to pay a hefty application fee (in the region of €600 or more) to secure your mortgage. Each bank will operate slightly differently, so call your local branch to get the details. You should also check if there’s an English speaking staff member who can help you, as this isn’t always the case.

It’s worth getting a mortgage agreement in principle before you go on too far with your property search, as this will give you a more solid idea of what you can afford.

Deposits / Down payments

You pay a deposit of between 10% and 30% at the point of signing the initial agreement to purchase your new home ( Contrato de Promessa de Compra e Venda ). This agreement must also be notarised before you can move on with the process.

If you’re not yet in Portugal, you might have to pay your deposit from abroad. This might mean making an international money transfer to cover the deposit amount. If you are looking for a way to send money to Portugal, Wise could be an option. If you’re transferring a large amount of money across currencies, it’s important you get the best deal available. One smart option is to get a Borderless account from Wise. With this, you can hold 15 different currencies all in one account (including GBP, USD and EUR). It’s like having a local bank account which you can use to pay like a local, wherever you need it. And if you need to, you only pay a small flat charge to transfer cash from one currency to another, and you always get the real exchange rate applied.

What kind of taxes and fees will I need to pay?

Although you're liable to fees as a buyer, these vary according to the circumstances. The main cost is IMT transfer tax, which could be as high as 10% of the property value if you're non resident and live in a tax haven, or absolutely nothing if you're buying a low cost property as your main family home. Talk to your solicitor about the costs likely to be levied in your circumstances.

Fees and taxes include:

• Stamp duty: Levied at a flat rate, 0.8% the value of the home
• Property transfer tax: Imposto Municipal sobre Transmissões (IMT): This is calculated on a sliding scale depending on the cost of the home. A higher tax is payable if the property is a second home.
• Notary and land registry fees: These are usually combined and comes in at around 0.2% to 1.2% of the property cost.

Estate agents fees are usually paid by the seller.

Buying a property is a big and exciting - step, but navigating the system in a new country can be a challenge. Luckily, buying your dream home in Portugal should be fairly straight forward if you follow these steps, and source the right local help if you need it.

Good luck with finding, buying and settling into your new home in Portugal.