Portugal: Overview
Country Rating » 
In Depth
- Overview
- Price History
- Rental Yields
- Taxes and Costs
- Tax on Rent (Example)
- Buying Guide
- Landlord and Tenant
- Inheritance
- Living There
- Useful Links
- Country Statistics
Directory
Global Statistics
Regional Statistics
- Sq. M. Prices
- Rental Yields
- Rents
- Price/Rent Ratio
- Buy/Sell Costs
- Rental Income Tax
- Capital Gains Tax
- Price Change 1 yr
- Price Change 5 yrs
- Landlord & Tenant Law
- GDP Per Capita
- GDP/Cap Growth 1 yr
- GDP/Cap Growth 5 yrs
- Economic Freedom
- Ec. Freedom 5 yrs
- Competitiveness
- Property Rights Index
- Currency +/- Value
- Taxes on Residents
Dramatic change ahead for Lisbon
The house price boom that swept through most of Europe and the developed world from 1995 to 2006 missed Portugal.
From 2001 to 2006, average property prices rose only by 17% (2% in real terms) in Portugal. In 2006, almost all regions registered property price falls while the average house price for Portugal as a whole rose by only 0.6%.
Bucking the national trend is the Algarve, popular with British and Scandinavian retirees. Average house prices in Algarve rose 6% in 2006. There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low.
On the other hand, the rental market is hampered by restrictive housing policies and by moderately high taxes. New housing laws were recently passed, attempting to tip the balance in favour of the landlord. However, tangible effects of these reforms has yet to be seen.
RENTAL YIELDS
Yields are moderate in Lisbon
Gross rental yields are around 5% to 6% in Lisbon, the national capital. For properties located in Cascais and Estoril, rental yields are lower at 3.6% to 4%.
Prime property prices in tourist-popular Algarve range from €3,400 to €4,000 per sq. m., higher than Lisbon, at €2,500 to €3,100 per sq. m., according to Global Property Guide research.
Low yields and pro-tenant laws have led to shrinking private rental market, from 39% of all households in 1981 to 30.6% in 1991 and 21% in 2001.
TAXES AND COSTS
Taxes range from moderate to high in Portugal
Effective Tax Rate on Rental Income |
|||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 13.2% | 13.1% | 13.1% |
| Click here to see a worked example | |||
Source:
Disclaimer |
|||
Rental Income: Net rental income is taxed at a flat rate of 15%, withheld by the tenant. Repairs, maintenance expenses, and local taxes are deductible from the gross rent leading to an effective tax rate of around 13%.
Capital Gains: Net capital gains are taxed at a flat rate of 25% in Portugal. Acquisition costs are deducted from the gross selling price of the property.
Inheritance: There are no inheritance and gift taxes in Portugal.
Residents: Resident individuals' worldwide income is subject to tax at rates from 10.5% to 40%.
BUYING GUIDE
Buying costs in Portugal range from low to moderate
Roundtrip transaction costs, i.e., the cost of buying and selling a property, range from 5% to 16%. Significant costs include the real estate agent’s fee (3% to 5%, plus 21% VAT), transfer tax (effective rate at 6% maximum) and legal fees (1% to 2%).
LANDLORD AND TENANT
Portuguese law is strongly pro-tenant
The law in Portugal is still strongly pro-tenant, despite substantial changes brought by the New Urban Lease Act.
Rent: The amount of the rent can usually be freely agreed between the parties, with the exception of low cost housing. Rent reviews can also be freely agreed (although they must take place annually), and, with careful drafting, cost-of-living rent increases and suchlike can be agreed.
Tenant Security: The parties may stipulate fixed-term contracts, but they must have a minimum initial term of five years, and there are automatic and consecutive extensions of three years. In the absence of such a fixed term stipulation, the lease agreement will be considered open-ended. Open ended contracts were previously much like ‘tenancy for life’ agreements and are very difficult to terminate.
ECONOMIC GROWTH
Portugal’s growth is at Europe’s tail end
Portugal (pop. 10.5 million) continued to experience weak economic performance in 2006. Although GDP growth at 1.3%, was higher than the annual average of 0.8% from 2001 to 2005, it was the lowest growth rate in all Europe. Portugal’s GDP per head, at US$18,465 in 2006, has been overtaken by Czech Rep, Greece, Malta and Slovenia.
While the adoption of the EU ushered a period of economic expansion to some countries, Portugal failed to take full advantage of opportunities created by EU membership. The strong euro vis-Ã -vis major currencies have deteriorated the country’s competitiveness has seriously deteriorated.
Portugal's economy is based on traditional industries such as textiles, clothing, footwear, cork and wood products, and beverages (i.e. wine). Its comparative advantage before was low labour costs, but it faces huge competition from Central Europe and Asia.
Weighing down on productivity are low human capital, heavy administrative burden on firms, restrictive labour market regulations and lack of competition in key sectors of the economy.
Huge fiscal deficit, at 6% of GDP in 2005, prevented the use expansionary fiscal policy to stimulate the economy. The government addressed the issue by raising the VAT from 19% to 21%, restricting public sector wages, increasing minimum retirement age to 65 from 60 and reducing sick pay sharply.
The reforms are paying off; fiscal deficit was down to 3.9% of GDP in 2006, still above the EU stability-pact ceiling of 3%. The deficit is expected to go down further to 3.3% in 2007 and 2.4% in 2008.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Bubble fears prompt foreign ownership limits in China
America & Caribbean
The slowdown of the U.S. housing market
Middle East and Africa
Bahrain is open to foreigners and sizzling hot
![]() |
|
![]() |
|
| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): €2,517 For a 120 sq. m. property, usually an apartment. | Rental Yield: 5.72% For a 120 sq. m. property, usually an apartment. |
| Rent/month: €1,440 For a 120 sq. m. property. | Income Tax: 13.25% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
|
Roundtrip Cost:
13.7%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 11.3% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice. | |
JANUARY 2008
- New airport opens up Portugal’s Blue and Silver Coasts - World of property
SEPTEMBER 2007
- Overseas property: Get sporty in Portugal - Telegraph UK
JULY 2007
- Portugal takes over EU presidency - BBC News
JUNE 2007
- Lisbon: a coastal gem where prices haven’t boomed - The Independent
- Confusion continues over property rental licence - The Resident
Subscribe to our Newsletter!
Enter your email address to sign up.





