Buying Property in Portugal: How-to and Costs for Foreigners

Between its stunning coastline, pleasant climate, and affordable cost of living, it’s no surprise foreign investment makes up roughly 20% of Portuguese property transactions each year.

Offering significantly lower market prices than many of its European neighbours along with attractive potential returns and fast-tracked residency opportunities, Portugal remains one of the most popular countries for foreign real estate investment.

Who can buy property in Portugal

Can non-residents buy property?

There are no special restrictions on foreign investment in Portuguese real estate. On the contrary, the Portuguese government actively encourages third country (non-EU) investors via the Golden Visa scheme, which offers residency to those who purchase eligible properties valued above a certain value.

Those interested in gaining citizenship by investment (CBI) can gain permanent residency – along with EU citizenship – after owning a property in Portugal for over five years.

Can foreign businesses buy property?

Portugal actively welcomes international commercial investment in real estate. From hotels and retail spaces to warehouses and offices, foreign businesses are permitted to invest in all manner of enterprises in Portugal. Investors may also choose to rent out and lease their properties.

How much does it cost to buy property in Portugal?

Transaction Costs

Who Pays?
Transfer Tax 1.00 - 8.00% buyer
Registration fee 0.20% - 1.20% buyer
Stamp Duty 0.80% buyer
Legal Fees 1.00% - 2% buyer
Real Estate Agent´s Fee 3% - 6%
Costs paid by buyer 3.00% - 12.00%
Costs paid by seller 3.00% - 6.00%
See Footnotes
Source: Global Property Guide

*Rates vary by property value, location (rural or urban) and whether the property is your primary or secondary residence

Does Portugal have taxes on real estate assets?

All property owners in Portugal must pay Property Tax, or IMI (Imposto Municipal sobre Imóveis) each year. Rates vary by municipality, sitting at 0.8% of the property value in rural areas and between 0.3% and 0.45% in urban areas.

Investors planning to reside in or rent out their property may be eligible for an exemption to Property Tax for up to three years, while properties set to be renovated may benefit from up to a five-year exemption. However, it’s important to note that rental profits are subject to a fixed tax of 15% of rental income.

Owners of properties worth over € 600,000 must also pay Wealth Tax, or AIMI (Adicional Imposto Municipal Sobre Imóveis). Rates begin at 0.7% of the property value each year, increasing to 1% for properties worth over € 1,000,000 and 1.5% over €2,000,000. Commercial properties are exempt from this tax. In the case of joint ownership,

Buying property in Portugal (step-by-step)

1) Before purchasing property in Portugal, investors will need to acquire a Portuguese Tax Number, also known as a NIF (Número de Identificação Fiscal) or Contribution Number (Numero de Contribuinte). This number is used as identification for a number of transactions, such as opening a bank account or purchasing a mobile phone Contract.

2) Once buyers have found a property they want to purchase, the next step is to employ the services of a lawyer to aid in the process of drawing up contracts and ensuring the legality of sale and any special requirements of the property. This process typically takes between 15 and 30 days to complete. During this period, buyers are expected to provide a reservation fee between € 6,000 and € 20,000 to ensure other parties don’t make a higher offer.

3) After a period of negotiation, once both parties have agreed upon a price, both the buyer and seller will be required to sign a Sale Contract (Contrato de Promessa de Compra e Venda) offering a mutual guarantee. The sale can then be finalised by signing and notarising the Property Deed (Escritura Pública de Compra e Venda).

4) Buyers will typically need to provide a deposit of at least 20 – 30% of the sale price. Most major banks offer loans of 65 to 75%, and often require an application or ‘commitment fee’ starting at around € 600. Portugal’s largest banks include Santander, Novo Banco, BBVA and Bankinter, and buyers are encouraged to compare their options to find an appropriate fit.

Is Portugal a good country for real estate investment?

Portugal is a popular choice for foreign real estate investors, with roughly 35,000 transactions made each year by international buyers. Average market prices throughout Portugal sit consistently lower than many of the country’s European neighbours, with prices typically ranging between € 1,000 and € 3,500 per square metre in rural areas, rising to highs of up to € 5,500/sq. m. for more populous urban areas.

Between 2014 and 2020, rising demand among investors saw property prices throughout Portugal increase by an average of 7.5% each year. While this increase poses greater costs to potential investors, this rate of appreciation makes Portuguese real estate very attractive to foreign buyers.

Portugal’s attractive climate, gorgeous scenery and affordable cost of living attract residents and tourists from around the world, providing real estate investors with a prime opportunity to rent out their properties. Average yearly rental yields range anywhere from 4.5% to 6.7% depending on the region, while temporary lets such as Airbnbs offer the potential for higher seasonal returns.

Footnotes to Transaction Costs Table

The round trip transaction costs include all costs of buying and then re-selling a property - lawyers´ fees, notaries´ fees, registration fees, taxes, agents´ fees, etc.

Property Transfer Tax
Property transfer tax is levied at varying rates, depending on the property classification. The tax base is the selling price of the property or current market value of the property, whichever is higher.

Registration Fee
Registration fees, including the notary fees, are around 0.20% to 1.20% of the property value.

Stamp Duty
Stamp duty is levied at a flat rate of 0.80%. The tax base is the selling price of the property or current market value of the property, whichever is higher.