Where to buy property in Portugal

Publication by the Global Property Guide research team.

With a rich history, sun-drenched coastlines and cities filled with architectural landmarks, Portugal has a lot to offer prospective expats looking for improved quality of life. In addition, prospective property investors, simply chasing Return On Investment (ROI), can benefit from lucrative house price increases and moderately good rental yields.

Since the Global Financial Crash, where property prices reached a landmark low-point circa 2009, Portugal's housing market has gradually rebounded, becoming one of the strongest in Europe. In relation to nominal and real gains, from 2012 – 2021, house prices in Portugal have appreciated significantly in value. A sizable amount of this growth has been achieved recently.

In terms of rental yields, landlords can expect to achieve appreciable gains on their investments. For instance, rental yields in Lisbon range from 3.06% to 10.39% and on average are 5.59%. With such yields – and very affordable asking prices in comparison to other European cities – Lisbon is an example of the vast potential of Portugal's property market.

Portugal's housing market has done well to remain resilient during the rise of global inflation. Strong ROI can be secured for prospective investors. In Q2 2022, a house in Portugal cost 190,054 on average. This is in comparison to the second quarter of 2021, where the average house price was 166,116 euros.

  • During the year to October 2021, the median price of dwellings in Portugal increased by 8.63% in real terms (Globalpropertyguide.com).
  • House prices rose by 4.9% in 2015, 5.7% in 2016, 7% in 2017, 9.7% in 2018, 11.7% in 2019 and 6% in 2020 (Globalpropertyguide.com).
  • Demand has been recovering. During the first three quarters of 2021, the total number of housing transactions in Portugal rose by 25.4% Y-O-Y (Globalpropertyguide.com).

Portugal also offers tax incentives for prospective newcomers to the country. Particularly if you qualify for Non-Habitual Residency (NHR) status, investors can benefit from extremely generous tax regimes for the first ten years of residency within the country. This can include cuts to income tax and capital gains when selling UK property.

1. Porto

A coastal city in the northwest of Portugal, Porto has attracted tourists, expats and residents for centuries. More subtle and subdued than Lisbon or many of the other major European cities, Porto retains a unique charm of its own. Porto's home-grown port beverages and stately bridges are renowned, making it a particularly enjoyable destination for foodies and culture aficionados.

Moreover, property prices in the north of Portugal have been resilient, rebounding strongly during the latter half of 2021. The median property price rose by 9.16% Year-On-Year in October 2021 to €1,084 per square metre – a gain in real terms gain of over 7%. For a slower pace of life, less touristy vibe and strong capital appreciation, Porto is an incredibly viable option.

2. Lisbon

The capital city of Portugal, Lisbon is as picturesque as it is vibrant and edgy. A city which has been shaped over centuries, Lisbon’s cobbled streets, historic landmarks and beautiful cathedrals, present a truly enticing destination. For expats seeking a new lease of life – as well as capital appreciation – Lisbon is among the most resilient of Portugal's already strong housing market.

Lisbon is a city which has been given an overwhelming seal of approval by the Portuguese themselves. Lisbon was voted the most liveable city in the country and more than 1m people commute to the city each day for work. Coffee is also a staple in the city and a vast selection of distinctive coffee-houses are on offer for those who love to sit and sip throughout the day.

Rental yields in Lisbon range from 3.06% to 10.39% and on average are 5.59%. The Lisbon housing market offers vast potential – price-to-rent ratios are among the lowest in Europe. Transactions from Q1-Q3 2021 reflect the popularity of Lisbon for housing speculation, increasing YOY by 22.1%. Lisbon's house prices have risen by 50% since the previous recession.

3. Algarve

Situated on the south coast of the country, the Algarve region offers stunning beaches, sheer golden cliff-faces and sandy islands to explore. As a result, the coastline attracts approximately 4m visitors each year. For those looking to relocate, if you can tolerate the tourist masses, the Algarve can offer a truly unique and exceptional quality of life.

The Algarve is particularly resilient compared with the rest of Portugal. Europe's housing boom – which missed the rest of Portugal – was experienced in the Algarve. This growth has largely continued. From 2015 – to 2020, house prices rose on average by almost 6% (5.3% in real terms) per annum. In October 2021, the Algarve was home to the most expensive houses in Portugal, with a median house price of €1,673 per square metre.

4. Faro

Despite being the capital town of the Algarve, Faro may have been inadvertently lost in a region which has plenty for tourists and expats to choose from. Yet, it is a hidden gem in and of itself – quintessentially Portuguese and full of character. 13th-Century Faro Cathedral captures the cultural nuance and religious undertone prevalent throughout Portugal.

However, property prices vary. Northeast of Faro, you can find cheaper apartments at €100,000 to luxury villas which exceed the €3 million mark. If the price does not put you off, nearby leisure activities contribute to a peaceful and enjoyable quality of life. Keen golfers can enjoy access to several world-class courses, including Vale do Lobo, Quinta do Lago, and Quinta do Lago.