Why Invest in Portugal
If you looking for 100% lifestyle at a fraction of the cost of your home in the UK or Ireland then Portugal is the country for you
Portugal basks in more then 3,000 hours of glorious sunshine a year
Growth rates of around 10% per annum and rental yields of maximum 10% in key locations
Stunning and diverse natural beauty, from rivers, cliffs and clean sandy beaches to mountains and championship golf courses, making it popular with all kinds of visitors
Interesting history and cultural heritage with a wealth of tourism potential throughout the country
Easy access via budget airlines (2 ½ hours flight from the UK and Ireland) and an advanced road infrastructure
Interesting new markets emerging on the Silver Coast, north of Lisbon, at lower prices than in more traditional locations
One of the lowest costs of living in the EU, though prices are slowly creeping up as Portugal regularizes its tax policies with the rest of the EU
A highly appealing tourist location and quality of life conducive to a peaceful retirement destination
Founding member of NATO
Member of the European Monetary Union since 2002
Well trodden property marketplace with stability and transparency in buying procedues for foreign purchasers
Lowest crime rate in Europe and stable political climate
Construction density limits in the Algarve set to 8%, guaranteeing preservation of the natural environment
The largest area covered by golf courses in southern Europe
English is widely spoken
Only 2.5 hours flying time from the UK, and with access to inexpensive flights makes Portugal the ideal holiday destination to be enjoyed throughout the year
When it comes to outdoor activities on the Western Algarve you are spoilt for choice! Choose from a range of water sports, adventure activities and experiences such as sailing,wind surfing, water skiing and mountain biking.
Portugal has a rich variety of nature with a range of protected species and areas awarded with World Heritage status
Portugal is one of Europe's premier golfing destinations - renowned for its range of first class golf courses, Portugal is a much sought after destination, popular amongst golf enthusiasts
Discover historic towns, view the magnificent architecture and experience the beautiful culture Portugal has to offer. From bustling street markets and night life to long stretches of uncrowded sandy beaches, there is something for everyone
Experience true mediterranean living with the finest fresh seafood and wine in the world
Why should I choose Portugal
If you are looking for a safe medium to long term investment, the Portugese property market hs much to offer and healthy rental yields and capital appreciation of up to 10% is being achieved in some hotspot locations. Portugal’s huge appeal as a tourist location and second home or retirement option is due in part to a safe and solid economic climate that continues to draw overseas property purchasers.
Other factors such as a high build quality compared with other European locations, a low cost of living and a beautiful climate are added factors to draw purchasers. For golf enthusiasts, the abundance of courses extending throughout the popular Algarve in southern Portugal are famed for their world class excellence and top notch facilities. Finally the proximity of Portugal from other EU locations, along with a large expatriate community both contribute to making it a highly popular choice amongst foreign purchasers.
The Portugal property market has long been popular amongst British buyers who have traditionally favoured the southern shores of the Algarve as a destination, where some 50,000 properties are now British owned. As a member of the European Union since 1986, Portugal is regarded as a safe bet amongst purchasers seeking a well established and stable economic climate in which to invest.
One of the beauties of Portuguese property lies in the diversity of opportunities available to suit all tastes and budgets: Property located in the popular golf resorts of the Algarve is now priced high, some at multi-million levels, while you'll find very little to buy for less than 100,000 GBP. As a general guide, a good standard two bedroom apartment will cost approximately 200,000 GBP. Lower prices can be found further north towards Lisbon and the Silver coast where an emerging property market is in progress due to a new motorway linking the area easily to Lisbon and the rest of the country.
As a new trend emerges for well located rustic, rural properties, many of which are in need of some restoration, property further north along the Green Coast, beyond the beautiful city of Porto can be purchased for as little as around 30,000 GBP, but do remember that the weather is not as warm as further south.
Meanwhile if it is top class golf facilities you are after, then the most popular spot remains the Algarve, between Lagos and Tavira, where the country's most prestigious golf courses can be found, all within easy access of Faro airport. Heading east from the airport, property on the eastern Algarve is still around 30% cheaper than further west, with three bedroom villas priced at around 150,000 GBP. Property in and around Lisbon and along the coast at fashionable Cascais is also priced high.
The Buying Process in Portugal
The property buying process in Portugal is relatively easy and hassle-free. Below is a general guide aimed at familiarising you with what to expect when purchasing Portuguese real estate.
Foreigners can buy property in Portugal without restrictions but the process varies a little from that in the UK. A good, English speaking local lawyer is essential to assist you in the purchase of your property and will ensure you do not fall victim to any potential pitfalls.
As with all property purchases the world over, first it is essential to work out your specific budget and criteria for buying, as well as consider what factors are important to your specific needs. In addition, a finance plan is also necessary, along with current information from banks and lending institutions so that you are well informed prior to finding your dream property.
It is important to note that residential property legally must have the following documentation:
• Habitation Licence for all property constructed after 1951
• Official record at the Land Conservatory
• Caderneta Urbana (detailed description of the property) from the Tax Office
The Notary and The Lawyer
As in many foreign locations, the Public Notary is a legal professional responsible for the witnessing (not conveyancing) of your property transaction. The notary is not a legal advisor and will not be held responsible for any irregularities in contracts he is to witness. It is therefore of utmost importance to hire a good lawyer to keep up to the mark on the state of legal documents, payments and permits pertaining to your purchase. They will also obtain your obligatory fiscal number and arrange for your payment, if necessary, of the CEMI, a variable state tax payment, prior to completion of sale.
Promissory Contract
This contract details all the conditions of the sale is a legally binding contract that is witnessed by the Notary. At this time, you are required to pay a deposit (usually 10% of the property value). Should the vendor withdraw from the sale after signing this document, he will be obliged to pay you double this amount and if you pull out, you will lose your deposit to the vendor.
The Act of Sale
Normally you will be ready to sign the Act of Sale, or Escritura de Compra e Venda three or four weeks after the Promissory Contract, once all the legal checks and transactions have been completed. The Notary verifies all necessary documents are correct prior to the actual payment taking place. Finally, you will receive a photocopy of the entry of sale which will be signed and sealed, and your new ownership will then be registered at the land registry.
Costs
It is wise to set aside 15% on top of the purchase price to cover transfer taxes, notary fees (2.5% of property price), stamp duty, mortgage arrangement fees and surveyor's fees. Legal fees are normally set at between 1 and 2% of the property price. A power of attorney will set you back a further approx. 200 GBP if you are unable to be present for the Act of Sale.
If you are building a property, 17% VAT is chargeable on all your building materials and builders' costs.
Should you be purchasing property in Portugal that you do not intend to live in permanently, the Portuguese law requires you to nominate a fiscal representative (your lawyer or a good friend) to receive your correspondence from the Portuguese tax authorities.
Mortgages
Euro mortgages are available for foreigners in Portugal to fund between 60 and 80% of the property price and will vary according to bank and your particular financial background. Both repayment and interest only mortgages are widely available with fixed and variable rate options. Currently interest rates in Portugal are low, at around 3.40% (2007).
The maximum loan term spans 30 years and the minimum loan value is set at 20,000 GBP. Lenders will not normally take into account rental income when calculating an applicant's level of borrowing.
Some developers of off-plan developments offer buyers installment plans over a period of years. Charges applicable vary according to developer and repayments are index linked. Although these deals can sometimes be highly beneficial, it is always advisable to shop around for the best mortgage or other finance arrangement to suit your needs.
If you own property in your own country and would like to borrow against this in an equity release plan, we can introduce you to an independent financial advisor to assist you in raising the necessary finance.
Tax Matters
A local tax expert will guide you through the intricacies of the Portuguese tax system. Below is a general guide to familiarize you with the principles of tax in Portugal.
Stamp Duty
IMT, a municipal tax, replaced the old SISA system of transfer taxes in Portugal in 2003. Tax is calculated taking into account the cost of the property, its size, intended use, location and age. Evidence of payment of this tax must be presented prior to signing the deed of sale.
Capital Gains Tax
Capital gains are bracketed with income tax in Portugal, without the need for separate rates for capital gains.
Non-residents pay tax at a flat rate of 25%, which is calculated from the difference between the declared purchase and selling prices.
Residents must pay income tax at 50% on the gain and this is stretched over five years. Exemption is however given if your capital gain is from a permanent home or if you have re-invested the money into another property within two financial years from the date of sale.
Inheritance Tax
Inheritance tax is not charged if you receive property from direct members of your family. However, other beneficiaries, including unmarried partners, will be charged between 0 to 50% on their inheritance. Tax rates can vary widely, depending upon the family relationship between all parties and the value of the property.
VAT
17% Value Added Tax (VAT) is charged upon property purchase in Portugal, with lower rates on the Portuguese islands of Madeira and the Azores.
You will need to register for VAT, whether or not you are a tax resident. All real estate related services are subject a standard rate of VAT at 21%.
Tax on Rental Income
Income tax will be charged if you let out your property. Double taxation agreements are in operation to prevent your paying tax in two countries. Tax on Portuguese rental income is calculated on a sliding scale, from with 40% downwards.
Local Taxes
A form of council tax, or IMI (Imposto municipal sobre imóveis, is charged to all property owners and is calculated on the value of your property. IMI can range from 0.2 to 0.5% of the property value for new builds and 0.4 to 0.8% for older properties.
How do we travel to Portugal?
Many major budget airlines operate to Faro (serving the Algarve) and Lisbon (for Lisbon and the Silver Coast), but you will also find some more limited services to Porto, an ideal entry point for access to the north of Portugal.
Airlines flying to Portugal include BA (www.ba.com), easyJet (www.easyjet.com), Ryanair (www.ryanair.com), TAP Air Portugal (www.flytap.com), Monarch (www.flymonarch.com) and First Choice (www.firstchoice.co.uk)
