The Unbelievable Benefits of Investing In Portuguese Real Estate
Boasting both a sluggish economy and increasing real estate prices, high unemployment and a welcoming atmosphere to foreigners, increasing rental prices and eye-popping government debt, Portugal is both a fascinating and contradictory environment for foreign investment. However, if you’re not scared away by Portugal’s domestic economic woes, its real estate sector can be wonderfully profitable, and its quality of life hugely desirable. In this article, we’ll go through the benefits of investing in Portuguese property, as well as pitfalls to avoid. Let’s get going.
The Joys of Owning a Part of Portugal
There’s a reason that total property transactions have increased almost 16% in Portugal over the last year, according to Statistics Portugal (INE): gradually, Europe and the rest of the world are realizing that Portugal is one of the best places to own a home in the entire world. While economic reasons play a part in this bold statement, and we’ll get to them below, the real reason is the stupendous quality of life Portugal offers, such as:
- Beautiful Beaches: Portugal has an entire face on the Atlantic Ocean, and boasts countless perfect beaches, including the World Traveler Award winning Algarve.
- Golf courses galore: Portugal has over 50 major golf courses, with more under construction, to the point where the government had to remove a tax on them to encourage more construction. The Penina Course was voted as the European Golf Resort Destination of the Year.
- Amazing natural environments, protected by government planning regimes to preserve the country’s natural beauty
- Perfect weather: the summer is cooled by the Atlantic breeze and the winters are warm, with rain coming in short bursts and few grey days. A truly unbeatable climate
- Easy navigation on almost entirely uncongested roads. Say tchau to traffic
- The cost of living is ridiculously cheap! Utilities like gas and electricity are low by European standards, and a 3-course meal can run you as little as 10 Euros. The food is fresh and delicious, with some of the best growing conditions on the continent, and the world-class vineyards produce some of the most excellent wines in the world.
- The country is rich with history and culture, including 13 of the UNESCO World Heritage sites, as well as a unique and beautiful blending of old Moorish architecture with Latin and European designs.
- The country is safe, with very low crime and no terrorism, which is becoming increasingly important in the modern world.
Thus, with perfect weather, beautiful natural environments, amazing beaches and golf courses, and high standards of living for a low cost, Portugal is one of the best places in Europe, if not the entire world, to live or retire. However, while the quality of life will get you interested, the economic considerations will be what truly get your attention.
The Economics of Buying Property in Portugal
While the Portuguese economy as a whole has experienced sluggish growth for decades, usually around 1%, and has experienced economic contractions as high as 4% in 2012, with a 15 year total growth of just 0.2%, the real estate sector has fared far better than the rest of the economy. In the last year,
- Property prices have increased 3.84%
- Flats prices increased by 3.77%
- Villa prices increased 4.77%
Overall, Portugal has had positive housing price growth for about 3 consecutive years, and a positive rate of housing price changes since the lowest slump of the recession in 2012. This isn’t expected to change now that the world economy has recovered, and investing in the growing Portuguese real estate market should yield continually positive results in the future.
Specifically, several regions of Portugal have grown faster than others. While property prices in the capital Lisbon have grown by about 2.59%, they have grown by
- 12.2% in Santa Maria de Feira,
- 10.4% in Oeiras and Barcelos,
- 9.9% and 9.7% in Odivelas and Porto respectively,
- 9.6% in Villa Franca de Xira,
- 8.1% in Cascais,
- and between 6% and 8% in Leiria (7.8%), Loures (7.7%), Amadora(7.6%), Sintra (6.6%), Setubal (6.5%), Gondomar (6.2%), Maia (6.2%), and Almada(6%), with growth around 5% common in other areas of the country
Some places, like Vila Nova de Gaia (4.2%), Funchal(3%), Braga (2.2%), Guimaraes (0.9%), and Coimbra (0.1%), have experienced slower growth, but as it should be evident, there are plenty of places in Portugal where you can invest your money and expect to see high year over year growth.
Portugal boasts truly impressive rental yields for Europe, as this chart from 2016 shows:
In Lisbon, yields range from 5.4% to 6.2% for both flats and villas. Moreover, other areas of the country can realize very similar yields, depending on proximity to the city center. Renting out with Airbnb can return even higher yields, although more intermittently.
Prices in Portugal per square meter are also among the lowest in Europe, making Portugal very affordable, as the chart below indicates:
In Lisbon, an 85 square meter apartment would cost about 200,000 euros to buy, while a 120 square meter apartment would be about 300,000 euros. And those are in some of the best areas too!
Finally, a quick word on taxes. Portugal’s rental income tax and capital gains tax are both about 28%, with a progressive tax on income earned anywhere in the world of between 14 and 48%. Fortunately, Portugal does not have inheritance or gift taxes, although the former may be of greater benefit to your loved ones than you. Still, a huge positive, as those conditions are rare around the world.
A Final Word:
Really, what more can be said about Portugal? The costs are low, the quality of life is tremendous, and the property is increasing in value and producing high returns. Now is the best time to get in on all that Portugal has to offer. Read our guide on getting a mortgage in Portugal, and enjoy this one final graphic to really drive the point home. Contact us at Crossborder and we can start making your Portuguese heaven a reality!