The property market in Portugal is thriving with 25% of all homes sold last year bought by foreigners. French and Brazilian buyers lead the pack. A fantastic Mediterranean climate, friendly locals, easygoing life and cheaper costs of living are just a few things that entice foreigners to make the move to this southern European country. For those who choose to relocate, there’s even better news with the introduction of tax breaks and easier residency process that make it financially lucrative to get your hands on a piece of property in Portugal.
Portugal aims to attract investors
Since 2009, the Portuguese government introduced a series of tax benefits for both EU and non-EU citizens. EU, EEA, Switzerland and those with Portuguese residence permits qualify under the Non-Habitual Residence (NHR) regime. After their first 10 years in the country, they are subject to taxes with the top bracket at 48% which is still lower than other countries in Europe. In addition, if you are investing €500,000 or more, you can get a Golden Visa which is a fast-track system for non-EU investors.
Housing prices remain affordable
After a depression of three years, property prices in Portugal began to recover in 2014 registering a growth rate of 4.84% in November 2017 according to Statistics Portugal. A stronger economy and rising demand are the main drivers for the surge in property prices. Fortunately, property prices in the country are still affordable even though the tax benefits pushed home prices upwards. The NHR is also tied to owning a home in the country to qualify which played a role in rising property prices.
According to the Global Property Guide, the country has some of the lowest prices or square metre prices for city properties in Europe which makes Portugal homes attractive to expats. And if you are looking for ways to gain access to home financing, there’s even better news as interest rates on housing loans are low at 1.019%.
Property in Portugal will increase in value
On the supply side, the inventory of housing in Portugal is limited and this also keeps the prices elevated. Since 2002, construction activity has been low with licensed dwellings in new constructions down by 90% based on INE stats. There are signs of recovery though and total dwelling stock has increased marginally in 2016. Given these factors, prices of real estate are expected to increase by 5% per annum over the next five years according to the latest RICS/CI Portuguese Housing Market Survey.
Hence, now is a good time to purchase your dream home in the country when prices are still affordable. If you are thinking of investing in property for rental income, this is also a viable option as rental yields are good especially in the capital, Lisbon. Rental yields range from 5.4-6.2% as reported by Global Property Guide.
Whether you are planning on retiring in Portugal or intend to purchase a piece of property as an investment, now is a good time to take advantage of the favourable conditions in the country. Tax benefits, easier residency rules, relatively affordable real estate prices and low loan interest rates make investing in the country financially rewarding.
