There are few countries in Europe which have benefited as much as Portugal from the worldwide property boom.  The country has always been very popular with tourists, and very often seems to be a consideration for retired couples looking to relocate overseas.  This has resulted in not only substantial interest in the local property sector, but a massive redevelopment and building program which seems set to continue for some time yet.

As with so many of the sunnier climbs of Europe, Portugal seems to be very popular with the UK Expat population, whether looking to retire overseas, holiday or the younger generation looking to sample life overseas.  Golf courses, apartment blocks and villas seem to be springing up on a regular basis, firmly cementing the tourist trade as a major part of both the Portuguese economy and culture.

Like so many of the recent “hot spots” of Europe, Portugal did become a major target for the time-share scams and other illegal property operations.  The possibility of foreign investors looking elsewhere soon persuaded the Portuguese authorities to act, and all estate agents are now highly regulated and can only operate under licence.

The country continues to prosper and the long term signs are still very positive, although whether property prices can continue to increase at historic rates is another matter.  Average temperatures of 13C in the North and 18C in the South perhaps offer a strong reason for the popularity of the country! 

Contents: Property Market Performance in Portugal | Property Costs in Portugal

Market Performance in Portugal

Even though the Portuguese property market has grown and developed over the last 20 years, many investors are still attracted by what they see as real value, a reasonable cost of living and a strong demand for properties.  It has not taken the Portuguese authorities too long to realise that the property market has the potential to substantially increase tax revenue for the country, and they have taken measures to ensure a fairer distribution of the cost of buying and maintaining property.

There are no restrictions on foreign ownership of Portuguese property for non-investment reasons - i.e. if foreign nationals relocate, or someone were to buy a holiday home.  However, the government have introduced stricter laws for speculators looking to make a quick turn in the market, and all investment properties need to be registered with the Portuguese authorities - thereby allowing them to monitor and control the number of speculators active in the market.

While growth over 12% in 2006 is unlikely to be bettered in 2007, especially against the back drop of a possible slowing of the worldwide economy, many analysts are still forecasting impressive price growth of some 10% for 2007.  

Places such as the Algarve have benefited from the initial boom in the property market, and as the market becomes more organised and transparent to buyers, interest is starting to shift away from the holiday “hot spots” into the relatively untouched beauty of the countryside.  The market still has lots to offer for those looking to relocate to the country and there is the opportunity to acquire a fairly priced property which should perform well in the future.

Property Costs in Portugal

Like many European countries there are quite a few tax implications and costs to consider when acquiring property in Portugal.  On average extra costs may add upwards of 15% to the overall, purchase price (although some situations can be very much higher).  Some of the costs you need to consider include :-

Transfer Tax - a sliding scale tax from 0% to 26%.  This has been at the centre of much controversy over the years, and there are moves afoot to lower the charge.

VAT - 19% on all new properties (normally included on the price)

Notary (Solicitor) Fees - Normally around 153 Euros per transaction.

Legal Fees - Conveyancing, etc which normal amount to between 1% and 2% of the purchase price.

Deed Registration - Between 0.75% and 1% of purchase price.

Surveyors Fee - Normally a set fee.

Selling Agent’s Fee - Normally between 5% and 10% of the selling price.

Mortgage Fees - Normally in the region of 1% to set up the arrangement.

It is essential that you check what fees are already included in the price and which fees need to be paid separately, as well as your own capital gains tax situation (should you decide to sell).  It can have a major effect on the final cost!