Portugal has a reputation for being one of the hidden gems of Europe. Plopped at the western edge of the Iberian peninsula, the compact seafaring nation used to be one of the great colonial powers in the world. Now the country of 10 million people is known for its relative affordability, friendly people, cities with Old World beauty, fado folk music and delicious Port wine.
Portugal has been a travel hotspot of late. But what if you want to settle there permanently? This article will guide you through the process of buying real estate in Portugal.
Before you get started, a word.
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Now, back to what you came here to read.
Prices vary in Portugal depending on whether you’re living in an urban or rural area and if you’re living by the sea or in the country’s rocky interior. If you choose to live in an urban area, like Porto or Lisbon, you’ll likely only be able to buy apartments, not single-family homes. The following table lists real estate prices from several Portuguese cities.
Lisbon: Lisbon is the capital of Portugal, as well as its only large city. That means that real estate there is among the most expensive in the country. On the website realtor.com, the cheapest current one-bedroom apartment lists for just over $200,000 USD, and the range for most apartments is around $360,000 to $425,000 USD, with several available to buy for around a million dollars.
Porto: Portugal’s second city, a little further north but still on the Atlantic Coast, is a hilly old-world enclave called Porto.The compact city of around 215,000 has apartments for sale in the broad, but significantly lower range of $65,000 USD to around $300,000 USD.
Viseu: This small city of 100,000 souls in Portugal’s interior is often voted Portugal’s best city to live. You can buy an apartment in Viseu much more cheaply than in the bigger cities of Portugal. The cheapest apartments go for a range between $35,000-65,000 USD, and a higher tier around $240,000-500,000.
Faro: This is a great option for someone who wants to live on the coast, but not break the bank. Faro is a small city on the southern coast with a rich Moorish history. It’s a great choice for someone who doesn’t want a big urban area, but still wants to be by the sea. You can buy an apartment in Faro for around $120,000-$190,000 USD.
Buying property can be a both a time- and labor-intensive process. And if you’re moving to Portugal from abroad you’ll want to begin your search well before you move to your new home.
That can be tricky, though, as purchasing a home means making multiple large transactions, like home inspections and down payments. Doing those in your home country is hassle enough. But trying to pay thousands of dollars from one country to another can raise another issue: currency exchange rates. If you have to wire a payment to a real estate professional in Portugal from home in the US, a large share of that money could be eaten when exchanging your money from US dollars into Euros. Don’t forget, the middleman performing the currency exchange gets to take a cut. Since most providers don’t use the mid-market rate, that can add up to quite a chunk of change.
Stressed about the prospect of vendors taking a bite out of your hard-earned down payment? The all-purpose wire transfer and currency exchange website TransferWise has got you covered. They have a wonderful new financial services offering called the borderless account. It’s perfectly suited to someone who needs to transfer and spend money across borders.
Having a borderless account is like having a bank account in numerous countries of the developed world at the same time. Now it’s simpler than ever to make and receive payments across the world. Traditional bank accounts are tethered to the country they were opened in. But the borderless account gives you bank information for countries spanning the globe. You are issued a British account number and sort code, a European IBAN, an Australian account number and BSB code, a New Zealand account number, and a US account number and routing number. It’s like you have an account in every one of those locales and the entire Eurozone.
With the Borderless account, you can deposit money for a real estate transaction in the account from the US and have it paid out to a liaison in Portugal simply and for the fairest rate you’ll find anywhere. With no account opening fees, give it a try today.
Rental Yields in Portugal
When buying rental property, one of the key factors to consider is if the rental yield for a given area is strong. That means that whatever you’re collecting for rent for an apartment in a city like Porto is enough to cover your own mortgage, plus any utilities, maintenance, or repair costs for the property, and still leave some room for pure income. Rentals are meant to make money for you, after all. You want to make sure you’re making a sound investment.
So how does Portugal stack up? Let’s take Lisbon as a representative sample. The housing market in Lisbon remains sensibly priced still, not over-priced like some European capitals. Rental yields in Lisbon range from around 4.5% to 6.7%, and smaller apartments fall on the higher end of the yield range. Apartments in smaller cities like Cascais and Oeiras can expect to yield about 6.7% and 6.15%, respectively.
In the coastal city of Faro, you can expect a rental yield of around 4.5% for a 120 sq. m. apartment. ²
Portugal, generally, has one of the higher rental yields of in Europe, with 5.45%.³
For any place you rent out in Portugal, you’ll need to collect rent. Yet again, TransferWise is the perfect tool for collecting rent while abroad. You already know the exchange rate will stay low and you’ll pay out for less in bank and transfer fees than with a traditional bank.
Being approved for a mortgage in Portugal is no more difficult than getting one in any other country. It just takes preparation and the right paperwork.
As soon as you know you want a mortgage for a property in Portugal, you should begin the process, as it can be time-consuming. Banks are still happy to offer loans to buyers from abroad as long as they can demonstrate the ability to make regular payments. Portuguese banks typically offer 30-year loans for non-residents. Lenders typically want you to be able to put up 20% of the purchase price. Like many lenders, they also require proof of your financial position, and an independent valuation of the property you hope to buy. ⁴
One thing you should keep in mind is that while there is no limit on how much you can borrow in Portugal, most banks will only offer to cover up to 65-75% of the value of the property, so it’s important to be in a stable financial condition and able to cover the share of the property that the bank does not.⁵
New construction slowed down in Portugal early in the decade, from around 2012–2016. But it has since picked up and is forecasted to be strong from 2017 through 2021. The growth of the construction industry in the next few years bodes well for those hoping to buy a home or rental property in Portugal, as there should be an increase in housing supply.⁶
Portugal is a vibrant country with a strong economy and robust local culture. It’s a wonderful place to live, rent out property or do a combination of both ——buy a home and rent it out part of the year. If you’re thinking of buying property there, TransferWise can help with many of your financial needs: from buying the property to collecting rent. The world has become more global and interconnected and TransferWise is one of the few financial pioneers that understands that. If you’re thinking of making a big real estate purchase in Portugal but have cold feet, remember this Portuguese proverb: “Quem não arrisca não petisca.” It translates to “Those who do not risk do not have a snack.”
All sources last checked 29 April 2019
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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