Portugal is a hot property market of Europe
Advantages and statistics for investing into Portugal real estate
Portugal Property Guide
Portugal - hot European market
According to the great article published by Listglobally, we can see that Portugal is one of the safest countries to invest into real estate. If we sum up the article ideas, we’ll come to the following points:
According to a study by APEMIP (Association of Real Estate Professionals and Companies of Portugal), Portugal takes the 19th place on real estate prices list (having France, the UK, Spain and Switzerland above in ranking and leaving Greece behind)
Emerging Trends in Europe ran a survey about the best European cities (2019) and moved Lisbon to the first place from the 12th and made Berlin shift to the second place. The main criteria for the respondents were “quality of life” and “positive leadership”
Property prices are constantly rising (without any peaks)
Property bubble is not likely to happen, that’s analyzed and confirmed both by Portugal Monetary Fund, International banks and investors. Mortgage and development sector are kept now under stricter control.
Let’s look at these and other factors and try to understand the reasons to invest into Portugal in 2019.
Real estate prices
According to Eurostat, house prices in euro area rose in general by 1.6% in the second quarter of 2019 in comparison to the previous period. Ini.pt marks the price ranges - the top expensive places to buy real estate in Portugal are Algarve with €1,562 / m2 and Lisbon with €1,355 / m2. It’s logical - both are favourite tourist destination points, the number of foreign tourists in general increased in 2018 – from 12,7 to 12,76 million, so these numbers shouldn’t decrease a lot.
According to INE.pt, The Lisbon Metropolitan Area is the subregion with the highest price range among municipalities (€2,437 / m2): the lowest value was registered in Moita (€674 / m2) and the highest in Lisbon (4 neighbourhoods in Lisbon observed average property prices above €4,000 / m2). The Algarve, the Autonomous Region of Madeira and the Porto Metropolitan Area also presented price differentials between municipalities larger than €1,000 / m2. It means you can find different offers even in the most expensive locations of Portugal. For those who are interested in increasing prices, Porto and Amadora registered the biggest growth – 20% and 22,7% accordingly.
Emerging Trends in Europe ranking
After a new PWC survey has been released with prospective view to 2020, Lisbon moved down from the pedestal, though still comes within the first 10 European cities. 61% of respondents think that one of the problems in 2020 can be the housing prices affordability, thus it’ll be a way to look for places with softer prices and Lisbon is definitely an option.
The main problem people are concerned about this year is the climate change, which also will impact not only the selection of target country to invest to, but also the whole real estate market around the world.
Non-permanent residence status and exemption from tax payments
One of the things that is surely advantage of moving assets to Portugal is the possibility to exempt from tax payments when you get a non-permanent residence status. It’s a good thing in case you would like to spend at least 183 days in Portugal and didn’t apply for this residence status in the last 5 years. It allows you both to exempt from double taxation and payments of interest and dividend taxes. It can also save your money in case of inheritance. Please see more details about this opportunity in our article about tax benefits.
What about economics?
Portugal’s economy is doing better than before, last year the GDP increased by 2.1% in volume compared to 2017, export increased by 5.3% (and made almost €58M), poverty risks as well as unemployment rate have been decreasing from year to year (source: INE.pt). It’s not yet perfect, but people feel much better in Portugal now – they have higher income, have access to health and social services and can afford travelling (Portuguese make the maximum number of tourists travelling through country).
It’s also worth mentioning that government initiatives about attracting new talents and brains already have their results and more and more people register startups and tech businesses in Portugal. It plays a great role both in amount of taxes paid and activity in real estate market. More people need an accomodation (smaller flats are of course more popular among nomads). This is the case mostly for Lisbon, but such places as Braga and Viana do Castelo proved to be tech hubs of Portugal too.
Rental yields you can achieve
Although Portugal has moderate property prices, it takes the 9th place among European countries with the highest rental yields. According to multiple experts (and confirmed by Numbeo), the gross rental yield in Lisbon varies from 4.7% to 5.7% which is way better than in Paris. In both cities it’s more than easy to find a tenant (short term or long term). In cities with higher rental yield you will spend more time to find new tenant in case of your property vacations. E.g. you can achieve up to 7% in Porto, and probably it’s worth all the search and marketing efforts.
Other expenses include all the management stuff like electricity installation, property tax and building management fees and can vary. As you can see the average income per month makes €545.71 and €6,548.52 per year, but you need to keep in mind the income tax 28%, which will make €2,352 per year. So at the end you'll have €4,196.52 net income per year. Since the buying price of this flat was €120,000 return period might be approximately 28,5 years. And there are 2 options to return your investments faster - choose short term rentals or decide for assets with higher yields.