Is Buying Property in Portugal a Good Investment?

Portugal is an appealing destination for real estate investment. The country offers a stable market and an attractive lifestyle, drawing international property buyers. Its appeal as a tourist destination also influences the real estate market. Portugal’s strategic location in Southern Europe provides access to major international markets. This, combined with a well-developed transportation network, enhances its desirability. Many are drawn to Portugal for its quality of life, including a mild climate and welcoming culture. These factors establish a foundation for evaluating property investment opportunities.

Key Market Factors for Property in Portugal

Portugal’s property market has shown consistent growth in recent years, with house prices increasing significantly. National house prices more than doubled between 2015 and 2024. The median bank appraisal value for residential properties rose by 16.92% year-on-year in April 2025 to EUR 1,866 per square meter. The overall property market is forecast to grow by 5.8% in 2025, outperforming the broader EU market.

Demand for property is driven by tourism, relocation trends, and digital nomads. Portugal attracts millions of tourists annually, especially to cities like Lisbon and Porto, and regions such as the Algarve. This fuels demand for short-term rental properties. Remote working has also led more international buyers to consider cities like Lisbon and Porto for long-term stays.

An imbalance between supply and demand continues to pressure housing prices. New construction has not kept pace with rising demand, particularly in major urban centers and the Algarve. This limited housing supply, coupled with strong buyer interest, contributes to a competitive market.

Key regions offer distinct characteristics for property investment.

Lisbon

Lisbon, the capital, has a dynamic real estate market with high demand for both short-term rentals and long-term living. The average price per square meter in Lisbon reached EUR 5,720 in May 2025. Popular areas include Baixa, Chiado, Alfama, and Parque das Nações, with the latter averaging EUR 6,000 per square meter for apartments. Lisbon’s rental market is strong, with gross yields in central districts ranging from 3% to 6%.

Porto

Porto, Portugal’s second-largest city, has also experienced increased tourism and offers a mix of traditional and modern properties. Property prices in Porto advanced 5.84% year-on-year to EUR 3,768 per square meter as of May 2025. Popular neighborhoods include Ribeira, Foz do Douro, and Bonfim, with average prices in areas like Cedofeita and Boavista around EUR 4,016 per square meter. Porto offers rental yields of approximately 4% to 6%.

The Algarve

The Algarve, known for its beaches and warm weather, is a popular destination for tourists and retirees. This region remains a top choice for property investment, especially among international buyers, with high demand for vacation rentals. The average price per square meter in the Algarve was EUR 3,414 in July 2024, with luxury areas like Loulé reaching EUR 4,073 per square meter. Rental income potential is strong due to consistent tourist influx, ensuring high occupancy rates for short-term rentals.

The Silver Coast

The Silver Coast, situated between Lisbon and Porto, is gaining popularity due to its affordability and natural beauty. Property prices here are more accessible than in Lisbon or the Algarve. For instance, the average asking price in Nazaré was EUR 2,956 per square meter in 2024, while Peniche was EUR 2,642 per square meter. This region presents opportunities for rental income, particularly with the growth of short-term rental platforms.

Inland and Northern Regions

More inland and northern regions like Braga and Coimbra offer more affordable prices while attracting student and tech populations. The Alentejo region, for example, has significantly lower average housing costs, with some areas around EUR 635 per square meter. These areas can appeal to long-term residents or those seeking tranquil settings.

Financial Commitments and Potential Returns

Purchasing property in Portugal involves various financial commitments beyond the sale price, including taxes and associated fees.

Upfront Costs

The primary upfront cost is the Property Transfer Tax (IMT – Imposto Municipal sobre as Transmissões Onerosas de Imóveis), which the buyer pays before the final deed. IMT rates vary from 0% to 8% of the property’s value, depending on its type, location, and whether it will be a primary residence or a secondary home. Rural properties incur a 5% IMT, while commercial properties are subject to a 6.5% rate.

A Stamp Duty (Imposto do Selo – IS) is levied on the property purchase at a flat rate of 0.8% of the transaction value. This tax is also due before signing the final deeds. Other acquisition costs include legal fees, ranging from 1% to 1.25% of the purchase price, and notary fees, between EUR 800 and EUR 1000.

Registration fees, covering the recording of the property title, can add another 1.5% to 2.5% of the property price, often combined with notary charges. Buyers should budget an additional 6% to 10% of the property’s purchase price to cover these incidental costs. For properties under EUR 1 million, this total falls within the 7% to 8% range.

Ongoing Costs

Ongoing costs are an important consideration for property owners in Portugal. The Municipal Property Tax (IMI – Imposto Municipal sobre Imóveis) is an annual tax calculated on the property’s Taxable Asset Value (VPT), which is lower than its market price. IMI rates are set by each municipality, ranging from 0.3% to 0.5% for urban properties and 0.8% for rural properties.

Properties with a Taxable Asset Value exceeding EUR 600,000 for individuals, or EUR 1.2 million for jointly declared spouses, may also be subject to an additional wealth tax called AIMI (Adicional Imposto Municipal sobre Imóveis). This tax ranges from 0.7% to 1.5%, depending on the property’s value. For apartments or properties within shared complexes, condominium fees range from EUR 1000 to EUR 2500 annually, covering maintenance of common areas and amenities.

Property maintenance and repair expenses should also be factored into annual budgets, with homeowners allocating 1% to 4% of the property’s value for these costs. Utility bills for gas, water, and electricity range from EUR 60 to EUR 150 per month, depending on usage and property size. Property insurance is mandatory for mortgaged homes, with basic fire coverage starting around EUR 80 per year.

Rental Income and Capital Gains

Property investment in Portugal can generate revenue through rental income. For non-residents, rental income sourced within Portugal is subject to a flat tax rate of 25% or 28% on the net income, after deducting eligible expenses like maintenance and IMI. A 10% stamp duty is applied to rental contracts registered with the tax authority.

Upon selling a property, capital gains tax (CGT) may apply to any profit realized from the sale. As of January 1, 2023, both residents and non-residents are taxed on 50% of the capital gain from real estate sales. This taxable portion is then added to the seller’s worldwide income and taxed at progressive rates, which can range from 14.5% to 48%. Reinvestment of sale proceeds into another primary residence within Portugal or the European Union can offer exemptions from this tax under specific conditions.

Financing Options

Financing options are available for non-residents seeking to purchase property in Portugal, primarily through Portuguese banks. Non-residents qualify for a loan-to-value (LTV) ratio of 60% to 70% of the property’s purchase price, meaning a minimum down payment of 30% to 40% is required. Loan terms extend for 25 to 30 years, with age limits set around 75 to 80 years at the loan’s maturity.

To apply for a mortgage, prospective buyers need to provide documents such as:
Passport
Portuguese Tax Identification Number (NIF)
Proof of income
Recent bank statements
Utility bill

Fixed and variable interest rate mortgage options are available, with fixed rates starting from 2.5% to 3.3% in the initial years. Mortgage-related fees include an application fee, a bank valuation fee (EUR 300-600), and a stamp duty of 0.6% on the total mortgage amount.

Navigating the Property Purchase Process

The process of acquiring property in Portugal begins with a property search, often assisted by a real estate agent. These professionals provide insights into the local market and help identify suitable properties. Once a property is found, the agent facilitates negotiation and offer submission.

Key Steps in the Purchase Process

Appoint a Lawyer: Appointing an independent lawyer is an early step for any foreign buyer. A lawyer protects the buyer’s interests, provides legal advice, ensures compliance with Portuguese law, and can act on behalf of the buyer through a Power of Attorney.
Obtain a NIF: Obtaining a Portuguese Tax Identification Number (NIF – Número de Identificação Fiscal) is essential. This unique nine-digit number is required for all financial and legal transactions in Portugal. Non-residents need to appoint a fiscal representative, often their lawyer, to obtain and manage their NIF.
Sign Promissory Contract: Following offer acceptance, a promissory contract (Contrato Promessa de Compra e Venda – CPCV) is drafted and signed. This legally binding preliminary agreement outlines the terms of the future sale, including purchase price, payment methods, and deadlines. A deposit, 10% to 20% of the purchase price, is paid upon signing the CPCV, securing the property.
Conduct Due Diligence: Before the final transaction, comprehensive due diligence is conducted by the buyer’s lawyer. This process involves verifying the property’s legal and tax status, confirming ownership, and checking for outstanding debts or encumbrances. Lawyers also examine planning permissions and ensure the property complies with urban planning regulations.
Sign Final Public Deed: The culmination of the purchase process is the signing of the final public deed (Escritura Pública). This legally binding document formally transfers ownership from seller to buyer. The signing takes place in the presence of a notary or an authorized lawyer, where the remaining purchase price is paid and all documentation is presented.
Register Property: Immediately after the final public deed, the property must be registered with the Land Registry (Conservatória do Registo Predial) in the buyer’s name. The notary or lawyer handles this registration, ensuring new ownership is legally recorded and recognized. This step secures the buyer’s property rights.

Roles of Professionals

Real estate agents guide buyers through property search and negotiation. Their fees are paid by the seller in Portugal. Lawyers are the buyer’s legal advocates, responsible for due diligence, contract review, and ensuring the process adheres to legal requirements. Notaries, as impartial public officials, ensure the legality and authenticity of the final deed and facilitate official property registration.

Residency Pathways Through Property Investment

Property investment in Portugal can offer avenues toward obtaining residency through specific visa programs. While direct real estate investment is no longer a qualifying route for the Golden Visa, other options connect property ownership or related activities to residency.

Golden Visa Program

The Golden Visa Program, officially known as the Residence Permit for Investment Activity (ARI), no longer includes direct real estate acquisition as a qualifying investment category. However, property can still be indirectly related through certain investment types. These include capital transfers into investment funds focused on real estate, or investments in urban rehabilitation projects. These avenues require specific financial commitments into eligible activities.

D7 Visa (Passive Income Visa)

Another pathway is the D7 Visa, also referred to as the Passive Income Visa. This visa is for non-EU citizens who wish to reside in Portugal and can demonstrate a stable, regular passive income. Owning property in Portugal can support a D7 application by providing a place of residence or generating rental income that contributes to the passive income requirement. The D7 Visa requires proof of sufficient financial means to support oneself in Portugal.

Both the Golden Visa and the D7 Visa serve different purposes and cater to distinct applicant profiles. The Golden Visa is for those making significant investments, while the D7 Visa is for individuals with a consistent stream of passive income. Property can be a contributing factor in demonstrating financial ties or providing a residence for both programs, aligning with their respective eligibility conditions.