Lisbon, the hilly coastal city of Portugal, isn’t just a tourist hotspot. In recent years, the European capital has been attracting investors from all over the globe.
Portugal’s capital boasts a thriving economy luring foreign investors with tax incentives and backing from the European Union and banking sector. With a growing tourism market, the demand for quality hospitality services and accommodation is on the rise.
Property investors have started partnering with Airbnb management companies to respond to the demand and manage their investments in the short-term rental market.
The Portuguese quality of life
The Place to be
Portugal’s capital city is considered to be one of the world’s most attractive cities to live and invest in. For the past two years, in 2018 and 2017, it has received the prestigious World Travel Award for the best destination and best city break destination. As of 2016, Lisbon hosts the largest technology conference in the world, Web Summit, which is expected to add an additional €2bn to the economy in the next ten years.
Good Quality of Life
Lisbon is known for the high quality of life its citizens can enjoy, welcoming investors to do business but also enjoy themselves while they visit the city. The country, ranks an impressive 3rd place on the 2018 Global Peace Index, making Portugal one of the most peaceful places in the world.
The Portuguese capital is not only peaceful, but it is also one of the sunniest cities in Europe with 300 days of sun per year. And don’t get us started on Portugal’s rich cuisine. The country serves fresh fish, delightful pastry, award-winning wine and a mean cup of coffee.
It’s no wonder Portugal is a proud owner of 26 Michelin stars restaurants, 8 of which are in Lisbon, and is the favourite European country for expats to live.Almost three-fifths of expats in Portugal (57 per cent) say their physical health is better as a result of the move, compared to a global average of 36 per cent. Click To Tweet
Property investment opportunity
Lisbon has become a prime destination for property investment, enticing foreign investors with its growing economy, real estate and tourism market.
The city is becoming increasingly popular amongst international tech start-ups and multinational companies, bringing with them top talent from all over the world.
In fact, Lisbon, just this year, has been hailed as the #1 market to watch in PWC’s emerging trends in Real Estate Europe 2019.
Lisbon in numbers
In 2018, 132 000 houses were sold in Lisbon, a 22% increase compared to the year before. The average price per square meter for a residential property in Lisbon is 10,5K€, compare that to other capital cities in Europe where homeowners and investors are paying up to 29,5K€ per square meter in London and up to 17,5K€ per square meter in Paris for prime real estate. Lisbon can still offer investors a high capital appreciation.
In Lisbon, between 2012 and 2018, the city saw the number of visitors grow by 50%, driving the demand for vacation rentals, and short and long term rental accommodation.
Investing in short-term rentals
With growing tourism numbers, the increased interest in Lisbon has led to a higher demand for quality accommodation faster than the market can supply. In 2016, Lisbon tracked over 54 million overnight stays.
Property investors are responding to the growing demand by placing their investment on the short-let market and managing their short-let (or Alojamento Local in Portuguese) with Airbnb management companies.
Property managers can expect to make between 65€ to 215€ per night on the short-term rental market across the year. Rates are subject to the location, size and amenities offered by the property.
Where to invest in Lisbon
Prices are rising in Lisbon, but properties across the city still have huge potential for capital gain. Recently, GuestReady conducted a study to help investors understand where to buy property for short-term lets in Lisbon. The study further reports on the most profitable streets in Lisbon and Porto.
The best neighbourhoods to invest in Lisbon are in the downtown area – or “Baixa”, where a two-bedroom apartment in Avenida da Liberdade that can go up to 150€ per night and Rua Garrett and Rua do Alecrim both for 130€ per night.
The Avenidas Novas is also a good bet, with a two-bedroom apartment in Avenida da República bringing in 120€ per night, and one in Avenida Fontes Pereira de Melo 105€.
Lisbon’s rental yields are comparatively among the highest in Europe ranging from 4.5% to 6.7%. Find out how much you can earn with your property in Lisbon here.
How to invest in Lisbon
To be aware of the steps to take and know everything about the buying process, you can consult the Home in Portugal Acquisition Guide.
The “Golden Visa” scheme was launched in 2012 and has been actively promoted by the Portuguese government to attract foreign investors. The initiative is set-up to allow successful applicants to work and gain access to temporary residence permits. Holders of the Golden Visa benefit from full access to public services within the Schengen Area.
It’s a fast track to a European passport for investors in real estate. After five years, Golden Visa holders can apply for permanent residence. Today, since the launch of the Golden Visa program, over €4.5 billion has been invested in Portugal. Find out more about the Golden Visa here.
There are several investment incentives: From the Portuguese Government including the popular Golden Visa scheme as explained above. The government further offers a Non-Habitual Residency program that grants investors a favourable tax category; the StartUP Visa program that supports entrepreneurs by integrating them in a startup incubator, as well as giving them additional benefits.
There are even several options available for financial support from the European Union and banking sector. The European Union provides support for projects related to urban rehabilitation, technology, innovation and R&D through the Portugal 2020 program.
Taxes and Costs
Nonresidents are only taxed on their Portuguese income. Residents, who reside in Portugal for 183 days or more, are taxed on their worldwide income.
Your real-estate, employment, investment, business and professional income are subject to personal income tax. Investment, real-estate and capital gains on securities are taxed at a flat rate of 28%. Other income is taxed at a progressive rate.
You can find more about corporate property tax here.