June 2023

Why Invest in Portugal: Numbers and opportunities

From world-class seafood and sunny Atlantic beaches to vibrant culture, cosmopolitan cities and vineyards aplenty, Portugal is an attractive prospect for tourists and real estate investors alike.

With an average of 300 days of sunshine each year, Portugal is an immensely popular place to live and visit. This, combined with a favourable tax regime and relatively low property prices compared to other European nations, makes it easy to see why investing in Portugal is so hot right now.

 

 

Life in Portugal

 

A Great Place to Live and Visit

If you’re seeking further signs that you should invest in Portugal, then just take a look at the international awards the country has won. At the prestigious World Travel Awards 2022, Portugal was named ‘Best Tourist Destination in Europe’ for the fifth time in six years, while Lisbon and Porto were awarded ‘Best City Break’ and ‘Best City Destination’ respectively. The country was also ranked 12th globally in the Quality of Life Index.

 

A Peaceful Sunshine Haven

It’s not just the weather and beautiful beaches that make Portugal a hot place for investment. As one of the oldest countries in Europe, it has many historical attractions that draw in tourists, from the medieval Castelo dos Mouros near Lisbon, to palaces and gothic monasteries.

Today, Portugal is a peaceful and vibrant place to live, as demonstrated by its 6th place ranking in the 2022 Global Peace Index, thanks to low crime rates and long-standing political stability.

 

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Portugal is also particularly well known for its cuisine, with freshly caught fish forming a significant part of the national diet. Bacalhau, or Portuguese codfish, is a favourite amongst locals and visitors, while decadent Pastel de Nata egg tarts are perfect for indulging your sweet tooth.

 

Investing in Portugal

Portugal is an increasingly popular place to invest, with an increase in volume of 67% between 2021 and 2022 alone, far outstripping its counterparts in Southern Europe. Though its Golden Visa programme which gave investors a fast-track to citizenship, is now set to end, there are many other factors to draw savvy investors to the country.

 

Property prices in Portugal remain far lower than in comparable European countries, while average rental yields are a relatively high 5% – a perfect combination for anyone seeking to profit from a residential property they can also visit from time to time.

 

Portugal in Numbers

 

How are the house prices in Portugal?

House prices in Portugal have been consistently increasing since early 2021, with year-on-year growth of 13.1% recorded in September 2022 and a comparable increase in the previous quarter. Lisbon saw a particularly large increase of 15.2% in the year up to November 2022.

It’s unsurprising that the demand for investment in Portugal also continues to increase, with housing transactions in Portugal rising by 8% year-on-year in 2022 and new construction licenses increasing by 3.1%.

The Portuguese economy overall is particularly strong at the moment, with growth of 6.7% recorded in 2022. Banco de Portugal meanwhile predicts ongoing growth of 1.5% in 2023 and 2% in 2024.

 

Short-term Rental Investment

How is tourism like in Portugal?

Tourism is on the increase in Portugal, with 1.5 million guests and 3.5 million overnight stays reported in January 2023. With average property prices of €3,830 per square metre across Portugal as a whole (compared to €21,179 in the UK), it’s easy to see why investing in short term rentals is such an attractive proposition.

 

What are the requirements for renting out my property in Portugal?

Renting out your property on a short-term basis requires a ‘Alojamento Local’ (short-term rental) license, but registering for this is relatively easy via the Tax and Customs Authority website. It’s important to be aware of limitations on the granting of new licenses in some areas due to laws that are moving through the Portuguese Parliament at time of writing.

 

Where to Invest in Portugal?

It’s perhaps unsurprising that the most popular places to invest in Portugal are it’s two largest cities, both on the Atlantic coast with beaches aplenty.

Lisbon is renowned for its sunshine, Michelin star restaurants and laid-back way of life. It’s also a popular hub for international tech companies, further increasing demand for rentals from workers who move there.

Rental yields in the city range from 3% to 10%, while house prices are on average around €5,116 per square metre – more than most other Portuguese cities, but a bargain compared to most European capitals.

 

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Further up the coast, Porto offers a cheaper deal, with an average of €3,276 per square metre. It’s a popular place to visit and live, with many digital nomads setting up home there. With countless world-class attractions such as Ribeira Square and the striking Clerigos Tower, it’s easy to see why. Investing in property in Porto is likely to return a rental yield between 3.5% and 6.5%.

 

How to Invest in Portugal

An increasingly popular and simple way of investing in Portuguese property is through a rental management company. You can find detailed information about this and helpful advice in our handy guide.

 

Golden Visas

Since 2012, Portugal has offered foreign investors the chance to benefit from temporary residency status and a five-year fast-track to permanent residence via a ‘Golden Visa’. At time of writing however, legislation is moving through Parliament to end the scheme. Existing Golden Visas will be honoured.

 

Incentives for investors

In addition to the above scheme, there are several incentives for foreigners to invest in Portugal. The non-habitual residence scheme provides investors with exemption on all foreign sources of income for 10 years and a 20% flat rate on incomes within the country.

Entrepreneurs also have the option of applying for a Startup Visa, which provides a residence and work visa, if they intend to develop a business offering innovative goods and services.

 

Taxes

If you’re a non-resident, you will only be taxed on your Portuguese income, unless you are in Portugal for 183 days a year or more. A flat tax rate of 15% applies to your net rental income in the country.

If your property is worth more than €600.000, you will also be required to pay a wealth tax of 0.7%, or 1% if your property is worth more than €1 million.

If you later sell the property, as a non-Portuguese resident you will pay capital gains tax at a flat rate of 28% on your profits from the sale.

 

Get the most out of your investment

 

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