Purchasing property in Portugal: The complete guide for UK expats

With its enviable weather, competitive pricing and welcoming culture, Portugal has long been a favourite among UK citizens looking to buy property abroad.

There’s plenty to do, with social clubs, fine dining and sports facilities spread across the country’s more populous areas, while those seeking respite will find it in the rural regions.

As with any big financial decision, however, it’s not all play: there are practicalities to be considered and choices to be made. Read on for an in-depth guide to buying property in Portugal.

Why buy property in Portugal?

Warm climate

Climate is a key reason why expats and holidaymakers alike flock to Portugal. The country boasts some of the warmest weather in Europe, getting more sunshine on average than California. Having said this, winter weather in the north of the country can be quite severe, so if you’re planning to reside in Portugal all year round, don’t leave off packing some warmer clothes.

A safe country

Safety is another factor that attracts expats from all over the world. In the 2023 Global Peace Index, published by the Institute for Economics and Peace, Portugal scored seventh out of 163 countries.

Excellent healthcare

Healthcare services in Portugal are excellent and affordable. Compared with healthcare standards globally, Portugal comes off rather well.

Affordable cost of living

In addition to affordable healthcare, housing and general living costs in Portugal are comparatively low. The 2023 Expat Insider survey from InterNations found that 78% of expats in Portugal agree that their household income is enough or more than enough to lead a comfortable life.

Rich culture

Finally, the culture of the country makes it appealing even to those who have no existing connections. Local residents are notoriously friendly despite potential language barriers, and a musical heritage means plenty of opportunities to socialise at dances and regional fairs.

The property market in Portugal

As mentioned, the cost of housing in Portugal is considered competitive despite rising prices in response to increased demand.

Portuguese property prices have been climbing steadily since 2014 across the country: in the year to October 2023, the median price of dwellings in Portugal rose by 8.17%.

Yet the cost of a house in the capital city of Lisbon remains far lower than that of a London property, with a two-bedroom apartment in the city centre costing from €350,000 to €500,000 compared to over £1,000,000 in London.

There is regional variation in house prices, as with anywhere else. As you might expect, the most in-demand locations are generally more expensive. However, there are many parts of Portugal which boast stunning scenery and social opportunities for a smaller sum.

In addition to the capital of Lisbon, some popular destinations include the Algarve, Porto and Madeira. Check out our list of the best places to buy property in Portugal for more detailed information about the country’s top locations.

Types of property available

Across the country there are a variety of different property styles available, from modern city-centre apartments to traditional villas or colourful townhouses. Prices vary depending on the state of the property and the conveniences available.

Apartments are a great option for those seeking a city base from which to go out and explore. If location is your main concern, an apartment somewhere central may be the best option. Additionally, such properties are often cheaper than houses with their own grounds. Condomínios are apartments with shared common spaces which are often maintained by building management.

On the other hand, for individuals or families seeking a greater degree of privacy, a garden, and possibly a pool, a villa may be the best way to go. Many villas in the typical Portuguese style are single storey and whitewashed, with a simple, clean aesthetic and a red-tiled roof; traditional country estates or farms in rural areas are known as quintas.

Striking a balance between an apartment and a countryside villa, townhouses offer both location and luxury. Known in Portuguese as moradias or casas geminadas, they are multi-storey buildings connected to neighbouring properties – yet often have their own patio space or garden.

Preparing for the purchase

Picking the perfect property is the fun part, but there are some important less-fun things to consider before you begin your house hunt in earnest.

Review your personal finances

It’s essential that you’re financially prepared before embarking on your property purchasing journey. Remember that it’s not just the cost of the property that needs to be taken into account, but also property taxes, notary and land registration fees, and other charges and expenses.

Based on your budget and the kind of property you want, evaluate whether you’ll need to take out a mortgage for your Portuguese property. Compare different banks to get the best price for your circumstances and assemble the documentation you’ll need.

Apply for a Portuguese tax number

In order to buy property in Portugal you’ll also need a Portuguese tax number, or Número de Identificação Fiscal. You can apply for one of these via a fiscal representative if you don’t already live in Portugal.

Consult with experienced professionals

Seeking expert help early on can make the whole purchasing process smoother, less stressful, and more affordable. Not all these services are essential for the sale to be legal – nevertheless, it’s a good idea to consult a professional in areas with which you are unfamiliar.

• A fiscal representative is necessary for the procurement of a Portuguese tax number, if you live outside the country at the time of property-hunting.
• A mortgage broker is not essential but may help to ease the process of finding a suitable mortgage plan if you don’t speak Portuguese, as many mortgage comparison sites are not available in English.
• A lawyer or solicitor is likewise not a legal requirement but will help to streamline your experience and make it less stressful by ensuring all transactions are above board and fair. Some real estate agents have their own legal team available to help with the necessary paperwork.
• A notary is a highly trained and specialised lawyer who is qualified to oversee the signing of the property deed. For the sale to be legal, they must be present at the signing.
• An interpreter is not essential, but will make it easier to navigate the language barrier.
• A currency broker can help you plan any international money transfers you need to make, potentially saving you a significant amount of money.
• A buyer’s agent can help you find the perfect property and may be able to negotiate the price for you, though they do charge a fee.

The buying process for Portuguese property

Below is an outline of steps you’ll take on your journey. If you want more information, we’ve written a separate in-depth guide to the process of buying property in Portugal.

1. Property search: Once you’ve decided where you want to be and what type of property you’re after, start your search. Local and national real estate agents, online property portals and buyer’s agents are all good places to start.
2. Making an offer: When you’ve found the perfect property, it’s time to make an offer. It’s okay to negotiate the price, but make sure your offer is reasonable.
3. Legal checks and deposit: If the offer is accepted, get your lawyer to perform legal checks and look over the contract. You’ll then pay a deposit, usually around 10%, and sign the contract.
4. Property transfer tax and stamp duty: The next stage is to settle the property transfer tax (IMT) and stamp duty.
5. Property survey and due diligence: Before finalising the sale, a surveyor can check the property for any defects or irregularities. Your lawyer can use this survey to perform due diligence checks and ensure the transaction is legal.
6. Completion of the deed of purchase: The final step is signing the deed of purchase – or ‘escritura pública de compra e venda’ – in the presence of a notary. You’ll pay the remaining balance, the seller will hand over the keys, and the notary will register the property in your name.

A rundown of the costs and fees

Service fees

Lawyer or solicitor fees typically range from 1% to 2% of the property price, while notary fees are generally between €950 and €1,500 or 0.3% and 0.5% of the property purchase price, including land registration.

A property survey can cost between €300 and €500. And if you opt for a buyer’s agent, expect to pay around 5% of the property purchase price in fees.

Taxes when buying

Property transfer tax (imposto municipal sobre a transmissão onerosa de imóveis in Portuguese, or just IMT for short) varies by location and property type, with rates of 5% for primary residences in rural areas and upwards of 7% in urban areas for properties over €181,034.

Stamp duty (imposto de selo) is 0.8% of the property value and can be paid at the local tax office.

Ongoing costs

Once you own the property, ongoing taxes apply, primarily the municipal property tax (IMI), equivalent to UK council tax. Rates range from 0.3% to 0.5% for urban properties and 0.8% for rural properties, typically exempting owners with incomes below €15,295.

An additional annual wealth property tax applies if the total value of residential properties exceeds €600,000.

If you’re buying property to rent it out, rental income is taxed at a flat rate of 28% for non-residents. For Portuguese residents, rental income is added to their other income and taxed at progressive rates ranging from 13.25% to 48%, depending on the total taxable income.

You’ll also face ongoing or post-purchase costs such as furnishing the property, maintenance, and travelling expenses, so you’ll need to factor those into your budget.

Currency transfer costs

Another key cost to consider if you’re buying from overseas is the cost of transferring money from your home currency into euros.

It’s important you choose a money transfer provider that offers strong exchange rates and low or zero transfer fees, such as Currencies Direct.

Timing your transfer can also make a massive difference. If you were buying from the UK and the GBP/EUR exchange rate dropped just two cents, you’d get €6,000 less on a transfer of £300,000.

We can help you time your transfer with regular market updates and insights, or you can use tools like forward contracts and market orders to mitigate volatility. Get in touch if you want to find out more.

Utilities

To live comfortably in your property, you’ll also need to ensure services and utilities are set up and ready to use. The process is different depending upon whether you’re moving into a brand-new property or a pre-owned home.

In the first case, it will be up to you to connect all the utilities and choose suppliers. Given Portugal’s liberalised electricity and gas markets, there is a lot of choice.

To set up an electricity connection, you will need to have your details to hand, including personal identification documents, your NIF number, proof of address and bank details.

Unlike electricity and gas, the Portuguese water service is handled by municipal authorities, meaning price and supplier are fixed. Telecommunications services, on the other hand, are highly competitive – by shopping around, you ought to be able to find a good deal.

As of October 2024, the average cost of utilities (electricity, heating and water) in an 85 metre-squared apartment is around €110 to €120 per month, while telecommunications cost around €24.49 per month on a 24-month contract. Telecommunications services include internet, telephone, and TV packages.

Embracing Portugal

Key to enjoyment of life in Portugal – or anywhere new – is an openness to exploring local customs and traditions. Naturally, there will be differences between British habits and mannerisms and those of Portuguese society – to integrate fully in the community, try to adapt to your new culture.

An obvious way to integrate with Portuguese locals is to learn the language. Speaking Portuguese will give you automatic entry into spaces that may otherwise be closed off and could provide an insight into the national character.

Another way to get involved in the local community is to join social groups. Undoubtedly there will be familiar activities available such as Zumba or golf, or you could go for something entirely new like padel – a social sport a bit like tennis.

If spontaneity isn’t your style or you’re more of a homebody, online social groups also exist to help expats forge friendships based upon mutual interests and locality.

Final thoughts: planning and preparation are key

There’s a lot to be said for living life vicariously, but when it comes to moving abroad it’s best to go in with a plan. The pitfalls of overlooking vital documentation or failing to budget for an essential service could derail your relocation and set you back hundreds of pounds.

For this reason, research is key – and this guide attempts to highlight the main considerations to be made when buying a place in Portugal. We’ve written more articles on overseas property you might find useful, and it’s good to do additional research elsewhere.

It’s also advisable to talk to professionals and experts who can help you make informed decisions, whether that’s a financial advisor, mortgage broker, or solicitor specialising in property purchases overseas.

For your currency needs, contact us for expert guidance and specialist support. You can create a free account in minutes and request a call from your account manager, or reach out to us at customer.s@currenciesdirect.com or +44 (0) 20 7847 9400.