Buying Property in Algarve, Portugal: Your Complete Guide

Dreaming of buying property in Algarve, Portugal? Good news—it’s easier than you think and a smart investment choice. There are no restrictions on foreign buyers, and property investment in the Algarve offers excellent returns.

The Algarve boasts world-class golf courses like Monte Rei, Michelin-star dining, and endless outdoor activities along the sun-kissed coast and marinas.

This guide to buying property in the Algarve provides key insights to help you understand your budget, explore the best places to buy property in the Algarve, and connect with trusted professionals for a seamless purchase.

Property Prices in Algarve, Portugal in 2025

The properties in Algarve, Portugal offer a unique selection of property types to invest in. Whether you’re looking for a modern apartment in the city center, a cozy villa by the beach with views of the Atlantic Ocean, or a charming townhouse in the countryside, there are numerous properties available for sale and rent in this beautiful coastal region.

In addition to location and amenities, the price of the property on sale is one of the most crucial factors to consider. Property buyers interested in buying property in the Algarve to list as a rental property and earn rental income will be pleased to know that in 2024, rental yields in the Algarve stood at 5.6 percent.

In the table below, we have provided a comprehensive overview of the average property price per square meter in different locations across Algarve, Portugal, in 2024.

Property prices will depend on the property type, size of the property, and amenities. Bear in mind when scouting out property for sale in Portugal Algarve that, generally, as you move further from the coast or the city center, prices tend to fall.

Buy or rent Algarve property?

Deciding whether to buy or rent property in the Algarve depends on your long-term goals and lifestyle.

If you’re planning to settle down, use the property as a holiday home, or invest in property for rental income, buying is a smart option due to the region’s stable property market and strong tourism demand.

This year, the luxury property market in the Algarve is still going strong, with areas like Loulé, Quinta do Lago, and Vale do Lobo seeing an impressive 18 percent boost in sales over the past year – something to strongly consider taking advantage of if you’re in a position to buy property.

If you’re testing the waters, unsure about your preferred location, or want flexibility, renting allows you to experience the Algarve before making long-term commitments.

Where to buy property for sale in Algarve, Portugal?

The Algarve offers diverse opportunities for investing in property. Here, we will explore some of the region’s prime destinations, providing prospective Algarve property buyers with a blend of history, scenic beauty, and thriving communities.

Why buy property in Tavira, Algarve?

Nestled along Portugal’s Eastern Algarve coast, Tavira offers visitors and residents a calm coastal region lifestyle and authentic Portuguese cultural richness.

With stunning views of the Gilão River and some of the Algarve’s best beaches, like Praia de Tavira, Tavira is a charming town with a mix of history, modern amenities, delectable cuisines, and a welcoming ambiance. It is a prime destination for investing in apartments, villas and other properties available for sale in the city. A real estate agent in Tavira can quickly help you find your dream home.

Pros of buying property in Tavira:

• Authentic Portugal: Cobblestone streets, historic charm, and a slower pace of life.
• Less touristy: Peaceful and unspoiled compared to bigger hotspots.
• Great for nature lovers: Close to Ria Formosa Natural Park and beautiful island beaches.
• Value for money: Generally lower property prices than Lagos or Albufeira.

Cons of buying property in Tavira

• Slower lifestyle: Not ideal if you’re after nightlife or a buzzing scene.
• Fewer amenities: No major shopping malls or hospitals nearby (but Faro is close).

Why buy property in Portimão, Algarve?

Thanks to its historic charm, bustling marina, and being situated close to numerous stunning beaches that make it one of Southern Portugal’s sought-after destinations, Portimão is an ideal spot for property investment. The area offers warm weather and affordable living and attracts expats and digital nomads with its welcoming community of locals and overall beauty.

Pros of buying property in Portimão

• City living meets the beach: Great restaurants, shops, and nightlife right by the sea
• Strong rental market: Popular with both short-term and long-term tenants
• Convenience: Well-connected with a stunning modern marina, hospital, and modern infrastructure

Cons of buying property in Portimão

• Traffic and tourism: Can get crowded in peak season, but is peaceful for the other parts of the year
• Less traditional: More urban than historic, if you’re after a traditional town feel

Why buy property in Albufeira, Algarve?

Albufeira, located on the coast in the southern Algarve, is a holiday hub. What was once a quaint fishing village is now a sought-after destination offering sandy beaches, a vibrant nightlife, and iconic views of the striking limestone cliffs and captivating rock formations the region is known for. 

Albufeira’s rich history and Moorish-influenced architecture make it one of the best Algarve cities for property investment, especially if you are interested in earning capital from the tourism sector.

Pros of buying property in Albufeira

• Tourism hotspot: Great potential for high rental yields
• Buzzing social scene: Tons of vibrant bars, restaurants, and nightlife
• Stunning beaches: Famous for golden sands and dramatic cliffs. Praia da Oura and Praia dos Pescadores are two of the best beaches in the region.
• Expat-friendly: Easy to integrate with a large international community

Cons of buying property in Albufeira

• Tourist heavy: Can be quite crowded and noisy during peak seasons
• Higher property prices: Prime locations come at a premium
• Less authentic: More geared toward visitors than traditional Portuguese life

Why buy property in Lagos, Algarve?

With a rich maritime history and breathtaking coastal vistas, buying property in Lagos, Portugal, is a top choice for property investment, appealing to diverse lifestyles, from families seeking a better quality of life to retirees in search of beauty and tranquility to enjoy their golden years.

One of the most charming towns in the Algarve, Lagos is captivating with its historic walled old town offering modern apartments and villas to take in stunning views of cliffs and pristine Atlantic beaches. Lagos is increasingly moving into the spotlight and has become a firm favorite amongst American buyers, with many properties providing sublime ocean views. Perhaps this stunning locale in the Algarve is the place where you will uncover your perfect property.

Pros of buying property in Lagos

• Historic meets trendy: A charming old town with a modern, cosmopolitan vibe
• Best beaches: Home to some of Portugal’s most iconic coastal spots like Praia Dona Ana, Praia do Camilo, Meia Praia, and the dramatic cliffs of Ponta da Piedade
• Great for expats and families: A balanced mix of locals and internationals
• Strong rental market: High demand for both holiday and long-term rentals

Cons of buying property in Lagos

• Pricier properties: One of the more expensive Algarve locations
• Busy in peak season: Summer crowds are part of the deal
• Windy at times: Great for surfers, but not everyone’s favorite

Why buy property in Faro, Algarve?

Faro, the Algarve region’s capital, has one of the largest expat communities in Portugal. This demand creates an investor’s haven, fostering high accommodation demand. Renowned for its rich history throughout the town’s cobbled streets and cultural allure, Faro offers diverse tourist attractions, making it an enticing prospect for property investors seeking a blend of cultural richness and thriving demand.

Pros of buying property in Faro

• Airport at your doorstep: Incredibly convenient for frequent travelers and renters
• Underrated charm: Historic old town with genuine Portuguese character
• Year-round living: Less touristy, more authentic and residential
• Good investment potential: Prices are still reasonable but rising steadily

Cons of buying property in Faro

• Fewer holidaymakers: Less foot traffic for short-term lets
• Potential airport noise: Depends on property location

Property Taxes in Portugal

Navigating Portugal’s property purchasing process entails much more than the excitement of finding your dream home. Here, we briefly explain the applicable Portuguese property taxes you will have to pay for property acquisition and ownership in Portugal.

Municipal Property Tax (IMI)

The IMI (Municipal Property Tax) is an annual tax, the amount of which is determined by the municipality where the property is located. Generally, IMI ranges from 0.3 to 0.45 percent of the Property Tax Value (VPT) for urban properties, although it can occasionally reach up to 0.5 percent. For rustic buildings, the IMI rate is set at 0.8 percent.

Property Purchase Tax (IMT)

Calculated based on the property’s value or declared amount in the deed, the IMT (Municipal Tax on Onerous Transmissions of Real Estate) is a property transfer tax that needs to be paid before the purchase is completed.

IMT varies from 0 to 8 percent based on property type, location, purchase price, and intended use. There is a fixed rate of 10 percent applied if the buyer is associated with jurisdictions that have more favorable tax schemes, commonly referred to as blacklisted jurisdictions. Our Portugal property tax calculator can help calculate your potential property’s IMT.

Stamp Duty

The Stamp Duty (Imposto do Selo) is an additional transaction tax the Portuguese state charges for real estate transfers. It amounts to 0.8 percent of the deed’s total value and must be paid at the time of purchase.

Additional to IMI (AIMI)

AIMI is a post-purchase tax that applies to property worth more than €600,000. There are three levels of taxation based on property value:

• 0.7 percent tax for properties valued between €600,001 and €1 million
• 1 percent tax for properties valued between €1 million and €2 million
• 1.5 percent tax applied to property worth more than €2 million

Capital Gains Tax

Capital gains refer to the profit from the property’s sale that may be subject to taxation. When you sell your Portuguese property, you must submit the property’s purchase details to the tax authorities for a capital gains assessment. You may be exempt from capital gains tax if you reinvest the total selling price in a new home within a certain time frame.

Our article, Property Taxes in Portugal 2025: An Overview, is a comprehensive guide to property tax in Portugal that you may find beneficial.

How to Buy Property in Algarve: A Step-by-Step Guide

Now that you know the price of properties in Algarve, Portugal and which towns to look at for properties, we have created a concise step-by-step guide for buyers outlining the purchase process and legal requirements for buyers. From securing financing and finding Algarve property for sale through to the final deed signing.

Practical Information for a Successful Property Purchase

The following essentials are crucial for buying property in the Algarve. Once you start the purchase process, it is important to have all these essentials ready to ensure the property purchase journey is seamless and legally compliant. 

Portuguese tax number

You will need a NIF, the Portuguese tax number, to open a bank account in Portugal. You can apply for the NIF number at your local tax office or get an attorney to assist you. If you are a non-EU citizen, you must have a fiscal representative.

Portuguese bank account

When buying property in the Algarve, it is recommended to open a Portuguese bank account to avoid transaction fees when making your purchase. There are a variety of Portuguese banks to consider, many of which offer mortgages for foreign buyers.

Required Documents for Buying Property in the Algarve

To purchase property in the Algarve, you will need the following documents: 

• Photo ID: A valid identification document that verifies your identity.
• Contrato Promessa de Compra e Venda (CPCV): The buying contract or property deed that outlines the terms and conditions of the property purchase.
• Energy Certificate: This document provides information about the property’s energy efficiency and must be presented to you by the seller. Read our guide, Portugal’s Energy Performance Certificate Explained, to learn more.
• Imposto de Selo: The stamp duty payment is a tax required by the Tax Authority for property transactions.
• Caderneta Predial: The land register document contains information about the property, including its location, boundaries, and registered owner.

Financing your property in Portugal

If you have capital, one-off payments on your property purchase price will be possible. However, a great selection of mortgage options is available from financial service providers, including BBVA, Santander, Banco Best, Bankinter, and Banco CTT.

Property Taxes in Portugal

Navigating Portugal’s property purchasing process entails much more than the excitement of finding your dream home. Here, we briefly explain the applicable Portuguese property taxes you will have to pay for property acquisition and ownership in Portugal.

Municipal Property Tax (IMI)

The IMI (Municipal Property Tax) is an annual tax, the amount of which is determined by the municipality where the property is located. Generally, IMI ranges from 0.3 to 0.45 percent of the Property Tax Value (VPT) for urban properties, although it can occasionally reach up to 0.5 percent. For rustic buildings, the IMI rate is set at 0.8 percent.

Property Purchase Tax (IMT)

Calculated based on the property’s value or declared amount in the deed, the IMT (Municipal Tax on Onerous Transmissions of Real Estate) is a property transfer tax that needs to be paid before the purchase is completed.

As we’ve mentioned, IMT varies from 0 to 8 percent based on property type, location, purchase price, and intended use. There is a fixed rate of 10 percent applied if the buyer is associated with jurisdictions that have more favorable tax schemes, commonly referred to as blacklisted jurisdictions. Our Portugal property tax calculator can help calculate your potential property’s IMT.

Stamp Duty

The Stamp Duty (Imposto do Selo) is an additional transaction tax the Portuguese state charges for real estate transfers. It amounts to 0.8 percent of the deed’s total value and must be paid at the time of purchase.

Additional to IMI (AIMI)

AIMI is a post-purchase tax that applies to property worth more than €600,000. There are three levels of taxation based on property value:

• 0.7 percent tax for properties valued between €600,001 and €1 million
• 1 percent tax for properties valued between €1 million and €2 million
• 1.5 percent tax applied to property worth more than €2 million

Capital Gains Tax

Capital gains refer to the profit from the property’s sale that may be subject to taxation. When you sell your Portuguese property, you must submit the property’s purchase details to the tax authorities for a capital gains assessment. You may be exempt from capital gains tax if you reinvest the total selling price in a new home within a certain time frame.

Our article, Property Taxes in Portugal 2025: An Overview, is a comprehensive guide to property tax in Portugal that you may find beneficial, and which also provides insights into potential property tax exemptions.

Property Purchase Costs

When purchasing property in Algarve, Portugal, it’s crucial to factor in the various one-off costs essential for the transaction. These include:

• Property transfer taxes (IMT): 0-10 percent of the property value
• Legal fees: €2,000 to €5,000
• Land registry fee: €200 to €250
• Notary fees: €500 to €1,000

Financing Your Property in Portugal

Once you have decided on the perfect location and property for your investment in Algarve real estate, you can begin planning how to finance your purchase. This section looks at how you can prepare your budget and Portugal’s financing options for buying a dream home.

Get your budget straight

Creating a clear budget that considers the various costs, from initial application fees to property taxes, is crucial. If you need to finance your purchase, also bear in mind that mortgage deposits usually range between 10 percent and 20 percent for Portuguese residents. In comparison, non-residents typically require around 30 percent of the property value as a deposit.

Secure financing for your property: Main options

If you have capital, one-off payments on your property purchase price will be possible. However, a great selection of mortgage options is available from financial service providers, including BBVA, Santander, Banco Best, Bankinter, and Banco CTT.

Mortgages in Algarve, Portugal

Getting a mortgage in Portugal involves approaching banks or mortgage agents for an initial estimate. While residents enjoy broader borrowing options, non-residents face different criteria. Typically, non-residents should budget for a 30 percent deposit and consider factors like the Loan-to-Value (LTV) ratio, which usually hovers around 70 percent.

Fixed-rate mortgages: Come with a premium but offer stability, protecting against rate changes.

Variable-rate mortgages: With this type of loan, your monthly payment will fluctuate based on the indexer (which is usually Euribor).

Cost and fees for mortgages in Portugal

Aside from application and valuation fees, significant costs are involved in securing a mortgage in Portugal. Notary, registry, and tax office fees for mortgage deeds, along with Stamp Duty Tax (IMI) at 0.6 percent of the property price, add to the financial considerations.

Navigating the mortgage landscape in Portugal demands a clear understanding of available options, associated costs, and varying requirements for residents and non-residents. A buyer’s agent like Goldcrest will be able to offer assistance and personalized experience like connecting you to prospective mortgage brokers based on your criteria.

This will ensure a smoother path towards property ownership in this vibrant European destination.

Goldcrest: Our Expertise Can Help You Find Your Dream Property

Goldcrest is a buyer’s agent based in Lisbon, Porto, and the Algarve. Equipped with local knowledge, exclusive networks, and international experience, we provide expert, impartial advice on real estate investments and how to buy property in the Algarve, Portugal.

From scouting out the perfect property to property acquisition, we have you covered throughout the process. Our team of skilled experts can cater to all your real estate needs, offering insightful expertise and strategic advice. Book a complimentary call with us today.