Updated: February 15, 2024
Is owning your own private escape in the sun-kissed paradise of Algarve, Portugal, your dream? Buying property in Algarve, Portugal, is not only a possibility but also a smart investment.
This popular coastal region in Southern Portugal borders Spain and offers residents and tourists alike a world-class coastal lifestyle and affordable living costs and makes the perfect destination for extended holidays or relocation to the allure of a slow-paced lifestyle enveloped by stunning beaches and a fantastic climate.
The Algarve region features diverse lifestyle offerings. These include world-class golf courses like Monte Rei, an array of traditional dining options and top-tier restaurants, and a myriad of outdoor activities near the marina and on the coastline.
In this comprehensive guide, we will give you an insider’s view of life in the Algarve and offer vital insights into the essential steps of acquiring real estate there – from understanding your budget and exploring preferred areas to enlisting trusted professionals to help you with your purchase.
We will also explore the value of working with a buyer’s agent in finding the perfect Algarve property, such as their expertise in negotiating fair prices, handling paperwork, and ensuring a smooth transaction process. Let’s begin turning your Algarve property dream and investment prospects into a reality.
Why buy property in the Algarve, Portugal?
Whether you are looking for a holiday apartment, investing in a secure villa, or simply seeking an investment property with proximity to the city and sea, the Algarve region offers a variety of property options.
The blend of rich history and culture, seamless international tourist accessibility through the Faro airport, and a variety of property prices and types to choose from create the perfect environment for a successful property investment with considerable returns, whether you’re looking in the administrative capital of Faro or the scenic coastline of Praia da Rocha in Portimão.
Can foreigners buy property in the Algarve region?
There are no restrictions on foreigners buying property in Portugal. Purchasing Algarve property is also relatively easy to do if you have the right support and assistance guiding you every step of the way.
The professional assistance of a local real estate agent or buyer’s agent is not a strict requirement. However, their services will prove invaluable in the long run. Of course, if you are purchasing a property to live permanently in Portugal, you will need to secure one of the valid visa options Portugal offers.
The Algarve Real Estate Market: An Overview
The properties in the Algarve offer a unique selection of property types to invest in. From a modern apartment in the city and cozy villas near the beach overlooking the Atlantic Ocean to a quaint townhouse in the country, there are many options available for sale and rent in the beautiful coastal region that you can explore before settling on the perfect property.
Key reasons to buy property in the Algarve
Attracted by the perfect weather, the coastline, delicious cuisine, and the high quality of life, you will find a large number of expats from the UK, USA, and other countries across Europe and the globe living and buying properties in the Algarve region. In 2021, according to Portugal’s Foreigners and Borders Service (SEF), Faro accounted for 15 percent of Portugal’s foreign resident population by district, proving its allure as an ideal destination to invest in a holiday home or rental property.
It’s important to note that in October 2023, the Agency for Integration, Migration and Asylum (AIMA) took over SEF’s responsibilities and duties.
Besides safety and quality of life in a multicultural coastal region, an additional reason for buying property in the Algarve is great returns on property investment through the tourism sector or rental income. Across the region, you’ll find the possibility for strong returns on your investment.
Property prices in the Algarve
In addition to location and amenities, the price of the property on sale is one of the most crucial factors to consider. In the table below, we have provided you with a comprehensive overview of the average property prices per square meter in different locations across Algarve, Portugal, in 2023.
Average asking price (€/m2)
São Brás de Alportel
Vila do Bispo
Vila Real de Santo António
Where to buy property in the Algarve?
The Algarve offers diverse opportunities for property investment. Here, we will explore some of the region’s prime destinations offering a blend of history, scenic beauty, and thriving communities for prospective Algarve property buyers.
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 city with a mix of history, modern amenities, delectable cuisines, and a welcoming ambiance, making it a prime destination for investing in apartments, villas and other properties available for sale in the city. A real estate agent in Tavira can easily help you find your dream home.
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 both expats and digital nomads with its welcoming community of locals and overall beauty.
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 in the Algarve, especially if you are interested in earning capital from the tourism sector.
With a rich maritime history and breathtaking coastal vistas, Lagos is a top choice for property investment, appealing to diverse lifestyles, from a relocating family seeking a vibrant community to retirees in search of beauty and tranquility for their retirement. One of the most charming towns in the Algarve, Lagos captivates with its historic walled old town offering apartments and villas where you can take in stunning views of cliffs and pristine Atlantic beaches.
Faro, the Algarve region’s capital, attracts expats, making it the second most expat-populated city after Lisbon, totaling 15 percent of Portugal’s expat community. This demand creates an investor’s haven, fostering high accommodation demand. Renowned for its rich history found throughout the towns 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.
How to Buy Property in Algarve: A Step-by-Step Guide
Now that you have an idea of the price of a property in the Algarve and which towns to look at for properties for sale and rent, we have created a concise step-by-step guide for buyers outlining the purchase process and legal requirements of buyers and sellers involved in the deal.
Step 1: Secure financing for your property
Assess your finances, explore mortgage options from Portuguese banks, and understand associated costs such as taxes, legal fees, and property registration expenses.
Step 2: Find the perfect property
Set a budget and research the Portuguese real estate market, focusing on location, amenities, and rental potential. Seek guidance from real estate professionals like buyer's agents or real estate agents.
Step 3: Make an offer
Once you find a suitable property, negotiate an offer with the seller, potentially facilitated by a real estate professional. Consider having a buyer's agent representing your best interests during negotiations.
Step 4: Reservation Agreement and CPCV
After an offer is accepted, a Reservation Agreement may require a refundable fee. The Promissory Contract (CPCV) finalizes the deal, often with a 10 percent deposit, signed in front of a Notary.
Step 5: Signing the Escritura
The Escritura, or Final Deed, officially transfers property ownership. Signed before a Notary, it involves paying remaining balances and fees. After signing, the buyer becomes the official owner, concluding the process.
Requirements for a Successful Property Purchase
An essential part of the process when buying real estate in the Algarve and Portugal is applying for a Portuguese NIF number and opening a bank account. These two requirements will also come in handy for any other transactions you need to complete in the country, especially if you’re a person from outside Europe.
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 yourself at your local tax office or get an attorney to assist you. If you are a non-EU citizen, you will need to 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
Once you start the purchase process, it is important to have all the essential documents ready to ensure the property purchase journey is seamless and legally compliant with Portuguese real estate law. Working with a real estate lawyer will prove to be an invaluable asset as they will be able to assist you with getting the documents you need in order and completing due diligence checks on the property on your behalf.
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 energy efficiency of the property 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, which is a tax required by the Tax Authority for property transactions.
Caderneta Predial: The land register document that contains information about the property, including its location, boundaries, and registered owner.
Potential Pitfalls of Buying Property in the Algarve, Portugal
It’s important to consider the potential pitfalls when buying property in the Algarve. During the process, you could encounter legal complexities with property title deeds or debts attached to the property that could lead to lengthy legal battles.
Besides the purchase price, you will also need to account for additional expenses beyond the property’s listed price, such as mortgage costs for foreign buyers, property taxes, notary fees, and registration expenses. Overlooking local regulations or tax laws could lead to fines or unexpected financial obligations.
Lastly, the location of the potential property is a crucial aspect to consider. Unforeseen issues, such as zoning changes or environmental concerns, can affect the property’s value or intended use. You should also be sure to learn and understand the ebb and flow of the location during high-volume vacation seasons and off seasons like winter when life slows down and access to local entertainment and amenities may be limited.
Seeking the professional services of a buyer’s agent or experienced local real estate agent will help you understand the intricacies of property acquisition in Portugal, navigate setbacks successfully, and save you from a number of potential roadblocks along the way.
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 you will finance your purchase. In this section, we take a look at how you can plan your budget and the financing options Portugal offers for buying a dream home.
Get your budget straight
Creating a clear budget that takes the various costs into account, from initial application fees to property taxes, is crucial. If you need to finance your purchase, also bear in mind that for Portuguese residents, mortgage deposits usually range between 10 percent and 20 percent, while non-residents typically require around 30 percent of the property value as a deposit.
Financing your property: Main options
If you have the capital, one-off payments on your property purchase price will be possible. However, there is also a great selection of mortgage options 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, lasting between 3 and 30 years, currently stand at approximately 3.9 percent for up to five years.
Types of Mortgages
Fixed-rate mortgages come with a premium but offer stability, protecting against rate changes. However, non-residents face a capped LTV ratio of 75 percent. Variable-rate mortgages, tied to the Euribor, provide fluctuating rates; currently, mortgage spreads sit around 0.85 percent. Monthly payments fluctuate over time, and early repayments might incur a 0.5 percent charge on the repaid capital.
Cost and Fees for Mortgages in Portugal
Aside from application and valuation fees, there are significant costs involved in securing a mortgage in Portugal. Notary, registry, and tax office fees for mortgage deeds, along with Stamp Duty Tax (IMI) at 0.8 percent of the property price, add to the financial considerations. The Property Purchase Tax (IMT) varies from 2 percent to 8 percent of the property price.
Navigating the mortgage landscape in Portugal demands a clear understanding of available options, associated costs, and varying requirements for residents and non-residents. This clarity ensures a smoother path towards property ownership in this vibrant European destination.
Navigating the property purchasing process in Portugal entails so much more than the excitement of finding your dream home. Here, we share a brief explanation of the applicable 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 of which the amount is determined by the municipality in which the property is located. The rates range from 0.3 percent to 0.8 percent based on the property type and location.
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. The property transfer tax rate varies from 0 to 8 percent based on factors like property type, location, purchase price, and intended use. Our Portugal property tax calculator can help you calculate your potential property’s IMT (property transfer tax).
The Stamp Duty (Imposto do Selo) is an additional transaction tax charged by the Portuguese state 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.
AIMI (Wealth Tax)
The Portuguese Wealth Tax (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 €600,000 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 refers to the profit made from the property’s sale that may be subject to taxation. When you sell your Portuguese property, you will need to submit the purchase details of the property to the tax authorities for a capital gains assessment. If you reinvest the total selling price in a new home, you may be exempt from capital gains tax. Our article, Property Taxes in Portugal 2023: An Overview, is a comprehensive guide to property tax in Portugal that you may find beneficial.
Property Purchase Costs
When preparing to purchase property in Algarve, Portugal, it’s crucial to factor in the various one-off costs essential for the transaction. These include notary and registration fees, attorney fees, transfer tax (IMT), stamp duty fees, and potential expenses related to the land registry. Additionally, there might be fees associated with lawyers, especially if legal counsel is sought during the property acquisition process.
Is it worth buying property in Portugal?
There are many good reasons to buy property in the Algarve, Portugal. Some of these key advantages include:
- No restrictions on foreign property ownership
- Investing in a dynamic market with a high return on investment potential
- Low cost of living compared with other countries in Western Europe
- Fantastic climate with incredible summers and mild winters
- Top-quality education and healthcare services
Consider these benefits and take into account the potential pitfalls that you may encounter during the process, which we explored above, to decide if the Algarve is the right place for you and offers the right investment market for you.
Goldcrest: Our Expertise Can Help You Find Your Dream Property
Goldcrest is a buyer’s agent that is 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 through to property acquisition, we have you covered throughout the process. Our team of skilled experts is available to cater to all your real estate needs, offering insightful expertise and strategic advice. Book a complimentary call with us today.
Frequently Asked Questions about Buying Property in Algarve
Do I need a lawyer when buying a property?
Working with a real estate lawyer is not a strict requirement for purchasing property in the Algarve. However, their professional legal services are recommended for a seamless and compliant purchase process.
What are the additional fees when buying a property in Algarve?
Besides, the property’s asking price costs are essential to factor in, which include notary and registration fees, attorney fees, transfer tax (IMT), stamp duty fees, and potential expenses related to the land registry.
How much do I need for a deposit payment?
The deposit for the property usually lies between 10 to 25% of the purchase price based on the condition that the mortgage offer is accepted. However, to be safe, non-residents and foreign buyers should budget 30 percent of the property purchase price for the deposit payment on a property in Algarve, Portugal.
Is property cheap in Algarve?
Property in the beautiful Algarve region is quite affordable. An apartment in the Algarve capital, Faro, will cost €2,378 per square meter, while in the USA, the Californian capital of Sacramento offers city center apartments priced from €10,520 per square meter.
Is buying property in Algarve a good investment?
Besides safety, and quality of life in the Algarve, buying property here offers great returns on property investment through the vibrant tourism sector or rental income.
Where do most expats live in Algarve?
You will find substantial communities of English-speaking expats living in the Algarvian cities of Tavira, Vilamoura, Lagos, Faro, Albufeira, Alvor, and Ferragudo.
Where can I find Algarve real estate beachfront properties?
Start looking for beachfront properties online by visiting online listing websites and real estate agencies. Once you have an idea of what you are looking for and the location you are looking in, you can contact a real estate agent for assistance with the process.
A buyer’s agent like Goldcrest will also be of great value as they will have access to exclusive listings through their network and solely work on your behalf as the buyer.
What are the pitfalls of buying property in Algarve?
There are a number of potential pitfalls you could encounter when buying property in the Algarve, which is why seeking the professional services of a buyer’s agent is highly recommended. Potential issues may include:
- Legal complexities with property title deeds or debts attached to the property.
- Overlooking local regulations or tax laws could lead to fines or unexpected financial obligations.
- Unforeseen issues related to location, such as zoning changes, environmental concerns, or limited access to local entertainment and amenities.
What is IMT tax?
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. The property transfer tax rate varies from 0 to 8 percent based on factors like property type, location, purchase price, and intended use.