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Why are investors so interested in Portugal?

Interest in Portugal real estate investment has been steadily increasing over recent years. The dynamic Portuguese market has a lot of variety when it comes to opportunities, from beach houses to luxury resorts to historic townhouses.

The real draw for investors is the strength of the Portuguese market, which has bounced back impressively from the financial crisis. Portugal’s low living costs and high quality of life have drawn professionals and businesses from all over the world, which, combined with consistent growth in the tourism sector, has seen the price of real estate in Portuguese capitals enjoy a steady increase over the past few years.

The Portuguese government has also proven itself to be very business-friendly, bringing in a number of measures to encourage investment and incentivize growth. The non-habitual tax regime and the Golden Visa program are among the most successful and together have brought billions of euros worth of Portugal real estate investment.

Portugal real estate market prices

In spite of the recent growth in the Portugal real estate market, property prices in Lisbon are still far lower than other capitals in Western Europe. Real estate prices in Portugal grew by 9.2% in the first quarter of 2019, which is above the European average, and ahead of countries such as Germany and Spain. Financial experts have forecast that the market will continue increasing steadily in the years to come.

Average house prices

In Lisbon, investors can expect to pay at least €250,000 for a two-bedroom apartment, more if located in one of the more expensive areas of the city. The average price for real estate transactions in the capital was €3,482/, far cheaper than cities like Paris, which is almost triple at €12,910/.

Another advantage in Portugal real estate investments is that there are plenty of excellent investment options to choose from. Although Lisbon is a popular choice among investors, the sunny Algarve also presents a lucrative investment opportunity, with a lot of variety on offer across the entire region. Prices range from €2,168 per  in cities such as Portimao to €3,279/ for luxury properties in Vilamoura.

Real estate investors in Portugal are also looking to the city of Porto to diversify investments. The northern Portuguese city has enjoyed a tourism boom in recent years, and is less expensive than Lisbon, with investments in up-and-coming areas costing as little as €1,000/.

Rental yields in Portugal

Low real estate prices and an increase in tourism income has created the perfect opportunity for real estate investment in Portugal. The growth in the tourism sector has led to a rise in short-term rentals, which means that real estate returns in Portugal are among the highest in Europe.

City

London

Paris

Berlin

Rome

Madrid

Lisbon

Rental yield

2.79%

2.79%

2.95%

3.92%

4.00%

5.45%

Long term vs short term rental in Portugal

Both long- and short-term real estate rental in Portugal provides good returns. There are different advantages to each option and you should consider carefully which is the best for you.

Long-term real estate rental in Portugal

Advantages

  • Certainty of fixed income
    Long-term rental contracts in Portugal last a minimum of 12 months, which means that you are guaranteed rental income.
  • Less damage to property
    Tenants who stay for longer in your property tend to result in less damage in comparison to short-term tenants. This means lower maintenance costs.
  • Lower management costs
    With just one tenant occupying the property for a long period of time, you don’t have to deal with check-ins and check-outs or cleaning.

Disadvantages

  • Lower rental yields
    The rental yields of short-term lets are far higher than those for long-term rental.
  • Rent protection legislation
    Portugal has very strict protections for tenants, meaning you may find it difficult to remove tenants or raise the price of rent.

Short-term real estate rental in Portugal

Advantages

  • Higher rental yield
    Short-term rental in Portugal offers the opportunity for more returns for investors, particularly with the growing popularity of booking websites such as Airbnb. There are also many management companies in Portugal that can handle the property on your behalf.
  • Personal use
    If you would like to use the property yourself, short-term rental gives you the flexibility to stay when you like

Disadvantages

  • More hassle
    Short-term rental typically requires more involvement on behalf of the owner. It is also imperative that you find a good management company to handle the property
  • Short-term rental restrictions
    Recent legislation has placed restrictions on short-term rental in some areas of Lisbon and Porto, so it is therefore important that you check before buying real estate that you intend to rent.

Buyer’s agent in Portugal

If you would like to invest in real estate in Portugal, using a buyer’s agent is the best option for you.

A buyer’s agent will select a range of suitable properties that suit your requirements, and provide assistance throughout the purchase process.

Take a look at this article to find out why using a buyer’s agent in Portugal is the best way to buy real estate.

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