Goldcrest has deep expertise in the Portuguese real estate market and has successfully assisted numerous clients in Portugal real estate advisory. Some of our clients have questions about whether to buy property in Spain or Portugal.
Global property investors have had an increasing interest in Portugal for the last decade and those wondering whether to buy property in Spain or Portugal should consider a few factors.
From a perspective of growth and capital gains that can be achieved, Portugal is a country that is constantly watched by real estate moguls. Other than the obvious pull that Portugal’s tourism has, it’s an attractive option because of the high rental yields, tax breaks, and lack of wealth and gifting taxes.
Spain has been more popular with retirees and those looking for a family holiday home, rather than those looking to secure a foothold in the EU property ladder.
Buy property in Spain or Portugal?
While both Portugal and Spain offer sunnier climes, it comes down to the numbers for a lot of people looking to purchase a property.
Spain has been popular as a relocation and retirement destination for many years. Despite this, for many investors, it is the less attractive option, from a purely numerical standpoint. Rental yields in popular parts of Spain are comparatively lower than those that can be achieved in the sought-after parts of Portugal. Property for sale in Portugal is also generally cheaper.
The taxation system in Spain is far less favorable to those aiming to maintain and maximize wealth through property purchases too.
Depending on the goal of the individual, there are naturally certain upsides and downsides of both real estate markets.
Portugal’s real estate market
Lisbon’s young but dynamic property market remains strong and healthy despite the pandemic
Average price of Portugal property 1,162 EUR/sq m according to the Deloitte property index
Average annual increase of 6.3% to property prices
Rental yields in Lisbon are close to 6%
Spain’s real estate market
Spain has a mature property market that has not shown signs of being affected by the pandemic yet
Average price of a property is 2,398 €/sq m according to the Deloitte property index
Average annual increase12.4% to property prices
Average rental yields in Madrid and Alicante are 3.99% and 4.14% respectively
Is property cheaper in Spain or Portugal?
Property in Portugal is far cheaper than in Spain, and with attractive rental yields in Lisbon and the Algarve, you can understand why Portugal is such a popular choice for investors.
Taxes in Portugal
Income from wages earned in Portugal is taxed at 20%
Income from outside Portugal is exempt and there is no maximum threshold
Private pensions from foreigners are taxed at a low flat rate of 10%
Income from capital such as dividends, capital gains, and other income is exempt from taxation in Portugal
Low/ marginal wealth, inheritance, and gifting taxes
Taxes in Spain
In Spain, wage income has a taxation rate of 24% up to a maximum of €600,000, rising to 45% past this threshold
This taxation rate is on income globally, irrespective of where it was received
Pensions are taxed in Spain at the income tax rate mentioned above
Dividends, capital gains, and any other forms of income are exempt from taxation in Spain
Anyone owning assets in Spain is obliged to pay a wealth tax (with the exception of Madrid)
The favorable taxation in Portugal often means wealthy individuals would rather invest money in Portugal over Spain to safeguard their investments.
Buy property in Spain or Portugal via the Golden Visa: which is better?
Spain and Portugal both have their own version of the golden visa but once again Portugal provides a more attractive offer.
On a Spanish golden visa, citizenship is only possible to apply after ten years, whereas in Portugal it is possible after five. In Spain, golden visa holders also have to commit to moving to the country for the majority of the year unlike in Portugal.
Portugal’s flexible stay requirement of just 14 days on average every two years is a big bonus for a lot of people looking to get EU citizenship while not permanently relocating.
In terms of areas to buy property in, Spain has no restrictions on where you can buy property, whereas Portugal does. From July 2021, inventors will no longer be able to invest in property in key urban centers like Lisbon, Porto, and the Algarve. Despite these new real estate restrictions, it’s perfectly possible to still acquire excellent value on your property investment in Portugal’s low-density areas.
Ask the experts: should I buy property in Spain or Portugal?
If you are considering purchasing a property in Spain or Portugal, get in touch with one of our property experts to talk over your individual case.
Goldcrest are real estate advisors with deep knowledge and expertise of the Portuguese property market. We work with individuals to provide tailored portfolios of real estate, ensuring confidence in a serious purchasing decision.
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Frequently asked questions about buy property in Spain or Portugal
Should I buy property in Spain or Portugal?
As Spain is a fairly mature market, Portugal offers higher rental yields to investors at this point in time. Portugal is also favorable in taxation matters.
Is property cheaper in Spain or Portugal?
When asking is property cheaper in Spain or Portugal, you only need to look at the price per square meter between the two countries (€2398/ m2, €1162/m2 respectively) to see that Portugal real estate is cheaper.
What’s better, buying a property in Portugal or Spain for the Golden Visa?
For the Golden Visa, Portugal offers a quicker route to permanent residency and citizenship after 5 years. Spain offers the opportunity to apply for citizenship after 10 years. With a Portuguese Golden Visa, it’s not necessary to permanently relocate as it is with the Spanish Golden Visa.