Real Estate Practices in Portugal
Real Estate Licensing Requirements in Portugal
There are some basic legal requirements to become a real estate agent, such as not having been condemned for any crime regarding real estate transactions and you need to apply at the Portuguese Construction Institute (INCI) for the license, and pay an annual fee.
Available Housing Types in Portugal
In Portugal, housing is usually classified by typology, i.e. number of bedrooms, signaled with a “T”. For example, a 3-bedroom apartment or house would be designated as “T3”.
There are several types of apartments available in Portugal, depending on the region and the area. From touristic apartments in the South (Algarve) or other beach areas, to modern high end condominiums in the big cities, there are many options. The most attractive apartments are on the waterfront, beach or river.
One of the most popular options in recent years is acquiring unique and beautiful apartments in classic renovated buildings in the city center.
By housing type, an apartment can be a normal, a duplex, ground floor, a loft, a penthouse, an attic or a studio apartment.
Types of villas include: a villa/house (detached or semi-detached), a country house (in Portuguese “quinta” or “quintinha” which can also be a farm), a terraced house, or guesthouses. Villas are normally situated in the countryside near the cities, towns and coastal areas. There are also high value villas inside the cities, in more upscale or residential neighborhoods.
Commercial properties are those with the license of commercial use or office use. A good investment option, often made by investment funds, is buying modern commercial buildings and full functioning
One of the best real estate investments at the moment in Portugal is buying renovated or empty buildings in order to rent them out to tourists or residents, or turn them into hotels and guesthouses. This type of investment usually has great returns.
Available Mortgages or Financing Options for Foreign Investors looking to buy in Portugal
In Portugal, mortgages can be issued by Portuguese banks to foreign investors. In order for a foreign buyer to obtain a mortgage from a Portuguese bank, the buyer should provide the bank all related documents and proof of a stable income that will allow the buyer to pay for the loan installments. If purchasing a property for self-use, Portuguese banks may offer a loan of up to 80% of the bank’s evaluation of the property. Depending on the bank’s evaluation of buyers’ income and the property, normally a variable interest rate, indexed to the EURIBOR, is given to the potential client.
Property Taxes in Portugal
The Property Tax (hereinafter IMI – Imposto Municipal sobre Imóveis), is a local tax which is levied on all Portuguese properties.
All property owners are obliged to pay this tax in two/three installments per year, depending on the value of the property.
The amount of this tax is calculated by reference to the official value of the property (cadastral value), and every Municipality stipulates an applicable tax rate to such value, between 0,3% and 0,5% per year.
Portugal Acquisition Costs for the Buyer?
- Generally speaking, when purchasing a house, one should consider:
- Property Transfer Tax (IMT): From 0 to 6,5%, depending on the value of the house and purpose (whether for main residence or not)
- Agent commission: 1-6% (depends on the agent)
- Notarization and registration: around 750€ (depends on the documentation and the notary)
Portugal Disposition Costs for the Seller?
Generally, for the seller:
Agent commission: 1-6% (depending on the agent).
Income Tax (IRS) or Corporate Tax (IRC) in case of capital gains: 24% max. (It depends on the amount of the gain).
The notary examines the property documentation (register and tax administration documents) and the documentation of both the sellers and the buyers
The notary asks for receipt from the Land Registry to verify the ownership and encumbrances of the property (mortgage, etc.) and so that they may be cancelled in the moment of purchase or any other previous moment.
Upon the signing of the purchase deed between the parties before the notary, the price shall be paid. In that moment, the ownership is transferred to the buyer.
The notary notifies the Land Registry of the contract of sale and, if applicable, the cancellation of encumbrances if there are any.
In Portugal it is very fast to acquire property. In one week all changes will be registered with the Land Registry.
Closing Procedures in Portugal
Once a decision regarding the purchase of a property has been reached, it may be formalized directly before a civil law notary or, the more frequent way involves signing a previous, private promissory contract with a portion of the price being paid (normally between 10 and 15%), and in which a deadline is stipulated for the formalization of the purchase-selling agreement before a civil law notary.
During the time period up until the final signing, the following steps are carried out:
The obtaining of the necessary documentation if not already obtained, such as in the case of foreign buyers, it is necessary to obtain a fiscal number (NIF). You can apply for and obtain a NIF immediately.
The obtaining of the financing required in order to carry out the transaction.
The obtaining of a Portuguese bank account, from which the final payment can be carried out and in which a direct debit is set up in accordance with the expenses that the property will have (light, water, taxes, etc.).
Finally, the public purchase deed is signed before a notary.