Is it really worth investing in Portugal?

Is it really worth investing in Portugal?

Real estate investment in Portugal has proven to be very appealing to foreigners in general, due to the legal regimes created to attract investors in the real estate market segment.

According to the National Statistics Institute (INE) released in June, investors with tax domicile in the European Union (EU) grew 72.3% over 2021 and buyers with third country origin increased 79.1%.

A total of 2556 properties were purchased, 1435 of these by EU residents. In total, they invested an overall value of 842.4 million Euros. The incentive programs for real estate investment present very favorable conditions and this is why Portugal has maintained a very strong position and stable demand when compared to other markets.

We highlight the residence permit for investment activity - Golden Visa - ARI Residence through investment - for third country citizens, i.e., individuals who do not hold Portuguese nationality and for citizens from the E.U. and the EEA, who make investments in national territory. In the first five months of this year, there was the start of Golden Visa approvals, after being stagnant in 2021, which was reflected in the acquisition of properties worth 190.2 million.

Despite the oscillations of the market due to the pandemic and the war, the demand continues with a tendency to increase, since Portugal, in comparison with other countries, has a dynamic market, an excellent quality of life and a low cost of living. Moreover, this year, Portugal entered the Top 25 of the Real Estate Transparency ranking worldwide, after climbing two positions to 24th position, conducted by the consulting firm JLL and La Salle.

To be considered a good real estate investment the annual return should always be higher than 4%/5%, after taxes have been paid. The profit margin of an investment of this nature will depend on the quality and location of the property, the payment of taxes, and the investment made.

If you want a quicker return on your investment, you can buy the property with the objective of Local Lodging, i.e. short-term rental, aimed at tourists, which is currently considered profitable, since they are willing to pay more than the locals.

To calculate the profit in this case, it is first necessary to account for the expenses you have with the whole process of acquisition and management of the property: Deed and registration costs, property taxes and others (IMT, IMI, sewage fees, civil protection,...), insurance (life, multi-risk, condominium), cleaning, maintenance and repairs In this way, by dividing the value of the rents, already without the value of taxes and expenses mentioned above, by the value of your initial investment, which should contemplate the expenses with the deed and tax.

Gesthomes is at your entire disposal to help you evaluate the viability of your property being a Local Lodging and to present the property management services, which will allow you to have peace of mind regarding your property.

This article is for informational purposes only, and does not constitute legal or professional advice of any kind.