The Portuguese Property Market: A ‘Financial Safe Haven’ for UK Investors?
06 January 2016
There are many reasons why people invest in overseas property. For some, the increased sunshine and a chance to experience a new culture up close and personal is enough to drive their overseas adventure. For others, it’s an opportunity to generate a sustainable income by taking advantage of more profitable markets. With low entry costs, attractive returns and unique tax benefits, the European property market provides an extremely lucrative investment opportunity.
Amongst the most appealing European markets is Portugal. When deliberating a property purchase in Portugal most people instinctively think of the warm, sunny climate, hundreds of miles of luscious beaches and laid-back Portuguese lifestyle. What is less well-known is the variety of financial benefits and Government initiatives offered to encourage international investors to the country. We’ve investigated some of the top reasons Portugal is quickly becoming a financial ‘safe haven’ for overseas investment.
With high quality properties and low prices comparative to the rest of Europe, the Portuguese property market offers some real bargains. According to Statistics Portugal (INE), prices in 2015 were still down 18% from their peak in 2007,but have begun to recover since 2014. In Portugal’s most expensive area of Lisbon average prices were around €1,227 per sq. m in 2015, while in the hugely popular Algarve area prices were around €1,201 per sq. m, according to Global Property Guide. This provides buyers with fantastic value for money.
Portugal’s continued market recovery will undoubtedly be supported by the country’s limited supply of property stock. In response to the first Algarve property boom in the 1980s, the Portuguese government set up a controlled, centralised development regime in an attempt to protect their coastlines and lands of special ecological or agricultural value. This meant that during the economic downturn of 2008, Portugal had far fewer empty, unsold properties than their Spanish neighbours. This limited supply will add fuel to the fire of market recovery, as demand is set to significantly overshadow supply, driving up property prices.
In addition to the low property prices, mortgage interest rates are currently very low and the cost of living is also significantly lower than in the UK. Expats can expect to pay €1 or less for a beer, and just €2 for a bottle of wine, making the relaxed Portuguese lifestyle much more cost-effective. The availability of low-cost, budget flights from airports across Europe and the UK means travelling to and from a Portuguese holiday home is cheap and easy for buyers.
In recent years the Portuguese government have responded to foreign concerns about economic uncertainty by introducing numerous incentives for foreign investors. The Golden Visa scheme introduced in 2012 means that investors who fulfil certain criteria automatically qualify for a five year Portuguese residency permit when investing in property over €500,000. The permit allows visa free travel in Schengen countries, as well as permission to work or study in Portugal. The Non-Habitual Residency tax scheme introduced in 2009 presents further financial incentives to expats looking to move to Portugal.
Investors seeking a buy-to-let property will find no shortage of tenants throughout the year. A popular holiday destination, and home to over 50 world-class golf courses, Portugal has a constant flow of visitors seeking rented accommodation. When the families and holiday-makers move out, the avid golfers move in, providing a continuous stream of rental income and making Portugal an extremely lucrative location for buy-to-let investment.
With all of the financial benefits of a Portuguese investment, combined with the beautiful sun, relaxed culture, and hundreds of miles of coastline it’s no surprise that British purchasers are rushing to take advantage of the unique opportunity to purchase property in Portugal. To find out more, contact our team now on (+44) 01202 765 011.