Buying Property in Portugal: A Complete Guide

Have you ever dreamed about buying property in Portugal? I did, and although it finally did happen, the road to purchasing our starter home was filled with a lot of bureaucracy, headaches, and surprises at every corner.

The ultimate goal was to move and buy property in Portugal. I started looking online as early as 2019; however, at that point, we still didn’t know where we would like to end up. After two scouting trips to Portugal in 2019 and early 2020, we planned on renting in or around Lisbon before deciding where we would like to purchase. We moved to Lisbon in mid-2020, Costa da Caparica in early 2021, and in December 2021, after six months of back and forth with the real estate agency and the bank, we bought a bank-owned property in the district of Santarém. If you want to read my specific story then click here (coming soon).

The process wasn’t easy. But I am not the only one that has learned the trick of buying property in Portugal. There are others—many others—who, just like me, faced their own challenges. Here are our stories, experiences, and advice on buying property in a country that we now call home. Hopefully, it will help others who are considering buying property in one of the most beautiful countries in all of Europe.

Ready to learn more about buying property in Portugal? Let’s get to it.

The Process Of Buying Property in Portugal

One of the biggest things you should know when buying property in Portugal is that the bureaucracy can be overwhelming, and it also helps if you know some Portuguese (or can hire someone who can help in this department).

But before you start googling houses to buy in Portugal, the one thing that you should focus on is getting your financials together BEFORE looking for your dream house. If you plan to ask for a loan from a Portuguese bank, start the process by making appointments at various banks and getting all your administrative documents in order. Why? This way, you can search for a place with a very clear idea of what you can afford, and when you find the right one, you’ll be able to move on it right away.

When we thinking about buying property in Portugal, we were told right off the bat by many banks that we would only be able to get around a €100,000 loan. This is because we were only in the country for less than a year, and we were both freelancers paying taxes in another country at the time. This meant that looking for properties that were€250,000 was not an option. The last thing you want is to find your dream house, put down the CPCV and realize that the bank won’t loan you the total amount.

Looking for A Property

Once you have a pre-approved mortgage or at least a clear understanding of how much money you have to spend, this is when you can start looking for your dream property.

When searching online, remember that prices are incredibly inflated in Portugal, especially in major cities like Lisbon or Porto. Be mindful that agencies like Remax and Century21 often list properties where the values do not match the price they are asking. Many places are overpriced for what you are getting, so do your own research, speak to the locals, and be patient.

In Costa da Caparica, for example, apartment and housing prices are incredibly inflated because there is little to no new construction happening in the area—so there is more demand than supply. Prices can be ridiculous. I remember talking to my neighbor (who was Portuguese) about the apartment he was renting. He had asked the landlady if she was open to selling her three-bedroom apartment in the São João area. Her price was€400k—I was shocked. To give you some perspective, our apartment (a two-bedroom located right across the hall), was recently bought for€259k. But prices are high. Two big houses located right in front of our building (one of which was a hostel) were recently sold for€800k each. However, as we currently live in Costa, we’ve realized that there are some properties that are reasonably priced, you just need to know who to ask and where to look.

When buying property in Portugal, there are a couple of questions you should ask:

Does the property have the right documentation?

Lee Ann Mumford, a real estate agent in Lisbon, warns that buyers need to ensure that all paperwork is in order before signing anything. “Some people think they can do everything alone without any help and just go buy a house. But in Portugal, it is very important to at least have a lawyer check everything as you can have properties that don’t have the licenses that allow you to live there, might have extra buildings that have been constructed without permissions so they are not in the documents or you have a big family with 20 cousins who have inherited the property and they all have to agree to sell.”

Paperwork can be a problem if you are looking for property outside of major cities. For example, when looking for properties in Lago Albufeira, I kept on coming across listings that would state that the “bank will not finance this home.” It turns out there there are some properties are built on land that is not legally owned by the person selling the property. Clara, who eventually bought a house on the Silver Coast, lost out on a previous home because many of the documents were outdated, which lead to a big mess in the Camara Municipal. This documentation mess led to the bank refusing her the loan for that property.

Do not ask the selling agent or the owner if the property has the right documentation. Most of the time, they’ll say anything just to make sure that the sale goes through. Although not specifically linked to documentation, I recently had a conversation with someone who bought a house in the Aroeira area. She asked if the property was hooked up to the city water line. The owner assured her it was and she took his word for it. Turns out it, it wasn’t. She said that she wouldn’t have bought the property if she had known as she can’t drink the water that comes out of her tap.

Does the property fall under any specific laws?

When buying property in Portugal, we were rushed into signing the CPCV. We were told that the process would go smoothly and we would get our keys to the property in just a couple of weeks. Then SURPRISE, we learned about the Direito legal de preferência.

The “Direito de Preferência” gives the neighbors of the land for sale the right to be informed of the sale and the right to buy this land at a price negotiated by the third party before the third party (in this case us) can complete the purchase. This only applies if the plot for sale has a “rustico” (rural/agricultural) part, which in our case, it did. As our property was bank-owned, the bank and its lawyers took care of contacting (or trying to) contact our neighbors, which in our case was only one person. The Camara Municipal refused to give any information about our neighbors (who do not currently live on the property), so the bank had to publish our names, the price of the property, and the address in the local newspaper. However, I’ve heard stories of people who have had to do this on their own and on their own dime—hiring lawyers that can help them with this process.

This law can also come into effect if the apartment/house you are trying to buy currently is rented. If the property is rented, the tenants can have the right of preference. They have 30 days to provide an offer from the time they get informed by the landlord about a potential sale.

Obviously, this is just one of the many laws out there. So when buying property in Portugal, make sure that you double-check before signing the CPCV and giving in the promissory deposit.

What kind of land are you thinking of buying?

Many foreigners are flocking to Central Portugal to buy a piece of land at an astronomically low price. However, as Lee Ann argues, “people often have the idea of buying a ruin and rebuilding it themselves. This can also be difficult as it can take years to get the permits before you can even start, and after that, it can take a long time again to get all the licenses to be allowed to live there. It is doable but important to know that you cannot just go there and build immediately.”

Story-time: When in Ericeira, I met an American/Brazilian couple who had bought a piece of land with no habitation license. After more then two years of back and forth in the Camara, they still weren’t approved to build on the land. Frustrated with the whole experience, they decided to sell the land.

There are two different building registrations here in Portugal: urban and rustic. On any registered building, the property paperwork also indicates a usage. These are mainly: habitation, storage, rural construction, or agricultural outbuilding. This is for the finance department to base the calculation for the property tax.

Urban vs. Rustic land

The buildings with an urban article have to have a license for usage (licença de habitação / utilização), which is what you call the habitation license. Buildings built before the year this licensing law was introduced are exempt from this license. It means you don’t need one. Now, this cut-off year differs from council to council, but in many regions, this year is 1951.

Registered buildings on rustic land often do not have a habitation license. This land is often part of a farm or an extra building next to an urban living house. Can you use these buildings as your living house? Yes and No. These buildings are very popular among foreign buyers because they are inexpensive. However, if you purchase such property, don’t expect to get a habitation license, tourism license, or a mortgage, as these are only given to buildings with an urban registration. These properties will also be harder to sell in the future.

Big ASTERISK here. Just because a property has a ruin doesn’t mean that it has a habitation license. Does it have a habitation license or a pre-1951 certificate? If not, it is likely still only a barn or armazem and not somewhere to live in.

**As always, when buying property in Portugal there are some exceptions to everything stated above, so make sure to check with a lawyer before buying anything.

Are there any outstanding fees or debts?

When buying property in Portugal, you assume the outstanding fees and debts of that property. That is why it is essential to check if the property is debt-free. If you are purchasing an apartment, make sure to confirm from the condominium that there are no outstanding fees and that the building is insured.

So how can you make sure that everything goes smoothly? Hire a lawyer.

As Fiona, who bought a property in Nazaré, says, “Piece of advice when buying property in Portugal: get your property lawyer who you trust is working for you only, and who is open to answering all of your random questions about the process. Because you will have many, the process is not very clear to people who’ve not been through it. My lawyer was fantastic and should cost no more than 2500 euro to see you through the entire process (which is writing and sending the promissory contract if applicable and finding, collating, checking the property documentation, including from the seller, the agent, the notary, from the bank, from the municipality, from the Kadaster (land registry), also holding your hand (so to speak) at the notary office on transfer day, then supplying all the new documents after the land registry is changed to your name.”

Negotiating the Final Price

When asked if they negotiated the final price of their property, all of the people I had asked answered yes, except for one.

Although they didn’t get the house, a friend of mine wanted to buy a home that was put on the market at 247K and was receiving many offers. As a result, she had to put in a higher counteroffer for 260K, and according to the seller, it wasn’t even the highest offer on the table. However, the seller accepted the offer as my friend had the highest deposit (25%). It is important to note here that this house was brand-spankin’ new—it was a new build, so that probably explains all of the offers. In the end, the house fell through, but she did end up buying another house that was initially listed at 260K and was negotiated down to 250K.

So when buying property in Portugal, how low can you go? Well, it depends on how lucky you are. Sinan, who bought a property in Lisbon, got a little lucky when negotiating his property. “When we saw the ad, the price was already 5% cheaper, than the previous ad we found, (it had been for sale for about a year we believe before we spotted it),” he says. “Talking with the agent, he mentioned that he believed the sellers would be willing to sell it with an additional 15% discount. We made our offer a few 1000s under that, and it was first declined because they got another buyer—but they came back to us about a week later because that deal fell through, and accepted our offer. In total, the price we paid was 81% of the initial asked price, so a 19% discount.”

Some people negotiated items to be installed, like A/C units, while others negotiated a rent-to-buy type of deal. Negotiation is to be expected; anyone who tells you otherwise is lying. Amanda, who bought the property in Central Portugal decided to negotiate hard, “I started at 20% less, met and agreed at 10% less, and no one was offended. On a previous negotiation which was won but fell through on finance, I went in at 30%, and we agreed on 15% less.” On our property, we negotiated 30% less. The house was put on the market at 100K, and we closed at 70K.

In the end, negotiation depends on many different variables, including price, location, size, age of the property, etc. Remember that the price per square meter will depend on the area. Lisbon, Sintra, and the train line to Cascais are the highest. But Ericeira, Sesimbra, Caparica areas have increased prices a lot. Once you start going farther away from Portugal hotspots, prices decline, and negotiation can get a little easier. When buying property in Portugal make sure to always enter with an open mind.

The 30% Downpayment

Let’s talk about the downpayment…the infamous downpayment. This is the part where numbers are can be very different. If someone has lived in Portugal for a while, has Portuguese tax returns, Portuguese income, etc., it is possible to get up to 90% financing for your property. Most foreigners don’t have these papers yet, so they usually get around 70% financed. However, this also largely depends on various factors like income, age, marriage, citizenship, etc. So when buying property in Portugal, how much downpayment should you put down?

When looking for a property when we first landed in Portugal, we had little to no financial history in any Portuguese banks. I had a contract as a freelancer for a company located in the United States that was paying me a decent monthly wage. My contract had no end date and is known as “an indeterminate contract.” However, this wasn’t enough to sway the Portuguese banks. Although I was earning a salary each month, it was from a foreign country and (at the time) not entering into a Portuguese bank. As a result, it technically didn’t count. I remember seeing an incredibly run-down apartment in Almada that was €80,000. We hoped that they would be flexible as it was a HUGE fixer-upper. After a lot of back and forth, the best the bank could do was provide 70%.

However, financial history might not be enough. Jessica (who has an Australian passport) writes, “Regarding getting this percentage lower, I do not think it’s possible. I say this because if anyone could have, we should have been able to. We “look great on paper” as lenders, and we were with this bank for three years, had all our savings and income with them, so we looked good. We had paid tax to PT for two years prior, so they saw our relatively big income. If anyone would get approved for less than 30% we should have, but they just didn’t budge. We even tried to get a loan with a 20% deposit with another bank (which costs money to apply), and also we were turned down by that bank and told the same thing.”

In the end, I also believe that it is all about luck. In fact, when buying property in Portugal, there is a lot of luck involved. Many of the people I spoke to were able to secure lower down payments, even foreigners. When buying property in Portugal, the downpayment is a toss-up. Some people put down 30%; others were able to negotiate to 20% or 15%, while others could secure 10%.

Sinan, who bought a property in Alges, states: “We are a special case because my partner is Portuguese, while I’m a foreigner (Schengen area) and still reside abroad most of the year, thus not a permanent resident in Portugal. We saw multiple banks, and initially, they refused to provide us with more than a 70% or 80% loan. However, we ended up being able to get a 90% loan. It was only possible because my partner already had another mortgage in this bank, and this helped their risk analysis (seeing that she basically never had any financial issue). It did take some negotiations though, including the option of moving this initial mortgage elsewhere. What I learned there is that there is no one size fits all, each case is somewhat unique.“

It also depends on if it’s your first rodeo. Tom, who bought two apartments in Lisbon, put a 30% down payment for the first house as he wasn’t a resident and 15% on the second house due to the high valuation of the first house and his residency.

A quick tip: 10% is the lowest you can get in Portugal. To achieve this, you need a good relationship with the bank, a good credit history, and to bear in mind that the Banco de Portugal only allows banks to make loans where the monthly payments do not exceed 30-35% of their income.

House Valuation

When buying property in Portugal, another thing that you need to look out for is house valuations. So what does this mean exactly? Let’s look at an example.

You’ve found your dream apartment in Lisbon, which is listed for €300,000. You sign the CPCPV, pay the promissory, and then you go to the bank to ask for a loan. However, after conducting its property valuation, the bank deems that the property is not worth€300K, but instead is only worth€250K. The bank accepts to give you a mortgage and finance the amount up to 80% on the bank valuation price—€250K.

This isn’t a usual or common occurrence as most of the time, the bank agrees with the valuation, but it is something that you should keep in the back of your mind.

Watch Out For Taxes

When buying a property in Portugal, you will have some additional payments, including taxes, fees for the notary, and the change of the documents for the property. Be prepared to pay around 6-8%. These taxes are mandatory when you buy a property in Portugal. There are precisely three that you will have to pay: the municipal property tax (IMI), the municipal real estate transfer tax (IMT), and the tax on stamps (IS).

Make sure to ask about all the prices of all of the taxes beforehand to know if you’re able to pay it yourselves or ask for a bigger loan that includes the taxes. Joana bought a house for €250K, her deposit was around €62K, and her taxes were around €12K.

Taxes also depend on whether you are planning on using the property as a primary residency, a holiday home, or are acquiring the property to use as a rental property. If you want to learn more about calculating these taxes, Lisbob published a great article on real estate taxes that you can read here.

Contrato Promessa Compra e Venda (CPCV)

When you are in the process of buying property in Portugal, you will probably have to sign a CPCV. The promissory purchase and sale contract (CPCV), as the name implies, is a contract that guarantees a future purchase or sale. The CPCV is essential if you want to secure the purchase of the property.

The CPCV identifies the intervening parties, the property, the amount, and payment methods, such as sanctions in case of breach of contract, the deposit amount, and other clauses applicable to each specific case. As a rule, in case of non-compliance with the CPCV by the promising seller, he or she will have to return the down payment in double to the promising buyer. In turn, if a promising buyer pulls out of the deal; they lose the down payment.

If you are waiting for the approval of the mortgage, and if both parties agree, a clause can be written into the CPCV that can establish the cancellation of the CPCV in the event of a refusal of the credit.

When Joana was buying property in Portugal, her lawyers informed her that she should try and give as little as possible. “The CPCV downpayment is negotiable. The ‘standard’ is considered 20%. However, our property lawyer advised us to give a little as possible in the Promissory and if possible, give NO promissory. He explained that even though the Promissory is a contract, it’s still extremely difficult to get the money back, even in a court. So his advice, based on his experience, was to avoid doing the Promissory if you can. Or negotiate it to be just 5k or 10k or 10% at most. He says many sellers will accept the much smaller amounts without question. The downside of doing NO promissory is that we risked another buyer swooping in and buying our house while we waited for the finance to process (which takes about six weeks when there are no hurdles to cross). We decided this was a fine risk to take in our situation. We were prepared to lose the house, and we were not prepared to lose a large chunk of money.”

Some additional info that can be helpful is that the agent gets his commission, or at least part of his commission, as soon as the promissory is paid. So you’ll receive a huge amount of pressure from the agent to pay a promissory and pay it fast, which is probably not necessary. If you’re willing to risk the small chance of losing the property to someone else while you wait for finance to be given, then go for it. Better than then losing a large sum of money.

In our case when we were thinking about buying property in Portugal, specifically in the Penascoso area, the selling agent pressured us and pressured us hard. We went to see the property in June, and we loved it. We were told that the process would be short and simple—we would get the keys in a week or so. Then came the emails telling us to “jump on this amazing offer before someone else does.” We succumbed to the pressure, but only because our promissory was around€2K. Fun fact, we didn’t get our keys in a week; we ended up getting them almost seven months later.

Timeline

When buying property in Portugal, the timeline can also depend. If you want to make the process go a little faster, then make sure to get a pre-approved mortgage. Nevertheless, it seems like 4-6 months is about the average time that it takes from finding the place of your dreams to getting the keys.

However, it can take longer. In our case, it took around seven months because of some administration problems that slowed the overall process. We also showed up at the notary to sign all the documents only to be told by the bank representative that they didn’t have the proper documents. We had to reschedule—this led to a full-on breakdown in English about the process and how unprofessional it was (if you want to read my particular story, you can find it here-story coming soon, make to bookmark this article).

Buying a Property in Portugal

So what is the number #1 thing that people who chatted with me wished that they had known before buying their property in Portugal? There are a couple of tips:

• First many people wished that they had gotten all of their financials in order before looking for a property. As mentioned many times in this article, looking for property with a pre-approved mortgage makes the whole process easier. By getting your financials in order, you can search for a place with a very clear idea of what you can afford, and when you find the right one you’ll be able to move right away. Anita from Lisbon recommends that “you should contact the bank before buying and preparing your file one year before buying a property in Portugal. This allows you to comply with the bank requirements and get the best rates and deals.”
• The second most common thread when buying property in Portugal is to get a lawyer. Remember that no matter how nice and helpful the agent seems, the agency isn’t working for you. The agent is represented the best interests of their seller and will tell you anything to get you interested in purchasing their property. Joana learned this the hard way and writes “don’t ever forget that it’s a game. It’s a pity, but you have to ‘play the game’ with them. I’m not a game player but I learned through 3.5 years of house-hunting and negotiating on properties that fell through, with many agents, all over the country, that I just had to take on a different persona to play the game on the same level they were.”
• If you can make sure to also hire an architect to view the property with you. Find one that is not situated anywhere near where the agent or house is located. Remember, towns and communities are small, and business owners know each other. It’s important to find someone who can be impartial. It might cost €80-100 but it’s worth it. If there are illegal builds in the house, the plans don’t match, bad construction, or low electricity supply, etc, the architect can advise before you negotiate.

And that is our ultimate guide to buying property in Portugal. Anything we missed? Any other questions? Make sure to leave them in the comments below, and we will try to answer them.