A reasonable cost of living, generous tax benefits and property prices that are collapsing in some cities… In a few months, Portugal should once again have all the assets to attract private investments.
The timing seems paradoxical, given that in certain districts of Lisbon, partial re-confinement has been introduced. And yet, in Lisbon, Porto, Setubal, or on the Algarve coast, investing in real estate can be seen as a good opportunity today.
Taxation is always very attractive
New foreign residents have been entitled to a special status since 2009. Most of their income (except public sector pensions) was tax-exempt for ten years! Last spring, this incredible tax advantage was slightly modified by the Portuguese authorities. Now, pensioners considered as “non-habitual residents” (NHR) pay a flat rate of 10% for a decade. It remains extremely competitive for new residents compared to other european states.
Falling Prices of Real Estate in Portugal
Not only has Portuguese taxation not become prohibitive… but stone prices are plummeting in places. Last June, Sábado magazine announced price falls of up to 46% in ten districts of the country, including Lisbon and Porto. This newspaper presented the most exceptional discounts but in reality, we’re seeing average drops of around 10 or 15% on old homes in these districts.
Given these figures, should we believe that the market is about to plummet? Not so much, according to Standard & Poor’s rating agency. Boris Glass, a senior economist at S&P, announced that the agency anticipates only a slight overall drop in prices this year, of 2.5%. Alfredo Valente, the managing director of the Iad group in Portugal also predicts that “until the end of 2020, there will be no huge reductions” .
Good deals are possible for Real Estate in Portugal
Real estate prices are unlikely to go up or down much in the coming months. Above all, from time to time, real bargains may come along. But transaction prices can fall very quickly, even between two similar properties. Why is that? Partly because the incomes of some households have plummeted as a result of the crisis. “The price drops come mainly from homeowners looking for liquidity, who can’t do otherwise,” confirms Cécile Gonçalves. That’s why sometimes spectacular discounts, such as those observed by the weekly Sábado, exist on the market.
Interesting offers in in Lisbon, but not only
The two most popular regions for private individuals are Lisbon and the Algarve coast. In Lisbon, Maison du Portugal reports in July average prices of 3,150 euros per square meter, and from 6,000 to 7,000 euros in the hypercentre. “By moving a little further away from the city centre, buyers will only spend 3,500 euros for a new square meter,” says Cécile Gonçalves.
On the Algarve coast, real estate in Portugal prices are now at 2,900 euros per square meter and in Porto, prices now average between 2,500 and 3,100 euros, according to Maison du Portugal. “They can reach 4,000 for the prestigious districts,” adds its director.
Apart from these historically prized spots, there are still a few small towns that are undervalued. For example on the Silver Coast, between Lisbon and Porto. The municipalities of Leiria, Coimbra or the seaside resort of Aveiro can thus be considered as potential good opportunities that are little less known.
Finally, north of Porto, buyers will again benefit from a real estate market with “lower” prices compared to traditional tourist spots. Large apartments are selling on average at 1,177 euros per square meter in Braga in June 2020, and at 1,248 euros per square meter for the coastal town of Viana de Castelo, according to the Iad group.