Investing in property in Porto
The housing market in Porto (and Portugal as a whole) is doing quite well for investors, with property prices consistently moving up over the last 15 years.
However, social unrest is rising due to the fact that people are no longer able to buy or rent in the cities where they work/study. In order to tackle this urgent issue, the local government is pushing new legislation to try to solve the housing crisis that is currently plaguing the country. As part of this new policy, it is no longer possible to enter the Gold Visa Scheme for buying 鈧�500,000 worth of property in Porto. This program grants participants the right to live in the country legally for a period of 10 years, after which they can apply for citizenship. There are still other ways to partake in the scheme, but buying property in the capital is no longer one of them. Furthermore, this new legislation to tackle speculation and high prices has given city councils full autonomy to suspend the issuance of permissions to open new Airbnbs. As of now, it is not possible to open an Airbnb in Porto, so you won't be able to rent your property to tourists (legally) if you're away from the city.
However, in what is arguably the most controversial proposition on the package, the government is also considering coercive leasing for properties that have been empty for at least one year, with no proof of utility payments. Although its application is still shrouded in mystery, technically, owners can be served a notice stating that their property will be forcibly rented to a local family (for a sum deemed adequate by local authorities) if the house or apartment has been vacant for a long time.
However, if your sole interest as an investor is to flip houses fast, you'll be happy to hear that real estate prices in Porto continue to rise, with property prices in the metropolitan area going up by more than 10% over the past year alone. On the downside, transaction costs associated with purchasing property in Porto are quite high. You should expect to pay the IMT (tax over property transactions), stamp duty, the cost of the house deed,聽and, if you need to rely on a loan, the respective banking fees (stamp duty). As an example, if you want to buy an apartment for 250,000鈧� and do not need financing, expect to pay 7,955鈧� for IMT, plus 2,000鈧� of stamp duty (0.8% of the total sale) and around 1,000鈧�/1,500鈧� for the house deed. If you need a bank loan for 80% of the purchase value (the highest cap in Portugal), then you should add 鈧�1,200 (0.6% stamp duty for a 鈧�200,000 loan) to the tally.
To try to lower the weight of taxes on homebuyers, the government approved a new legislative package in 2024 seeking to support people under 35 to buy their first homes. As many people struggled to leave their parent's nest due to house prices, legal residents (foreigners included) between 18 and 35 can now rely on the State to finance up to 10% of the property price. Before, buyers needed to have those 10% as a down payment, as banking institutions are only authorized to lend up to 90% of the property value. Furthermore, this new legislation exempts new buyers from most taxes related to the process of buying a home, such as the IMT (tax over property transactions) and its respective stamp duty. It's important to note this exemption only applies to people buying their first home and whose annual income does not surpass 鈧�83,696. Also, there is a 鈧�450,000 cap on the property price so that buyers can take full advantage of the program.
If it's the other way around and you're trying to sell property in Porto, you should expect to pay real estate agent fees (usually 5% of the sale value), value-added tax over those fees (23% VAT), and other related legal fees. Plus, if you don't invest your capital gains into another property, you will have to pay income tax (IRS) on over 50% of the amount you made. For example, if you had initially bought your property for 鈧�200,000 and are now selling it for 鈧�250,000, you've had a capital gain of 鈧�50,000. However, you can deduct repairs, maintenance expenses and real estate agent fees. For simplification purposes, let's assume you never had any other deductible expenses besides the agent fees (5% of 250,000鈧� = 12,500鈧�). This sum will be deducted from the initial 鈧�50,000, bringing your capital gains down to 鈧�37,500. As mentioned above, the IRS will only be applicable to 50% of your gains, which means 鈧�18,750 will be subjected to tax. If you are a legal resident and pay your taxes in Portugal, the amount you will effectively pay will depend on your other sources of income and annual deductions, with current tax brackets ranging between 14.5% and 48% (for higher-income households/individuals).
However, if you're living in another EU country, an additional 5% will be added to your bracket as a 鈥渟olidarity tax鈥�. Finally, if you live and pay taxes outside the EU, then you will have to pay a 28% flat tax on 100% of your capital gains: in this case, you'd pay 鈧�10,500 (37,500 * 28%) just in taxes for selling your property.
