Much discussion has surrounded Brexit recently, and rightly so, but with it needs to come the understanding this is a British political issue and not one of foreign countries like Portugal. For Brits however it begs the question, how does an investor navigate this turbulent time when buying property abroad?
Since these talks began, both the Portuguese and the British governments have noted they do not intend on changing the relationship between the two countries. The Anglo-Portuguese alliance dates back to 1294 and is considered to be the world’s oldest economic alliance. During periods of political instability some investors will naturally be more reserved, others however will see an opportunity to invest.
For the latter, along with those looking to increase their knowledge, what should you consider when searching and buying property in Portugal?
1 - Financing your property purchase
The exchange rate has dropped by 20%, but there are two possible ways to combat this. Firstly, find a property that has been sold by someone from the UK and agree to a price in sterling, this way you are not subject to making your purchase in euros. Secondly, take a mortgage out in Portugal, interest rates are at an all-time low (1.75%) and can be fixed for up to 35 years, you can also fix your exchange rate for 2 years so no fluctuation in the exchange rate.
2 - Location, Location...
If you choose the Algarve, there are over 90 daily flights in the summer and over 60 in the winter, compared to Lisbon where there are just 8 flights a day. This is important if looking at investing with rental income in mind. The Algarve is well established for short term rentals, where as Lisbon is more long term rentals.
3 - Investor residency & tax liability
The Portuguese Non-Habitual Residency Programme - enables those who become tax residents in Portugal, and are accepted under the NHR, the opportunity to receive qualifying income tax free, both in Portugal and in the country of where the income is sourced.
The NHR regime represents a major step forward in making Portugal a tax free jurisdiction for individuals in receipt of the qualifying non-resident income. Qualifying incomes include pension, dividend, royalty and interest income.
4 - New build or resale property?
The benefits of a new property are that it will have a high build standard and will come with a 5 year guarantee. The downside of buying new is sometimes the locations are not as favourable, and you may pay a high premium (E.g. currently 2 bedroom apartments on the beach in Porto do Mós are over 300,000€, but in town you can find resales for 200,000€, these will usually need restoration, and may not come with a swimming pool).
Resales can be a great option, especially if you find the right property and it already has a good list of rental clients.
5 - Healthy retirement plan
There are so many reasons to retire in the Algarve. The weather, the quality of life, the low cost of living, beaches, up to 10 years tax free on your pension, and many more… Then there are the reasons not to; miss the family, fear of change and the unknown, health care, what if it all goes wrong? These are all valid questions that need to be considered on a move abroad, and particularly when contemplating retirement. If however, you are well informed to make a decision that feels right for you, then there needs to be the question of - how wonderful could life be if it goes right?!
Retirement in the Algarve offers peace and serenity, but it also provides retirees a plethora of opportunities for a healthy and active retirement with year round events, sports, entertainment, socialising and ways to stay young at heart regardless of your age. Family may also be closer than you think, e.g. If you live in London and moved to Cornwall you would be a 4 or 5 hour drive away. If you moved to Loulé, Algarve, you will be just a 2.5 hour flight, and 15 minute drive away. Family could actually become a little jealous of your new lifestyle, so you may want to plan for regular visitors.
6 - What’s hard and what’s easy?
Cars - the biggest shock I had when moving across was how expensive cars are to buy in Portugal compared to the UK. One way around this is to bring your own, you are also allowed one free car plate change when you become a resident.
Tip: Buy a left hand drive car in the UK to bring over, there’s on average a few hundred on sale through autotrader.
Shopping - on arriving it’s great fun finding local shopping centres, but after a while you may miss your favourites from home. I order online from Amazon, Next and Asda and have these shipped to the Algarve Freight Center in the UK, they provide a weekly delivery service and I pick up from their local collection centre in Almancil.
7 - Social life
Expect a few changes. Firstly, everyone eats much later in Portugal, it’s also a very social culture, so expect to go out more often. Food is very important to the Portuguese and ‘prato do dia’ (plate of the day) is served almost everywhere. Popular dishes like grilled fish and Portuguese piri piri chicken, salad and chips can often be found for 5€ or 6€. Wine selection is vast and of good quality and both beer and wine are enjoyed very reasonably, a good bottle of wine can start at 5€, a beer for 2€. Coffee is a ritual and of excellent quality, a ‘Bica’ (expresso) will cost approximately 1€. Award winning chefs and Michelin starred restaurants are also available.
The 5-star Conrad Hotel in Quinta do Lago will set you back 80€+, here wines will range from 25€ to 2500€ a bottle.
8 - Rental income
Holidays - important to keep in mind if you will be occupying your property during busy periods; summer season, school holidays, etc. you may lose out on prime bookings. Holidaymakers will be searching for properties during this time so this can be the downside of renting if using for yourself as well. Planning around this so your property is available during these times will help increase your bookings.
Pool - the number one request of holiday makers is a pool, so when investing to rent keep this in mind, and when advertising your property this should be the key feature of your advert.
Location - a property close to the beach or with a sea view, you will command a higher fee and gain more booking weeks in a calendar year.
9 - Where to research
Becoming informed is key. Talk to as many people and companies as you can to get the information you need. A great TV program to watch is A Place in the Sun, on Channel 4, and More 4. They also have a website to view properties online and a great hot tip is to contact them directly, nothing beats having an informative chat. They can recommend lawyers, currency exchange, real estate agents, and you never know you could even end up on the show. Another great company is RightMove Overseas, they have a large portfolio of properties for sale and a dedicated team, again pick up the phone for a chat and let them guide you on how to get started on your exciting search.
10 - Best way to view properties
The only way to get a real feel for the properties and locations that interest you is to be on the ground in Portugal, so book a flight! A great website for this is skyscanner.com, it saves you time and finds the best flights to suit you. Next is choosing a real estate agent, on this subject I own Ideal Homes Portugal. I started this company 8 years ago and wanted to create a company that helped clients find their ideal property and had excellent services. My goal is to keep clients for life so ensuring they are confident in their investments and that they have the support they need to buy in Portugal is key to what we do.
Over the years we have helped everyone from families with young children to investors just wanting to take advantage of the returns achievable in Portugal. Our model has proven successful and today we have 52 staff waiting to help you on your journey. Most of our team are expats so they have been in the same place you are today, and are happy to help guide you on your investment in Portugal and the Algarve.
Ready to start your new life abroad?
My first recommendation would be to take an extended holiday to Portugal, for at least a month. Ideally between November and March to experience the county’s quiet period. If you like the quiet season then also try the busier months between April and October. If seasonal breaks aren’t doable and you’re in the process of planning your retirement, another option could be to buy a small property you can use frequently, and also generate rental income.
This trial period is ideal for you to familiarise with the areas and ways of the country, it also establishes you in the local banking and tax system.
Need more info? We’re here to help. Get in touch!
Chris White - CEO, Ideal Homes
W: www.idealhomesportugal.com
E: enquiries@idealhomesportugal.com
T: (00351) 289 513 434 | 0800 133 7644
