The costs of buying property in Portugal
Property purchase costs in Portugal mean that the price you see advertised for a property will not be the final price you need to pay.
As is the case anywhere you purchase a home, there are a number of other costs that you need to allow for. These include property taxes, stamp duty and legal fees. In addition, you also need to consider the exchange rates and allow for currency market fluctuations. These can have a significant effect on the amount you need to pay in your home currency.
Independent property lawyers usually advise you allow an additional 8-10% on top of your property price in Portugal. As an example, this means that if you have a €270,000 budget property, you shouldn’t be looking at homes any higher than €250,000.
Portuguese property purchase costs
Property transaction costs are largely unavoidable and trying to minimise them by, for example, using a cheaper lawyer, could be a false economy. Here are the main costs.
Transfer tax (IMT)
The most significant of all the property purchase costs in Portugal is the transfer tax, known locally as Imposto Municipal sobre a Transmissão Onerosa de Imóveis or IMT, for short. It is levied based on a number of factors. They include the price of your property, whether it’s rural or urban and whether it will be your primary residence.
The standard rates of IMT tax in Portugal are 5% of the property value for rural dwellings and 6.5% for urban properties. However, there is a sliding scale in place that can mean you may pay nothing at all for a low-cost property if it’s your main home. Alternatively, you could find yourself paying up to 8% on high-value properties. For a more accurate picture of what you’ll pay, speak to your estate agent or lawyer.
Stamp duty (Imposto do Selo)
The amount for this varies by property type and value and is usually between 0.4% and 0.8%.
New-build homes in Portugal will attract VAT (IVA) of 23%. This should be included in the purchase price but it’s worth double checking! This is not required for resale homes.
Notary and land registry fees
A notary is required to legally validate all property purchases in Portugal. Typically, you can expect to pay a notary between €800 and €1,000. To be on the safe side, allow around 1.5% to 2% of the total property price for notary and land registry paperwork. This is paid once you receive the keys and sign the final contract.
Independent lawyer fees
These will generally be between 1-3% of the purchase price, depending on a number of factors. They may be a larger percentage of a cheaper property as the workload is essentially the same.
Currency transfer costs
If your home currency isn’t the euro, you’ll need to use a foreign exchange specialist. These not only offer better service than the banks but are more cost effective too. Smart Currency Exchange does not charge fees on transfers of more than £3,000.
Property survey costs
In Portugal, getting a building survey is an option that many local people don’t bother with. But if you do choose to get one, there are plenty of surveyors to choose from. It’s often a good idea to get a survey, however, especially if you’re buying an older home that could have hidden structural issues.
Property surveys in Portugal aren’t usually very expensive — it’s unlikely that you will be expected to pay more than €1,000 for a thorough assessment of a property. That’s a relatively small price to pay to ensure a property is structurally sound.
Utility connection fees
Towards the end of the buying process, you’ll need to set up your utilities for your new home in Portugal. These include electricity, water, possibly gas, but also the telephone and broadband. If already connected, you’ll only need to change the contracts into your name, usually at a minimal cost. Your estate agent can often assist with this.
Ongoing maintenance costs
Your finances in Portugal will continue to be very important throughout the property purchase process, when you first move there, and beyond. There is a lot to think about, from drawing your pension to the implications of letting your property should you wish. You will want to make sure you know exactly how much money you need to pay your mortgage and all of your other bills and regular payments.
There are numerous costs that you will need to allow for on a monthly or yearly basis. These include local property and council taxes, community fees, utilities, insurance, maintenance costs and council tax (IMI).
It makes sense to do some detailed research into the cost of living in Portugal and how it compares to your home country.
