Money saving tips for Portuguese property

Purchasing a property in Portugal may be a second home, a forever home or an investment opportunity.

While property prices are generally affordable by international standards, and you may be saving a pretty penny by downsizing, you can still save money. In a new country, with an unfamiliar property market, legal system and language, it is easier to pay more than you need to.

Beware false economies. It might seem that the simplest way to cut costs is by not employing a property lawyer. But if something goes awry with your property purchase, this can be an expensive mistake. Using your high-street bank instead of a currency specialist can also prove costly too.

Budgeting effectively for additional costs  

One way to save money on buying a property in Portugal is to budget effectively. Early on, it’s important to factor in the additional costs rather than hunt for a property that reaches your ceiling budget. Generally, you will need 8-10% for additional costs on top of your property price in Portugal.

The most significant cost is Imposto Municipal sobre Transmissões Onerosas de Imóveis (IMT), transfer tax. How much this is varies on the property price, whether its urban or rural and if it will be your primary residence.

Standard rates of IMT tax in Portugal are 5% of the property value for rural dwellings and 6.5% of urban homes. However, a sliding scale means that you could pay almost nothing for a low-cost property or 8% for high-value properties. Speak to a tax specialist to be sure of what you’ll pay.

You will also need to factor in stamp duty, imposto do solo, which varies by property type and value. It is usually between 0.4 – 0.8%.

New builds will have a VAT of 23% but this is usually included in the property price.

Additionally, you will need to pay the notary between 1.5 – 2% of the total property price.  This is paid at the end of the property sale.

Savings on Portuguese property 

It is possible to find cheaper homes in Portugal. You could purchase a fixer upper, farmhouse in the countryside or downsize to an amazingly located studio apartment. At the start of a property development, developers want to raise the cash so you may be able to buy the home at an extra affordable price. You may have to live in a partial building site for a while.

With thorough research, you can make significant savings. For example, even along the sought-after Algarve, property is generally more affordable in the quieter, less developed east. Look to the Silver Coast for even greater savings on coastal homes. Plus, buying a little inland will see your money go even further. If you’re moving to Portugal full time, you may not need to be as close to the airport as a holiday home buyer.

Negotiation strategies for property prices 

When you find a property in Portugal that you’re interested in purchasing, is there room to negotiate on the price? Bargaining may not be second nature to many, but considering the substantial sums involved in property transactions, it might be worth setting aside any reservations.

Do your own research to enable you to negotiate effectively and confidently.

There are numerous general records of prices in each district or region of Portugal, available from property portals and regional governments.

Plus, gaining a detailed knowledge of local prices is straightforward in the digital age. Most portals allow you to filter properties by bedrooms and features, making it easy to compare prices of similar properties. You can also check the cadastral value in the Conservatória do Registo Predial.

It’s also a good idea to ask around. The estate agent may not be the most impartial judge, so try some other property professionals such as surveyors and property lawyers.

You can also look for the wider picture of the market. Is it a buyer’s or seller’s market? There is objective data available, including on sales volumes and time to sell. Armed with this knowledge, a buyer can more easily ascertain if a price is fair, or if a vendor is being optimistic. There can be a tendency in some markets to overprice for foreign buyers.

Timing considerations for property purchases 

Is there a cheaper time to buy property in Portugal? It is hard to say. Common sense suggests that holiday homes will be cheaper at the end of the summer season. But then investors will be saddled with running costs for several months without income.

Property hunting in the off season can mean that there is more room for negotiation, with less competition among buyers. Sellers who have listed during this time may be motivated to sell and therefore more open to negotiation.