Country Overview | Key Property Facts

Types of Tenure:

All property in Portugal is bought on a freehold basis as leasehold does not exist in Portuguese property law. However, if the property you're considering is part of a shared building, the shared areas will be sold under the law of propriedade . This law specifies that a condominium association must be created to take care of cleaning and upkeep. In some instances a private company will take on these responsibilities and in smaller developments neighbours will handle it.

Forms of Ownership:

It is possible to own property in Portugal as a sole owner or as a co-owner where several people share ownership rights. The two main forms of co-ownership are joint ownership and collective ownership; joint owners have specified shares allocating receipt of income and payment of expenses while collective owners have no such abstract shares which they can dispose of freely. A common form of joint ownership is purchasing property through a company which can provide tax benefits. Fractional ownership schemes such as tiered ownership or timesharing exist in Portugal . A form of leaseback scheme similar to the one that is popular in France has also starting to appear into the country.

Restrictions:

There are various restrictions on the sale and acquisition of real estate in Portugal including restrictions under family law and the matrimonial property regime. In special circumstances, given parties have the right of pre-emption (i.e. the property must be sold to that party). Since the introduction of the free movement of capital at the beginning of the 1990s, there are no longer any restrictions on the acquisition of real estate by non-residents, even if these are not nationals of EU member states.

Property Rights:

Property rights are secure in Portugal. The right to private property and the transfer of real estate during life and on death is enshrined in Article 62 of the Portuguese constitution. Property law and the various types of property are almost exclusively governed by the Portuguese Civil Code. Portuguese civil law distinguishes rural and urban land (predios rusticos and predios urbanos).

Mortgage Finance:

The Portuguese domestic mortgage market is well established and competitive. As a foreign investor, you have the option of either remortgaging your UK property and taking out a loan in sterling or borrowing from a Portuguese lender in euros secured on a mortgage against your Portuguese property. As a rule, banks will finance - according to the financial standing of the borrower - between 60% and 80% of the assessed value of the real estate. The interest rate will be agreed between the bank and the borrower (euros tend to be subject to a lower base rate of interest than sterling). Portuguese banks can now set their own terms for the loan, under the supervision of the Bank of Portugal. Although contracts with a term of up to 50 years do exist, contracts normally have a term of 25 to 30 years. Portuguese banks generally require life assurance as security and require additional forms of guarantee for foreign investors.

Local Practices:

Fractional ownership schemes such as tiered ownership or timesharing exist in Portugal. The leaseback scheme already popular in France is also starting to be introduced into the country.

Issues & Risks:

Portugal is generally a safe place to buy property, with well developed property law and strict planning regulations. However, sluggish economic growth at present (2006) creates the risk of weak domestic demand for property and the country also has an insignificant rental market. Property prices in the popular Algarve region are high relative to the rest of the country.

Regulations:

Various regulations apply to property transactions in Portugal. Firstly, your lawyer will search the land register to check that the seller is authorised to sell the property in the first instance. All parties must have the capacity to conduct their own legal affairs independently under the law (e.g. they must not be minors under 18 years old or mentally infirm). In the case of companies owning property, capacity to act is established from the commercial register or from relevant documents (certificate of incorporation, certificate of good standing, etc.) Third-party claims on the real estate must be honoured (e.g. from creditors) and unpaid taxes must be paid before the transaction can be made. There are several provisions that protect the environment and cultural heritage in Portuguese law which must be observed. There are also several legal obligations placed on the vendor under Portuguese law – see below for details. Portugal has relatively strict planning regulations. There are no extra obligations for foreigners purchasing real estate in Portugal .

Key Property Markets:

The three key property markets in Portugal are the Algarve, the Silver Coast and the Costa Verde. The Algarve is a region lying right in the south of Portugal on the Mediterranean coast. The area enjoys the best weather in the country and is highly popular with tourists and golfers. The Silver Coast (or Lisbon Coast ) is the Atlantic littoral stretching between Lisbon and Porto. Often labelled “the real Portugal ”, the Silver Coast is not as developed as the Algarve and prices are cheaper but still with great beaches and towns. Cheapest of all is the Costa Verde region (meaning "Green Coast") in the north of the country stretching norwards from Porto . The Costa Verde is known for its lush valleys and is slightly wetter and cooler than the south of the country. Real estate prices in large Portuguese cities or holiday areas are comparable today with those of other EU countries. Around 90 per cent of all property purchases made by foreigners in Portugal are in the highly developed Algarve .

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