Have you dreamt of making Portugal your permanent sunny home?
With its breathtaking, charming villages and warm climate, Portugal continues to be one of the top destinations for expatriates seeking a fresh start abroad. Whether you’re considering retiring here, relocating with your family, or buying a relocation home, Portugal offers an irresistible lifestyle.
However, buying property abroad is a major decision that requires thorough research. In this article, we will explore whether 2025 is the perfect time to invest in Portuguese property and why now could be your best opportunity.
The Portuguese property market in 2024
The portuguese property market has grown steadily over the last few years, with prices in October 2024 being 12% higher than in the same month the previous year.
The island of Madeira saw the largest increase during this time, with prices increasing 17.4% year-on-year. On the mainland, the North experienced the largest growth at 13.2%, while Alentejo (north of the Algarve and south of Lisbon) had the lowest growth at 4.5%.
Portugal property prices VS UK
The table below shows an average price comparison between buying property in Portugal and the UK.
| Location | UK Price per square metre € | Portugal Price per square metre € |
|---|---|---|
| City centre | 4,818 | 3,644 |
| Outside city | 3,806 | 2,476 |
These figures demonstrate that purchasing an apartment in portugal’s city center costs 37% less that in the UK and properties outside the city are 46% cheaper. Coupled with a lower cost of living, Portugal could be a wise investment if you’re thinking of buying property abroad.
In December 2024, the cost of living in Portugal was 30.1% lower than in the UK, covering essentials such as food, utilities, clothing, leisure, and travel—making Portugal not only a smart real estate investment but also an affordable place to live.
What’s the forecast for Portugal's property market in 2025?
According to CGD (Caixa Bank in Portugal), prices will continue to rise in 2025 as more people decide to purchase property in Portugal and demand outstrips supply.
In addition, the recovery in the economic climate, partly due to the implementation of the National Recovery and Resilience Plan, is encouraging people to buy property. This plan was launched in 2021 to address the financial impact of COVID-19 on the country. It has included European Union funding to promote various projects including infrastructure, forest and water management, sustainability and digital transition.
People are expected to have more disposable income in 2025, as the economy continues to improve, meaning more property purchasing power. The interest rate is also predicted to decrease from 3.5% to 2.75% – another reason why property purchases in Portugal will become more attractive.
This means 2025 is a good time to buy property in Portugal before prices increase and demand gets even higher.
Portuguese property investment in 2025: The best decision
Investing in Portugal in 2025 is a good idea for several reasons.
Seasonal rentals: high demand
Portugal is experiencing record numbers of visitors, with 13.1 million tourists between January and August 2024 alone
Popular destinations like Lisbon, Porto, and the Algarve see a consistent influx of tourists each year, making short-term rental properties highly sought after. Seasonal rental properties in these areas can command premium rates during peak travel periods, ensuring attractive returns for investors.
Long-term rentals: Consistent Demand
If you don’t want to miss out on the opportunity to purchase an investment property in Portugal but aren’t ready to move there you could rent the property to long-term tenants.
Families, young people, retirees and remote workers are all moving to Portugal, and not everyone wants to buy property, making them ideal potential long-term tenants.
The table below shows the monthly average rent, property cost and rental yield in key locations:
| Location | Average Monthly Rent € | Property Cost € per m² | Gross Rental Yield (p.a.) |
|---|---|---|---|
| Lisbon | 1,200–1,800 | 5,000–7,500 | 5.1% |
| Porto | 950–1,400 | 3,500–4,500 | 5.5% |
| Algarve | 900–1,300 | 2,500–3,500 | 5.2% |
| Braga | 700–1,000 | 1,800–2,500 | 4.7% |
| Aveiro | 800–1,100 | 2,000–2,800 | 5.3% |
The Portuguese Golden Visa still exists but you can no longer invest in property to obtain residency through this procedure. However, you can invest in other areas such as Venture Capital, Scientific Research, Job Creation, Arts and Cultural Heritage or an existing or new business venture.
Tax incentives for property purchasers in Portugal
Portugal offers a range of tax incentives to encourage property investment, which is another good reason to consider buying a home in Portugal in 2025.
Non-Habitual Resident (NHR) scheme
The NHR scheme, amended in 2024, provides significant tax advantages for expatriates relocating to Portugal, offering:
- A flat 10% tax rate on foreign pension income
- Exemptions or reduced rates on other foreign income, such as dividends, royalties, and interest, for up to 10 years
- Tax-free status on some foreign-sourced income, depending on tax treaties between Portugal and the investor’s home country
Capital gains tax benefits
Capital gains from selling your main residence in Portugal can be tax-exempt if the proceeds are reinvested in another property in Portugal or the EU.
Reduced property transfer taxes
The Imposto Municipal sobre Transmissões Onerosas de Imóveis (IMT), a tax on property transfers, varies based on the property’s use and value:
- Residential properties intended as primary residences have lower IMT rates.
- Some exemptions apply for properties below a specific value which is often relevant to affordable housing buyers.
Low annual property tax (IMI)
Portugal’s annual property tax, the Imposto Municipal sobre Imóveis (IMI), is relatively low compared to other European countries. Rates range between 0.3% and 0.45% of the property’s taxable value. Discounts are available for properties in low-population regions.
Tax incentives for renovation projects
Investors purchasing properties to renovate, especially in urban regeneration zones, can enjoy reduced VAT rates (6% instead of 23%) on construction costs. These properties often qualify for additional IMT exemption.
In summary, Portugal offers an excellent opportunity to buy property in 2025, before prices rise further. For more information on buying property in Portugal and the purchasing process get in touch with our property experts.
3 key points to remember
- Price are expected to rise in 2025 in Portugal: This is the perfect time to invest
- Portugal offers great rental opportunities : both seasonal and rentals due to the number of tourists that visit each year
- Our iad Overseas agent can help you find the perfect property in Portugal within your budget.
- https://www.globalpropertyguide.com/europe/portugal/price-history
- https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+Kingdom&country2=Portugal
- https://www.theportugalnews.com/news/2024-10-27/house-prices-predicted-to-continue-to-rise-in-2025/93107
- https://tradingeconomics.com/portugal/interest-rate#:~:text=In%20the%20long%2Dterm%2C%20the,according%20to%20our%20econometric%20models.
- https://www.reuters.com/world/europe/foreign-tourism-portugal-hits-new-record-summer-seasons-peak-2024-09-30/#:~:text=In%20the%20first%20eight%20months,more%20than%2018%20million%20guests.
- https://www.globalpropertyguide.com/europe/portugal/rental-yields
- https://getgoldenvisa.com/non-habitual-resident-portugal#ftoc-new-nhr-non-habitual-resident-tax-regime-nhr-2-0-ifici
