As prices continue to rise, is there a real estate bubble in Portugal? The European Commission and the Bank of Portugal have both warned that the market is overvalued, although rising prices aren’t the only symptom. The recent reopening of real estate credit by banks has also raised concerns about an overvalued property market. Despite this warning, many Portuguese investors continue to invest in the country.
Lisbon is a real estate bubble in Portugal
The Portuguese capital has witnessed a housing bubble that is the biggest in the European Union. The Portuguese property market has soared beyond its true market value, despite a lack of regulations. While the number of foreign buyers is still small, the numbers of foreigners purchasing Lisbon property are expected to increase. According to a recent report by Colliers, more than 75% of apartments sold in the capital were bought by foreigners.
As a foreigner, it is important to consider the costs of purchasing property. A EUR500,000 Golden Visa covers any type of property, but prime properties cost a premium. Prices in peripheral areas are also rapidly rising. Despite the high cost of properties, an investment in a refurbished apartment with a water view might offer a reasonable return – although the yield has decreased proportionately in Portugal’s main cities.
However, transaction costs are very low in Portugal, with notary and legal fees ranging between one and two percent of the property’s value. There is also a 6.5% transfer tax, which may be avoided with a holding company. Lastly, foreign buyers must be aware of wealth tax, which is calculated based on the value of the property. Although the tax is high, it is unlikely to deter foreign buyers.
Although property prices in the city centre are still affordable, they have skyrocketed in recent years. As a result, most landlords are shifting toward short-term rentals. In addition, the availability of good apartments in Lisbon is limited and may be harder to find unless you have a lot of money to spare. In addition, if you are looking for a large apartment, you may have to go outside the city’s hub.
Although Portuguese property laws are strict and protect tenants, they also offer attractive rental returns. In Lisbon, rentals in apartments and villas average 4.5% to 6.7% on a net basis. While long-term rentals are based on long-term lets, short-term lets on sites like Airbnb can yield even higher returns. This means that investors can reap more profits and lower costs. A 50 sq. m. apartment can fetch 6.32% to 6.7% rental yield, while a two-bedroom villa can get you as much as a 6% return.
The price of residential property in Portugal is rising faster than wages. Although there is no immediate evidence of a real estate bubble, experts warn that Portugal is at risk of oversupply and a spike in bad debt. Despite this, the country’s real estate prices are rising at a slower rate than in recent years. The third quarter of 2021 saw prices rise 5.46% YoY and 2.85% QoQ, and are still lower than the previous years. The median price of a one-bedroom apartment in Lisbon surpassed US$1,750 last year.
The capital city of Portugal has more than 500,000 residents. The city is a mere 7-hour flight from New York. Its proximity to several European capitals makes it an ideal destination for a weekend getaway. It is also the capital of Greater Lisbon, a district of Lisbon. The city is part of a metropolitan area of more than eighty thousand people. About a quarter of the population of Lisbon lives below the poverty line.
Algarve is not a good option to invest in
Algarve is a popular destination for holiday homes, and is an excellent place to invest in commercial property. The region is a major source of income, thanks to tourism, and its location means homeowners can enjoy the sun year round. Moreover, this region is home to several outdoor activities, including golf courses and hiking trails. Albufeira is a lively city in the Algarve, with a large international population.
The Algarve is a popular real estate investment destination, thanks to its excellent climate, award-winning beaches, and delicious cuisine. With a good rental yield, Portuguese property can also be a solid financial investment. Moreover, as more foreign tourists visit the country each year, the rental income generated by Portuguese property can easily cover the annual costs of owning a holiday home.
Despite its popularity, Portugal has many other locations to offer good investment opportunities. Lisbon, for instance, is one of the most popular destinations for foreigners, and offers a diverse range of properties at competitive prices. Lisbon’s prime market prices range from EUR2,154 per square metre to EUR3,300 for luxury homes in Vilamoura. With a good rental income, Lisbon is a desirable location to invest in.
The climate in Portugal is a key reason why people invest in Algarve property. While Portugal’s south is warmer than its northern counterpart, the northern parts can still be wet and cold in winter. The Algarve enjoys a pleasant climate in most seasons, with 300 sunny days per year on average. The hottest month in the Algarve is July, where the temperature averages around 33 degC. The coldest month is January, when the temperature drops to twelve degrees Celsius.
The Algarve region is close to Lisbon, the capital of Portugal. A trip to Lisbon can take more than three hours by train or private car. The Algarve region is home to two airports, Portimao and Faro. Although both airports have international flights, the former is preferred for domestic travel. It is also close to Spain, and is a good choice for holiday homes.
However, if you’re looking for a safe investment opportunity in Portugal, you may want to look elsewhere. With the new Golden Visa requirements, only a small percentage of foreigners can buy residential property in Portugal. But there’s still room for investment despite the restrictions. Portugal’s real estate market continues to grow and will continue to attract foreign buyers in the future. A small number of foreign nationals can even apply for residency here under the Golden Visa scheme.
Rising prices are not the only factor to confirm the existence of a real estate bubble in Portugal
The country’s housing market has witnessed record price growth, owing in part to the combination of a strong demand and a lack of housing supply. During the first quarter of 2015, the growth in residential investment was 13% higher than a year earlier. This is the highest increase in house prices since 2010.
Another factor to confirm the existence of a real-estate bubble in Portugal is the ease of immigration for non-citizens. According to Luiza, it has become easier to immigrate than in the past as bureaucratic procedures have been simplified. Non-citizens may have trouble registering at a health center or obtaining a NIF.