Why choose the Algarve?
The Algarve is a mature, stable market; the growth in low-cost airlines has reinvigorated property appreciation and rental potential. It is recognised that the Algarve offers amongst the best golf in the world. With courses and rates to suit all abilities and budgets.
Property in Portugal is high quality and good value for money and experiences a growth rate of approximately 5% per year. It is accessible to the whole of Northern Europe (and indeed the world) through the international airports of Faro ensuring solid communication links for the future.
Strict planning rules limit development. This control means that new property is sympathetically added to the area and also restricts the supply of property. As a result, there is less competition for holiday lets and resale properties from an investment perspective.
The Algarve was recently awarded 1st place in "Best place to buy" by Channel 4's A place in the Sun - 2005 and Portugal was also awarded 3rd place in "Best place to Invest" in 2006.
Why choose Spanish Algarve Properties?
Rather than cover many areas we have chosen to specialise in just one - the Algarve. Our experience of this coastline spans 30 years. We have built up a detailed knowledge of the region and nobody knows it better. With 2 local offices and a maintenance and rental company, Spanish Algarve properties offer a complete service for anyone who wants to deal with the specialists.
We have a local team speaking English, Portuguese, Spanish, German and French. We all live and own property in the area and know all the reputable developers.
What is the rental market like?
We are currently achieving between 15-25 weeks rental a year for our clients on the Spanish Algarve through our local property services company www.spanishalgarveservices.com. This is proving more than enough to cover our client's costs for owning property in the area. The market is growing and is already strong locally and Northern Europe.
Our Services business also has a number of clients that are looking for long term rental property - whereas the return per week will be slightly less than short term it can provide a reassuring guaranteed monthly income.
How do I view properties in the area?
The best way to visit the area is with us on a viewing trip. Our trips are second to none in this industry. We offer a bespoke viewing experience where you will have our total focus; no tour buses, we promise! Equally if you prefer to travel by yourself we can provide the support you need when searching for the right property.
During our trips you will be under NO PRESSURE to buy what so ever. We firmly believe that the area sells itself. As you already know, we are a family business with property interests in the area and a friendly, impartial, all encompassing service. Our colleagues in the area are not working on commission!
All we ask for is a confirmation of available funds, a general knowledge of the area and definite requirements.
Can I reserve a property?
YES. Many of our clients choose to put down a refundable deposit to fix the price of a property and take it off the market until they can visit the area to view it. These refundable deposits are not offered by every developer, but are usually £2000, giving you 30 days to view and decide whether or not to buy. This put you under NO OBLIGATION.
What are the basic procedures and legal acts involved in acquiring a property in Portugal?
Having chosen a property, your Lawyer should search the local Land Registry (Conservatora do Registo Predial) to confirm that the vendor has clear title of ownership, charges or mortgages over the property and actual building and plot size being sold.
A fiscal number (numero de contribuinte), obtained at the local Tax (Finanças) office, is mandatory. This number will come in the form of a card, which you will need for payment of annual property taxes, supply of services to the property or to open a Portuguese Bank Account.
Your Lawyer will obtain the official tax document (caderneta predial) relating to the property from the vendor and check that the description of the property (number of rooms, area of house, area of land, etc) is the same as in the land registry.
A copy of the usage licence (licença de utilizaçao) will be obtained from the local town hall (Camera Municipal). For residential property, you will need a Habitation Licence (licence de habitçao). Non-residential licences need to stipulate the appropriate commercial or industrial use.
A Promissory Contract of purchase and sale will be drawn up (Contracto de Promessa de compra e venda) this should be signed by you and the vendor. It should include: Identification of the parties, Identification of the property, Agreed terms and conditions of the contract. A deposit of 10% of the full purchase price is normally payed at this stage.
Transfer Tax (IMT - Imposto Municipal sobre Transmissoes) must be paid prior to issue of the Final Deed of Sale. A certificate must be issued by the Local Tax Office (Finanças), which proves payment and must be submitted to the Notary prior to completion of the Final Deed. The value of tax due depends on the sale price the property.
On completion of the sale, the Notary issues a final deed (escritura) and title pertaining to the property in question. Prior to issuing the document all certificates referred to above must be provided to the Notary.
Finally, on completion of the sale, it is very important to ensure that the property is immediately registered in your name at the (Conservatõria do Registo Predial) and also in the Local Tax Office (Finanças).
What fees/taxes can be expected during the buying process?
There are 2 taxes that relate directly to the property:
- IMT rate - a one off tax that is payable when the property is deemed to have changed hands. The tax is related to the transaction value of the property or if this is deemed to be too low the evaluated value given by the local tax office. The tax is around 6% but as stated earlier is directly related to the value of the property.
- IMI annual tax that is paid in two payments over the year. The local authorities calculate this tax annually. As an example though this year the Loule council have set their local tax at 0.45% of the property's value.
Notary and registration fees are in addition and payable upon signing of the title deed. The notary fees are around the 200 euros mark and the stamp duty 0.8% of the property value.
With lawyers fee of 1%, you should budget for around 8% overall for the purchase of a property.
What is the cost of living in the Algarve?
The cost of living is around 30 - 40% cheaper than in the UK, particularly for food, drink and travel. The pace of life is much more conducive to relaxation and the majority of activities are based outdoors. Even if you choose to live in or near the main cities or tourist areas, you can enjoy a slower approach to everyday life, and if you visit some rural locations, you might think time has completely stood still. The more touristy a destination is the more the price tag will reflect this - prices for living still comparable with the UK. Outside of this though as you go to quieter and more rural areas the prices become extremely reasonable and the produce sourced from local suppliers is of outstanding quality.
How much will my property cost to run?
Maintenance costs if within an urbanisation vary by development and charges are driven by many factors - the size of the urbanisation and the ratio of properties to it, what facilities there are on the site, landscaping, heated pool and size of the pool. Typically a 2-bed property on a luxurious development would be from 100 euros per month to include all maintenance of common parts.
Running costs for property in Portugal are much lower than in the UK. Approximate monthly costs to include the highest community charges and all necessary utilities and taxes (electricity, water, gas, sewage and local taxes) are around 210 euros: 2 bed apartment; 260 euros: 3 bed townhouse and 350 euros: 4 bed detached villa.
What taxes should I expect to pay?
In accordance with EC tax law, Portugal has recently introduced measures to clamp down on the use of offshore tax havens. The abolition of the tax on bequests to resident direct family members, along with reductions in capital gains and corporation tax make Portugal one of the most inheritance tax-friendly countries in Europe.
You are considered to be resident in Portugal if you spend more than a total of 183 days in Portugal per calendar year (cumulative, not consecutive), or if a "habitual residence" is available to you on December 31st of the relevant tax/calendar year and it appears that you intend to keep it and occupy it as your habitual residence. A person resident in Portugal is liable to Portuguese tax on worldwide income and gains. A person not resident in Portugal is liable to income tax on Portuguese source income, and to capital gains in respect of assets in Portugal.
Portuguese income tax is levied on a sliding scale from 12% for the first 4,266 euros; with various incremental increases up to 40% for anything over 53,322 euros.
Property tax varies from 0.7% to 2% of the fiscal value of the property, and is levied annually by the local authority.
Inheritance tax was abolished in 2004. With the abolition of these taxes a Stamp duty with a flat rate will apply, there will be exemptions available for transfers to spouses, descendants and ascendants.
Any questions that you have about taxation should be discussed with your lawyer who will be able to recommend a tax expert.
What Capital gains tax will I pay when I come to sell my property?
CGT is charged on the profit from the sale of any property bought after 1 January 1989. Property bought before this time is exempt from it. CGT is calculated by the Financas (tax office) and is levied on 50% of the net profit acquired on the sale of a property - it is charged at a flat rate of 25% for all non-residents. Unfortunately if you own a property through an offshore company, the full gain acquired on the property is taxable. CGT may be rolled over if another principal residence of a greater or equal value is bought between 12 months prior and 24 months after the sale. For newly acquired properties of lesser value the gain is calculated on a pro rata basis.
Do I need to make a Portuguese will?
Yes definitely, it is essential to complete a Portuguese will and lodge it with a Portuguese lawyer. Without this if the foreign resident dies without having left his or hers Portuguese property to legally specified heirs, the estate automatically passes to the Portuguese state. Your Portuguese will should reflect ONLY what property is owned in Portugal; including UK property will lead to serious complications. The names of English speaking lawyers can be obtained through the British embassy or consulates in Portugal. We are also able to recommend professional lawyers fully conversant in the purchase of a Portuguese property for the foreign buyer.
Which permits will I need to live in Portugal?
There is no need to apply for this before you enter Portugal, and if your stay is for less than three months (even if you will be working), or if you will be undertaking seasonal work that doesn't exceed eight months, you do not need a resident's permit. However, you will need either a temporary or permanent residency permit if your stay is for longer. Permits may vary in category but all can be renewed and extended. Spouses of people coming to Portugal to work also require a permit, and children under 14 years may have their names endorsed on their parent's permit. In all cases you need to pay a visit to the nearest Foreigners Service (Serviço de Estrangeiros e Fronteiras/SEF).
After getting a residence card, you must obtain a Portuguese (blue) identity card (bilhete de indentidade). Always carry your Portuguese identity card or passport. You can be asked to produce your identification papers at any time by the police or other officials.