This article was written by Ayres Neto of Coldwell Banker Global Luxury. He leads a team of agents in Portugal and you can find him here.
Portugal has become the “dreamland” of thousands and thousands of expats. Our weather is fantastic, our infra-structure is very good, we have easy and fast internet access almost everywhere and excellent roads/airports/housing conditions. Life here is cheaper than in many other countries in Europe, we also have great wine, cuisine, nightlife, architecture, history. It’s mix of dozens of positive aspects that make life in Portugal so unique and exciting to expats. Remote working professionals, early retirees among other categories have chosen our cities to live. So what about real estate? It seems complicated. Should I buy, should I rent, what’s the story there?
As years go by I learnt that most of my international clients come to Portugal extremely confused about our Real Estate system. They try to gather online information but misconceptions and contradictory information are plenty, which leaves them “dazed and confused” to use a Led Zeppelin reference. I’m a real estate professional here in Portugal for Coldwell Banker. That’s what I do for a living, so if you hate real estate professionals feel free to stop reading. I will try to explain at least in a generic way, how Real Estate works in Portugal and how it worked in the past to give some context. So, let’s start with that.
Prior to the arrival of the multinationals from the US and other countries, the market was very segmented and to buy property here you would need to do some “window shopping” and visit dozens of brokerages to find what you want. Every brokerage had its own listings and were very protective and secretive of them to avoid losing to its competitors.
Once the multinationals arrived around 15 years ago, the scenario started changing slowly, they brought an American way of doing things. Locals back then hated this “new way” of doing things, but that’s the nature of the beast, new “ways” come, old “ways” go. It was a complicated period to say the least. But things evolve, habits change, more and more international brokerages from all over the world arrived and the inevitable happened. The old way is dying. It’s on its last breath and remain relevant only in the countryside, villages, etc. And before anyone says that I am only defending the international companies, there are plenty of Portuguese small to medium size brokerages doing a great job, helping people to work the new way. And this new way is not exactly new. It’s been prevalent for over a decade.
I recently saw a report stating that 86% of real estate transactions are done thru an agent. The vast majority of them are done by two agents, one representing the buyer/renter and another representing the seller/owner. Dual agencies are becoming rarer by the minute. People are conscious about the importance of having someone (buyer/renter agent) representing and protecting them against unforeseen situations or legal issues. That’s not my opinion. That’s statistically proven. However, I do acknowledge that for a newcomer, things are not clear-cut and very frequently I am approached by clients that upon arrival, only see the “wild-west” side of Portuguese real estate, a doomsday scenario painted in social media where people just keep feeding each other misconceptions. I honestly feel awful about someone who’s planning to move here and is scared to death of their upcoming housing situation. So let’s get to common issues here:
No MLS (non-Americans – it’s a Multiple Listing System that makes agents/buyers/sellers lives a lot easier)
True there’s no MLS here. However, we agents have access to a software that gives us the history of the property, listed price (and changes), comps (equivalent listings) and a lot of additional information that will help us to find the right property for you.
No buyer agent in Portugal
Immense misconception. Any agent in Portugal is capable of working as a buyer agent and help you to find the right property. My two cents of advice: interview several of them, pick one and go with her/him to guide you through. A buyer/renter agent will have access to the vast majority of properties available. And beware, the ones that he/she might not have access are likely to have issues with them. Any reputable brokerage checks documents, etc. No one wants to risk the brokerage license for a listing, it’s not worth it. Specially the big names in the industry.
Agents hide addresses of listings
True, but not for the reasons people think. It’s related to the old habit of “protecting the listing” from another agent. It’s also dying because it’s proven that a listing with location sells faster than without it. But it’s not related to the client, it’s related to other agents. Again if you have a buyer agent he will know how to overcome that easily.
“I can’t find what I want here. I’ve been looking like crazy, can’t find my dream property!”
You moved to a different country. A lot of buildings here have twice the age of the United States. Just as an example Coimbra University is from 1290. Harvard University is from 1636. For someone to help you, you first need to help yourself. Define wants and needs. If you want a modern kitchen with state of the art appliances, new fancy bathrooms, plus elevator and AC/heating system but at the same time you want a beautiful “pombaline” facade at Principe Real, they do exist. But it will cost you the big bucks. It will have the same quality you will find in any major city of the world. But it will be expensive. If your budget doesn’t allow that, you have a choice to make. You, not your agent. There are plenty of neighborhoods with modern buildings in Lisbon, with everything you need, heating, AC, etc. But they lack the charm of Principe Real or Chiado. Something’s gotta give. You need to make a choice and live with that. It’s an old city. The seven hills city.
Should I buy or should I rent?
“If I buy there will be trouble, and if I rent it will be double”.. Little Clash reference…..
It’s obviously a personal choice, Every buyer/renter will have their own circumstances, but the most important factor is to understand the options.
Cash buyers: Process is very straightforward. If you have a buyer agent (highly recommended) he should interview you, find feasible options according to your wants/needs present that to you and then narrow down to the ones you like. Pick one, put a proposal and go for it. Very common question, what kind of discount should I expect on the asking price. The short answer is, there’s no rule, It’s a case by case scenario and that makes the importance of a buyer agent even more relevant. Once a price is agreed upon, a CPCV (Promissory contract) will be drafted, approved by both parties and then signed. It’s the initial step of the purchase. Normally a down payment of 10 to 20% of the agreed price will be given to the buyer to the seller. Americans (rightfully so) get scared of that. Why? In the US the down payment goes into a escrow account, protected, so no parties have access to that until completion of the deal. In Portugal, money goes from buyer acct to seller acct. However there are laws in place that prevent this situation going sour. In my experience I’ve never seen a seller “taking the down payment and run” unless the buyer did not fulfill his/her contractual obligations. If the seller does not fulfill his contract obligations, by federal law, he has to return the down payment in double. After all the paperwork is exchanged, a deed is celebrated in a notary and at that moment, buyer gets full ownership of the property.
Buyers that need financing
Portugal has a very friendly and easy banking system for expats. I’ve done dozens of loans for international buyers and as long as they meet the financial criteria/requirements they can buy here. Normally the mortgage payment will be below the equivalent rental payment for the same house. So if you buy a 300k apartment, your mortgage payment should be less than renting the same property, which makes buying more enticing than renting for most people. Portugal has a very high home ownership percentage, around 75%. Just as an example, Germany has 51%, UK 63%, France , US, Canada and Australia 65%. Any reputable brokerage in Portugal will have its own “intermediário de crédito” (similar to a mortgage broker in the US) that can guide you thru the system, research banks to find you a solid and viable option. The process CPCV/Deed is exactly the same as described above, but it’s important that the buyer includes in the CPCV a resolutive clause, conditional to loan bank approval. If the loan does not go through, buyer can get this down payment back. Again, your buyer agent should help you understand every step of the process.
Renting in Portugal
To rent in Portugal is not a complicated process per se. There are plenty of properties available and renting legislation is designed to protect both parties in order to create a just and safe marketplace. Lease terms can be from 6 months to 5 years. Because Portugal has become such a popular destination, beware that prices have risen steadily for the last 8 years. However, the pandemic and consequent Short Term Rental industry collapse, prices have come down and availability is now bigger than anytime in the last decade. Is this a long-lasting, sustainable scenario? I don’t think so. The remote worker boom of the last 12 months will keep this market heated, specially after the tourists come back. For most people renting is a stop-gag until they find a permanent housing situation, but for some that own property elsewhere is a good solution, no strings attached. To each his own.
So that’s my two cents for the day, if you need any real estate assistance in Portugal drop me a line, I lead a team of 8 international agents, mostly expats, we speak 8 languages in between us and cover the whole country. We’ll be glad to help.
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