The Complete Guide to Buying Property in Lisbon – US Edition

Carefully created with our US clients in mind, this article will delve into why Lisbon is so popular with US investors and how to invest in this thriving real estate market. We will also touch on the hugely popular Portuguese Golden Visa programme and the Non-Habitual Resident tax regime.

Why are US investors so interested in Lisbon?

At Athena Advisers, we are seeing an increasing number of US residents relocating to or investing in Lisbon, many of which originate from California. There are numerous reasons why our clients are interested in property for sale in Lisbon, but the five key ones have been listed below and we’ll delve into each of these attractions a little deeper later on in the guide.

EU residency: Portugal’s residency by investment programme, the Golden Visa allows non-EU residents to apply for Portuguese residency and eventually citizenship by investing in qualifying Portuguese real estate. 

Tax incentives: the Portugal NHR – short for non-habitual resident – tax programme allows qualifying expats to significantly reduce their worldwide tax exposure.

Rental income: though short-term lets are limited in some parts of Lisbon, there is a thriving long-term rental market with yields of up to 5.5%.

Entrepreneurship: an emerging hub of innovation attracting the likes of major international brands and the future home of the world’s largest start-up hub, Lisbon is a melting pot of entrepreneurial spirit.

Quality of life: bordered by the azure waters of the Tagus river and baked under 300 days of sunshine, cosmopolitan yet steeped in history, Lisbon offers a unique way of life. In fact, in 2019, Monocle named Lisbon as the 10th best city in the world for quality of life.

Lower cost of living: Lisbon vs. San Francisco

Whilst offering an incredible quality of life, Lisbon also offers a lower cost of living when compared to San Francisco. For example, in Lisbon’s A Brasileira an espresso costs €2 and espresso at Saint Frank Coffee in San Francisco will set you back $2.75. However, it is not just food and drink which is easier on the wallet…

Gym membership

  • Lisbon (Holmes Place): €60.50 per month
  • San Francisco (Equinox): $245 per month

Transport pass

  • Lisbon: €30
  • San Francisco: $81

Hairdressers

  • Lisbon (Moscow Beauty Bar): €30-50
  • San Francisco (Barrow Salon): $95-225

Restaurants (2 courses + wine)

  • Lisbon (Invicta Madragoa): €60
  • San Francisco (Fog Harbor Fish House): $108

International schools (2020/21)

  • Lisbon: €6,400-€23,000 per annum
  • San Francisco: $12,700 – $42,500 per annum

Taxes, healthcare & education: Portugal vs. the US

In addition, taxes can work out to be more economical in Lisbon. For example, In the US inheritance tax is 40% whilst it is 0% in Lisbon. 

In Portugal, there is a solid public healthcare system in place and private health insurance is significantly more affordable than in the US as you can see in the graph below which shows the combined health costs per person. See our Healthcare in Lisbon article to learn more.

How much does healthcare cost in Portugal

 

Portugal has one of the best education systems in the world, with amazing schools and universities such as IADE in Santos which is a leading design university with a focus on advertising, marketing and photography. Our article on education in Lisbon takes a closer look at this and unveils some of the best schools in Lisbon.

Business revolution

Lisbon is the official home of Web Summit, Europe’s leading technology conference and dubbed the “best technology conference on the planet” by Forbes. Though the last edition was held online due to the pandemic, the event draws in around 70,000 tech aficionados and industry luminaries a year. Web Summit will be hosting this annual event in Lisbon for the next 10 years and the event is expected to inject some €2bn into the local economy whilst cementing Lisbon’s reputation and a major tech hub.

Another exciting project in Lisbon is Hub Criativo do Beato in Marvila which upon completion will be the largest start-up hub in the world, surpassing Station F in Paris, spanning 100,000 sqm (1.08 million sq ft). 

Google is always opening up new campuses around the globe and the new campus in Lisbon will create just over 1,000 brand-new jobs. Plus, as many more business centres emerge, more and more international companies, like BNP Paribas, are opening a Lisbon HQ.

New infrastructure will take well-connected Lisbon to new heights

Over the next decade, billions of euros of public and private investments will revolutionise the infrastructure in Lisbon. This includes a brand-new airport in Montijo which is due to be completed in 2023 and will allow the city to welcome a further 43m travellers a year. There are also plans to construct a brand-new high-speed rail link between Lisbon and Porto which will cut the travel time by half.

The Lisbon property market

When compared to London, there are five times as many properties for sale in Lisbon with around 190 properties for sale per sqm. At Athena Advisers, our team is here to help you sift through the various properties for sale in Lisbon and help you pick a residence that suits your unique needs. 

There are four key factors that continue to underpin the Lisbon property market:

  • A shortage of spacious, prime renovated or resale properties 
  • No unsustainable downturn in the market due to the COVID-19 pandemic
  • There is still a high level of international interest and Lisbon and Portugal are frequently featured in lists of the best places to retire or relocate abroad. 
  • There is a high demand for Golden Visa property for sale in Lisbon as the programme is changing at the end of the year.

How much does property for sale in Lisbon cost?

How much does property cost in Lisbon

Whilst property prices have increased in Lisbon, thanks to the huge sums of investment reshaping the capital and the popularity of Lisbon with international property buyers, property prices remain low when compared to other major European capitals. 

Though Lisbon city centre is quite compact, the average price per sqm varies according to the neighbourhood. The map below takes a look at the typical property prices in Lisbon’s most sought-after bairros. One of the key areas to watch is Alcântara which offers very competitive prices per sqm and is about to welcome a large international school which will increase the demand for property here. 

Property prices in Lisbon

 

 

Buying a property in Lisbon: costs and finance options

Property purchase costs

Generally speaking, we always advise clients to factor in around 8% for purchasing costs. You will need to pay IMT which is usually 6% of the sale value, stamp duty (0.8% of the sale value) and finally closing costs, which include lawyer fees. Closing costs usually come to around 1% of the sale price, if not less.

Running costs

You will need to pay IMI every year which ranges from 0.3-0.5% of the tax registration value of the property. Condominium fees are €1-€2 per sqm per month. If you choose to rent out your property to generate the income you will need to pay 9% tax on short-term lets and 14-28% tax on long term lets.

Mortgages in Portugal

Depending on your circumstances, US citizens can get a mortgage to pay for the Lisbon property. Typically, you can expect an LTV of up to 70% for a maximum term of 40 years. Variable interest rates range from 1.75-2.9% a year whilst fixed rates (fixed for 10 years) are around 1.9%. 

However, it is important to note that if you are buying a property in Lisbon to qualify for a Golden Visa you must pay that initial minimum investment in cash. Typically, this is €500,000 though we do have some options, like Poiais de São Bento, which enable you to access the programme at the lower rate of €350,000. You can always finance the remaining part.

A cost simulation

How much does it cost to buy a property in Lisbon

 

Generating income – renting out your Lisbon property

Though short-term rentals are somewhat restricted in some bairros and affected by the pandemic, Lisbon has a booming long-term market. This is partly due to the fact that so many people are now working from home, meaning that they can move abroad to a city like Lisbon which offers a better quality of life. 

Long-term rentals (contracts lasting a year or more) can generate yields from 3-5.5% and some of the most popular areas for long-term rentals are Chiado, Lapa, Estrela and Santos. At Athena advisers, we have a rentals department that can help aid investors with this process. See our complete guide to Rentals in Lisbon to learn more.

How much does it cost to rent in Lisbon

 

Portugal Golden Visa programme – citizenship through investment

Launched back in 2012 and hugely popular with our US clients, the Portuguese Golden Visa programme allows those that make a significant investment in Portugal to apply for residency and ultimately citizenship. Since its creation, investment via real estate is the most popular route, accounting for 90% of all golden Visas awarded. To date, €5.8bn has been invested in the programme and just over 26,000 visas have been awarded to investors and qualifying family members. 

To qualify for the programme by purchasing real estate, one must invest €500,000 in Lisbon real estate and this sum must be paid in cash. This can be any property, off-plan, resale or even a combination of several lower-priced properties. Some property opportunities allow investors to access the Golden Visa programme by investing €350,000 however these projects are increasingly hard to find in Lisbon. 

One of the great things about the Golden Visa programme is that it is possible to include certain family members in your application such as your partner, children or parents. One of the other attractions is that you do not need to spend long periods in Portugal to qualify for residency. On average, you will only need to stay in Portugal for seven days a year. 

After five years, you will have the opportunity to apply for permanent residency of full Portuguese (EU) citizenship. 

 

How long does it take to become a Portuguese citizen? 

Launched back in 2012 and hugely popular with our US clients, the Portuguese Golden Visa programme allows those that make a significant investment in Portugal to apply for residency and ultimately citizenship. Since its creation, investment via real estate is the most popular route, accounting for 90% of all golden Visas awarded. To date, €5.8bn has been invested in the programme and just over 26,000 visas have been awarded to investors and qualifying family members. 

To qualify for the programme by purchasing real estate, one must invest €500,000 in Lisbon real estate and this sum must be paid in cash. This can be any property, off-plan, resale or even a combination of several lower-priced properties. Some property opportunities allow investors to access the Golden Visa programme by investing €350,000 however these projects are increasingly hard to find in Lisbon. 

One of the great things about the Golden Visa programme is that it is possible to include certain family members in your application such as your partner, children or parents. One of the other attractions is that you do not need to spend long periods in Portugal to qualify for residency. On average, you will only need to stay in Portugal for seven days a year. 

How much does a Portugal Golden Visa cost?

Immigration application fee (petition phase): €533 per person

This fee must be paid at the start of the process to enable you to submit your application online and it will need to be paid again each time you renew your Golden Visa.

Immigration office approval fee (granting phase): €5,325 per person

The rate will be reduced for future residency renewals. 

Residency renewal fee: €2,668 per person

Following the current timeline for the programme, you can expect to renew your residency every two years.

Golden Visa changes – what does this mean for investors interested in Lisbon?

n order to drive investment inland, in 2022 it will no longer be possible to combine a residential property investment in coastal areas like Lisbon or Porto with a Golden Visa application. This means that US investors who wish to apply for a Golden Visa by buying a property in Lisbon have a narrowing window of opportunity to do so. Our article on the Portuguese Golden Visa changes takes a closer look at how the programme is changing. It is important to note that commercial property for sale in Lisbon will not be affected by this upcoming change – see our article on commercial property in Lisbon to learn more. 

Though not an official deadline, we strongly recommend that those interested in applying for a Portuguese golden visa by investing in Lisbon real estate begin the application process by the end of August 2020 to ensure that they make the January 1st 2022 deadline. After this date, it will no longer be possible to access the Golden Visa programme by purchasing a residential property in Lisbon. 

Portugal’s Non-Habitual Resident regime

This hugely popular programme is open to those who choose to become a tax resident in Portugal and reduces their tax exposure, making it a great option for those who are planning on moving to Lisbon on a long-term basis. 

The Portugal Non-Habitual Tax regime is available for 10 years and reduces the tax on foreign-sourced income to 0%. Do note that as of March 2020 pensions are subject to tax but at a discounted rate of 10%. Any income generated in Portugal will be taxed at 20-28%, the same as Portuguese citizens. Below we take a closer look at the tax benefits of the Portugal NHR programme

Income sourced from abroad

  • Dividends and interest  – 0% tax
  • Private pension – 10% tax
  • Real estate income – 0% tax
  • Salary – 0% tax (providing that it is properly taxed in the source country)
  • Income from high added value activities – 20% tax (if not exempt)

Income generated in Portugal

  • Income derived from high added value activities – 20% (reduced rate)
  • All other income will be taxed at progressive rates of up to 48%, in line with Portuguese residents. However, special types of income generated in Portugal, like capital gains, interest, real estate income and dividends, will have a lower tax rate of 28%. 

Who can apply for the Portugal NHR (non-habitual resident) regime?

To access the NHR regime, one must satisfy the following:

  • You cannot have been a tax resident in Portugal within the previous 5 years
  • You must become a Portuguese tax resident by remaining in a Portuguese territory for more than 183 days a year OR have a property in Portugal listed as your main residence. This property may be purchased or leased. 
  • You must comply with the exemption conditions required for each type of income.

How to apply for the Portuguese Non-Habitual resident tax regime

 

How to become a Non-habitual resident in Portugal

 

First, you will need to get a Portuguese tax number, called a NIF.

Next, you must establish your residence in Portugal. This can be done by buying a property in Portugal or leasing a property on a term for one year or more. At Athena Advisers, our team can help you find the perfect Portuguese property for sale or a prime rental property in Lisbon. 

You will need to register as a Portuguese tax resident before the 31st of December of your first year of residence. 

In the following year, you must apply for the Portuguese NHR programme before the 31st of March. 

Lisbon

Lisbon is complex and unique and until recently wasn't seen as the obvious choice for property investment, but in the past few years, it has seen a dramatic increase in popularity. Paris, London, Berlin, Rome are all cities that have a clear identity and cultural offering. Often thought of as the San Francisco of Europe, Lisbon is undergoing a m...

Carlota Pelikan Carlota Pelikan

- Added to shortlist

- Removed from the shortlist

Undo