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17, sep 21 | Reading: 9 min.

Buying or Renting a House in Portugal

Buying or renting a house in Portugal is a question that many people put on the table at certain moments of their lives. Be it the moment you want to leave your childhood home and have a new adventure in another country; when you reach retirement age or when your job requires it. In this article, we will help you understand which is the best option for your current situation.


Photo by Hutomo Abrianto – Unsplash


Family, employment, or your financial situation at the time may influence your choice. Apart from these aspects, there are others that you should consider before looking for a house. Keeping in mind that these choices have pros and cons, it is crucial to make the right choice. Regardless of how you choose, it will affect your lifestyle and the balance in your family budget.



Is investing in real estate in Portugal is safe?


Investments in any sector are usually characterised as low or high risk. In this case, in Portugal, real estate is considered a safe investment because your money is invested in a tangible asset. Real estate is necessary for everything, from the house we live in, to the place where we spend our holidays, to the supermarket or even the gym we visit weekly. Therefore, the demand for residential or commercial real estate will always be high.


Whenever money is invested in real estate, the real estate sector will always have a small impact compared to other sectors, even if the panorama is one of crisis. A good example of this is the pandemic crisis we are going through which started in 2020. Covid-19 has put several sectors at risk that were previously considered safe. Financial instability and labour shortages during the collective lockdowns in Portugal have shaken several sectors in unexpected ways. The real estate sector was not spared either and experienced some changes, albeit temporary. Shortly after the first lockdown, new technologies made it possible to carry out property visits practically from Portugal to any country on the other side of the world. We can say that the pandemic crisis accelerated a new era of technology, which was not completely unknown to us, but which is now widespread in the labour market.


We need to be clear that investing in real estate is not about buying it and then living in it. Here you expect a financial return, either by selling the property or renting it out. The modalities that guarantee you the return on your invested money are, as mentioned earlier, sale, renting and real estate funds. Get to know some aspects of these:


  • When you sell a property, you should find a property with an attractive value, make renovations, and put the property back on the market. In this model, you can get good advice from a real estate agent who knows the area well and has an idea of what the market demands in terms of renovations. If you want to sell your house, the Casas do Barlavento team has several interested clients waiting to get their dream home.


  • Buying a property to rent is one of the most popular types of real estate investment. It provides monthly income or seasonal income depending on the quality of the lease. You can choose between long-term rental or local lodgement (learn all about investing in rental property in Portugal). This investment requires the property to be in a good location. In other words: If you are interested in a house in a coastal town, the closer it is to the beach, the more success you will have. The same is true for rural tourism lodgings. The quieter the surroundings, the more guests will want to enjoy your property. Casas do Barlavento offers a property management service for those looking to invest in local lodgment from afar. We guarantee that all tasks are carried out by a specialised team and that we have a portfolio of clients who enjoy spending their holidays in peace in the Algarve.


  • The real estate fund is another investment option, but it requires some patience because the gains are not immediate. One of the advantages of investing your money this way is that you don't have to deal with tenants, red tape associated with buying and selling property, taxes, or maintenance costs associated with traditional real estate. (Learn more about these and other real estate investments).


After realizing that real estate investment is a great way to use and grow your savings safely and profitably, always make sure you get all the necessary knowledge about each model. Get information from qualified professionals, or even talk about the subject amongst your friends, so that you can make an informed decision in the future. Casas do Barlavento has been in the real estate business for over 15 years, in one of the most promising areas of Portugal, the Algarve. We guarantee experience and knowledge in Western Algarve, and in all these years we believe that the successes of our clients are also ours. We want to be a part of your celebration!


Photo by Toa Heftiba – Unsplash


You may still have doubts about the original question - buying or renting a house? That always depends on your long-term goals as well as on your current financial situation. It is best to make two lists of pros and cons. Make one list for buying a home and another for long-term renting. After you have made your lists, add our suggestions to the appropriate boxes:


List of benefits of buying a house:


  • Increase Net Worth: Buying a house is one of the most common ways to increase net worth. A house can be a passive investment at first, but if you choose to do so, it quickly becomes an active investment when you put it on the market for sale or rent.


  • Lasting investment: a property is something that lasts over time and can stay in the family for many years. The houses or apartments you purchase can be passed down to future generations. With the sale, rental or full use of the property, your heirs will have a source of income. Even if they choose to live in the property, they will not have to pay rent or monthly instalments on bank loans for housing. Increasing the value of the property through renovations and constant maintenance will further increase the value of the property in the market.


  • A house to suit your lifestyle: When you buy a house, it may initially have everything you need, but tastes change and so do requirements. Therefore, you will tend to do the necessary work and changes to make the house fit your needs again. This is a great advantage over rented houses as you do not need the landlord's permission to do these works.


  • Lower loan rate: the monthly rate on a mortgage is usually lower than current rents. Interest rates are currently lower, a fact that supports this statement. In the past, when rates were "normalised" or higher, we could say the same thing.



List of disadvantages of buying a house:


  • Costs of buying a house: we know that when you buy a house, costs are inevitable, especially at the beginning of the whole process. When you apply to the bank for a mortgage, you have to pay a monthly instalment and still guarantee at least 10% of the value of the property. Usually, this is the value of the down payment given to the seller as a guarantee in the purchase contract. In addition, you will need to consider other initial values such as:


- The opening of the process in your bank, (the value depends on the bank you choose);


- The IMT - Municipal Tax on Onerous Transfers of Real Estate, is calculated according to the value of the property;


- The stamp duty, which is 0.8% of the value of the house;


- The deed, the amount of which is also based on the value of the property.


Other costs are incurred during the year, such as life insurance, condo, IMI - Municipal Property Tax, or multi-risk insurance. Although maintenance costs are not a regular occurrence, they should also be considered. Monthly payments to the bank are made over several years, 30 or even 40 years.

This is not necessarily a disadvantage, but a reality, and you should always factor in these costs in addition to the value of the property.


  • Devaluation of property: devaluation of property occurs when a property experiences a decline in value. This happens due to the deterioration of the property or due to other factors such as oversupply in the same area, poor maintenance of the infrastructure around the house, lack of documentation when selling and a real estate bubble. These are risks, but fortunately they do not happen that often.


List of benefits of renting a house:


  • Geographical Mobility: Geographic mobility is an advantage for those who choose to rent a house, considering the impact of globalisation on employment. Nevertheless, there are deadlines in the contracts that must be met when renting for a long period.


  • Cost-free: the cost of the condominium, IMI or even the maintenance of the property, is not borne by the tenant but by the landlord. If it is to be borne by the tenant, this must be specified in the contract; how the payment is to be made, whether directly or through a deposit that was originally required when you moved into the rented apartment. We can also add that you will not be in debt to the bank, as renting a house does not require a mortgage.


List of disadvantages of renting a house:


  • Endless rent payments: Rent is paid monthly and indefinitely, as long as the landlord renews the lease, or the tenant wants to stay in the property. Renting does not guarantee your ownership of the house, and you will always have to pay for something that will never be yours.


  • High Rents: Rents are higher than they were a few years ago. This phenomenon in leases occurred after the Bank of Portugal restricted home loans. Demand for long-term rentals increased, and so did rents. All regions of the country have suffered from these changes. The regions where this was most noticeable were Oporto, Lisbon and the Algarve.


  • Permission for works: The leased house cannot be altered without the landlord's permission. If the landlord consents to the work, the cost may be borne by the tenant without entitlement to a refund. This is only the case if the change the tenant wants to make is, for example, an extra room for a new family member. The landlord should never refuse maintenance work in the house.



  • End of the lease: At the end of a property lease, there are two hypotheses: The contract is renewed for the minimum period of 1 year, or it is not renewed. There is currently a problem with this last proposition. The demand for houses to be rented is enormous, which makes it difficult for those whose contract is not renewed. While it is true that the end of the contract must be communicated to the tenant promptly, finding a new home will be a challenge.


Buying or renting a house can be a difficult decision to make, especially for those leaving their parents' home for the first time. In other cases, foreigners looking for Portugal as their future home also struggle with the same question. We always advise you to review your current and future financial situation and, above all, define your long-term goals. This is the best way to come to a conclusion.


If you decide to buy a house, you can count on the support of Casas do Barlavento throughout the process. We know that it is an important decision in everyone's life. Therefore, it must be accompanied by the knowledge and professionalism of the real estate sector in Portugal, specifically in the Western Algarve. Please contact us!