Portugal is one of Europe’s most attractive destinations for overseas buyers. With its stunning coastline, mild climate, and welcoming lifestyle, it’s not hard to understand the appeal. But while buying a home here can be a rewarding experience, it’s not without its challenges.
Whether you’re planning a permanent move, a buy-to-let investment or a holiday home, understanding the potential pitfalls in advance puts you in a stronger position. From hidden legal complications to fluctuating exchange rates, this guide explains how to spot and sidestep the most common risks.
Contents
- Choosing the right location
- Understanding the full buying costs
- Managing currency risk
- Avoiding legal traps
- Why structural surveys matter
- Risks of buying off-plan
There are many places you could call home in Portugal, such as a villa in the Algarve
Choosing the right location
Portugal may appear compact on a map, but its regions are strikingly diverse – from lively beach resorts to sleepy inland villages. Jumping into a purchase without understanding what daily life in your chosen area really involves is one of the most frequent buyer missteps.
Ask yourself probing questions. Will the climate suit you year-round, or is it only suitable in summer? Do you want a place buzzing with tourists or something more peaceful and residential? If you’re hoping to integrate locally, will there be opportunities to interact with Portuguese neighbours, or is the area dominated by fellow expats?
Short-term rental rules are another key point. Lisbon, Porto and parts of the Algarve have introduced strict licensing limits for local accommodation. If letting is on your radar, get clarity from a legal adviser or estate agent before you buy. A property without a tourist licence in a restricted zone is unlikely to be rentable under current rules.
Ultimately, the best advice is to spend time exploring different regions before committing. Local estate agents can help identify towns or suburbs that reflect your needs, but nothing replaces the insight gained from physically experiencing the area in different seasons.
For more detail on every step of the process, claim your free copy of our Portugal buying guide:
Understanding the full buying costs
Property prices in Portugal may seem good value compared to other parts of Europe, but many buyers overlook the added expenses that come with purchasing real estate here. These costs can easily add 8–10% to the agreed purchase price, depending on the specifics of the transaction.
The headline costs include:
- IMT (transfer tax): This varies on a sliding scale up to 6.5% for resale properties.
- Stamp duty: Usually fixed at 0.8% of the property value.
- Notary and registry fees: Between 1.5% and 2% combined – essential for formally recording your ownership.
- Legal fees: A good property solicitor will typically charge 1–3% of the purchase price.
If you’re buying a new-build property, VAT (IVA) may also apply. This stands at 23% and is generally included in the advertised sales price, but it’s important to double-check.
Additional costs can include home insurance, survey fees, mortgage arrangement charges, connection fees for water and electricity, and management fees for those buying in condominiums. Speak to your lawyer ahead of time to prepare a full cost breakdown. It’s better to plan now than scramble for funds later.
Managing currency risk
Buyers from outside the eurozone often ignore – or underestimate – currency risk when budgeting for their Portuguese home. Yet exchange rates can fluctuate dramatically over just a few weeks. If your deposit, balance or fees are sent when your currency weakens, it could cost you thousands unexpectedly.
Let’s say you agree to buy a property for €300,000. If you’re paying in pounds sterling and the rate shifts just 2% against you, that’s roughly £5,000 lost due to timing alone.
To manage this risk, financial experts strongly advise using a specialist currency provider – especially one familiar with property purchases. Unlike high-street banks, they can offer margin-beating exchange rates and forward contracts, which allow you to lock in a rate even before your funds are ready.
Forward contracts are especially helpful during the two to three-month period between signing the Contrato de Promessa de Compra e Venda (promissory contract) and completing at the notary’s office. Ask your currency specialist to provide visibility over your final euro cost in advance – it will help you stay on budget and avoid last-minute panics.
Our partner, Smart Currency Exchange, is one of the few providers tailored to overseas property buyers and offers personal one-on-one support throughout your purchase.
Avoiding legal traps
Portugal has strong legal protections for property buyers – but only if you take the right steps. The biggest mistake many make is relying solely on the seller’s solicitor or agent without appointing their own legal representation.
You should always use an independent lawyer who is registered with the Portuguese Bar Association and specialises in real estate transactions. Ideally, look for one who speaks fluent English and has experience with international clients.
Your lawyer will carry out vital checks before you sign anything. These include ensuring the seller has legal title, inspecting planning permissions, confirming the property’s boundaries and checking for debts or charges attached to the home. Inheritance disputes and co-ownership misunderstandings are also common in rural areas and could delay or derail a sale.
If you’re planning to apply for a visa or residency (such as the D7 passive income visa or Golden Visa), it’s even more crucial to choose a lawyer who understands the connection between property law and immigration requirements.
The earlier a lawyer gets involved, the smoother and safer your purchase will be. A modest upfront investment could prevent far more expensive problems later on.
Why structural surveys matter
Property surveys are not a legal requirement in Portugal, and many domestic buyers choose to skip them. However, for international buyers unfamiliar with local construction norms, skipping a survey is a gamble that can backfire.
Older properties, particularly in rural regions, often suffer from damp, poor insulation and dated electrical or plumbing systems. These issues may not be apparent at first glance but can equate to thousands in repairs after you move in.
To protect yourself, you can hire an independent chartered surveyor or engineer to carry out a full inspection. You’ll want someone who follows standards recognised by professional bodies such as the Royal Institution of Chartered Surveyors (RICS) or their Portuguese counterparts. A good lawyer can help source a reputable expert near your property.
If a problem is uncovered, your lawyer can negotiate a price reduction or amend the contract terms accordingly. It is also possible to include a clause in the promissory contract that gives you an opt-out if major structural faults are found. We’ve written more extensively about how to get a property survey in Portugal if you would like to know more.
Given the modest cost of a survey relative to the property itself, many overseas homeowners think of it as a small price to pay for peace of mind.
Risks of buying off-plan
New developments and off-plan properties can be excellent value, especially in up-and-coming areas. However, there are certain challenges that buyers must consider early on to prevent serious issues down the line.
Firstly, understand that when you buy off-plan in Portugal, your deposit is typically between 10% and 30% of the purchase price. You will commit to staged payments throughout the build, even though the completed property may be 18 months away.
As construction progresses, delays can occur due to factors outside your control – from supply chain disruptions to bureaucratic hurdles. Completion dates can overrun and you need to be prepared for those delays.
Furthermore, market conditions can evolve mid-build. If the developer reduces prices to attract more buyers during this period, your early purchase might lose some of its value – at least temporarily. On the other hand, a finished development can draw new interest, potentially making your property more attractive.
To minimise these risks, only buy from developers with a strong track record, and insist on seeing previous completed projects. Have your lawyer review the plans and get written guarantees over delivery timelines, specification and refund conditions. Make sure the contract includes a snagging clause, so all defects are rectified before full payment is released.
Buying off-plan in Portugal can be a sound option – but it demands careful due diligence and experienced support throughout the process.
Start your property search with confidence
Buying a home in Portugal as a foreign national is entirely possible and often straightforward – but only if you are properly informed and supported. At Your Overseas Home, we offer trusted guidance from legal experts, property consultants and financial specialists to help ensure your purchase runs smoothly from beginning to end.
Speak to a property consultant about your next step.
