Tag Archive for: Trends & forecasts


Before and after moving to Portugal you have probably come across articles, posts and videos telling you the reasons to buy real estate in Portugal. Many of those, of course, are authored by real estate agents who would like to sell you a house. They might include facts and good reasons for buying or just state the obvious triad of sun, beaches and food and try to derive a rationale for buying from that.

A lot will surely be relevant for you in regard to moving to Portugal, but let us have a look at the factors that determine whether Portugal is also a good place for your money.

We will start with general reasons which give buy-to-let investment an advantage over other investment opportunities and then see if there are any additional advantages that apply to Portugal more than to other countries.

Focus in this post will be on reasons and, hence, advantages. Follow the respective link if you would like to learn more about the 5 biggest threats to the real estate market in Portugal in 2023 or the troubles that the Governments housing law package ‘mais habitação’ might bring.

The terms investment and buy-to-let will be used interchangeably.

What are the main reasons to do buy-to-let investment in general?

Investing in buy-to-let has some advantages over other types of investment. These are not universally true but apply to most developed markets and buildings most of the time.

Cash flow and passive income

On the top of the wish list of many digital nomads and part-time investors is passive income and cash flow respectively. Despite the obvious required tasks that are still needed, like search, selection and financing process as well as various property management tasks, real estate is very suitable to generate a constant, long-term and low maintenance income stream.

Further, many tasks can be outsourced to advisors, which can make it even easier to implement.

Capital appreciation and leverage effect

On top of the above-mentioned cash flow returns there is a fair likelihood that the value of your asset (meaning house, apartment etc.) increases in the long-term. Although this is usually hard to cash in on without selling it builds and stores wealth.

This is even more the case when debt financing is applied, since the value increase applies to the market value of the total investment which is higher and often a multiple of the invested equity. This is also known as the leverage effect and we will shed light on that in a future post.

You might argue that a big share of the mortgage rate go into interest payments which you will never see again. However, you still have the returns:

  • Firstly, the difference between the income of the property and the costs of the mortgage.
  • Secondly, the part of the monthly rate that is the repayment.


Depending on your personal tax rate this may or may not apply to you. In many countries taxation of real estate investments is more favourable compared to other asset classes because it is often considered a retirement provision. Regulations vary and it may be worthwhile to stay on top of the topic to align your decision with it.

Often tax advantages come in the form of:

  • reduced capital gains tax at sale after a certain minimum holding period or when the reinvestment meets certain criteria
  • reduced tax for buildings under monument protection or in dedicated development areas
  • increased write-off options to reduce the taxable profits
  • deductibility of costs to reduce the taxable profits
  • special deductibility or direct subsidies for improvements of energy consumption
  • reduced tax for rent coming from affordable housing
  • tax reductions to transform short-rentals to long-term rentals

In Portugal some of these are about to change with the implementation of the housing law package ‘mais habitação’.


Since the underlying factors which determine the performance of real estate are rather slow and the market is very large, volatility is lower than in many other asset classes. This is also supported by the fact that property is not very liquid (or tradeable) and often held long-term.


Often called an inflation hedge, one reason for buy-to-let investment is that it offers relatively good protection against inflation. This will depend on the type of real estate, rental law as well as the tenancy situation. However, the following contributes greatly to safeguarding your money:

  • Firstly, market rents (the rent that a unit could be let at) move freely, so at time of high consumer inflation and-or rising incomes, new lease contracts are entered into at respective higher rents. Each time a lease ends and a re-letting takes place this can be repeated.
  • Secondly, most lease contracts have an indexation clause which links them to consumer inflation. Variations of it also exist, e.g. step rents (fixed increase) or rent updates according to market rents. Even when these often cannot reflect the entire inflation, the adjustment is much better than in many other investments.

Limitations often occur when governments apply rent caps trying to maintain affordability. In Portugal, an example of this would be parts of the housing law package ‘main habitação’.

What are the reasons to do buy-to-let investment in Portugal specifically?

There are some reasons for doing buy-to-let investment that currently apply more to Portugal than top many other European markets.

Supply and demand

In Portugal, more than in many other European real estate markets, limited supply meets rising demand. A lengthy licensing process, one of Europe’s highest GDP increases, rising average incomes and a strong immigration have led to annual double digit increases in rents and sales prices in Lisbon and some other locations.

Whereas most countries in the EU face stagnating decreasing property values, Portugal has only seen a slower increase and current forecasts expect a moderate decrease of 3% that is yet to be seen.

Further, the governments housing law package ‘mais habitação’ has the potential to put further pressure on housing supply.

Market development

The Portuguese real estate market has become significantly more professional, international, transparent and investible over the past 10 to 15 years. This was also supported by politics that incentivise investment and create stability for market participants.


Often foreign investors plan to divest in their home market and invest in Portugal after they have moved. What becomes obvious during that step is that, despite being exceptionally expensive for locals, real estate purchase in Portugal is still rather affordable for foreigners. This shows in absolute terms (price of a unit), in square meter terms (price per sqm) and in rental returns (yield):

  • Instead of one apartment you can often buy a building and maintain more control over your investment.
  • Instead of buying a unit in a secondary location you can often buy in a prime location.

International attention

This is a relatively soft factor, but should not be underestimated.

Despite being rather small country the international attention of media, tourists, digital nomads and immigrants is significant and poses a relevant support to the economy and, therewith, the real estate market. It benefits the important hotel & hospitality sector, allows Portugal to attract foreign investment and direct funds to areas of the economy that need improvement. This strengthens employment and support incomes and eventually the real estate market.

Is buy-to-let investment in Portugal for me?

As you will probably already have learned from other posts on Real Estate Bricks, this will always depend on your personal risk-return-profile.

Compared to some markets, where foreigners typically come from, Portugal is a bit less transparent and professionalised. Although this is constantly improving, real estate investments in Portugal have higher risks and higher returns.

Always consider the risk exposure that suits your lifestyle, the mix with other investments as well as diversification of investment types or even real estate types.

Also, what should be kept in mind is that the investment process as well as potential refurbishments and the property management may be more difficult than in your home country.

Be honest to yourself and define the amount of risk and hassle you are able and wiling to deal with.


If you have made all of the above outlined considerations and still find yourself optimistic about making buy-to-let investments in Portugal you can benefit from some untapped potential and achieve higher than usual returns from a very dynamic rental market and strong capital appreciation.

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If you are looking for advice that helps you to understand the Portuguese market, limits your risks, supports your buying process or you want to get connected to other services along the investment process, drop us a line.

In case we put you in business with 3rd-party servicers we may collect a referral fee from them.


Have you ever wondered:

  • How has the sales price of T4 apartments in the city of Porto evolved over the past 15 years?
  • What is the net yield of a prime apartment in Lisbon?
  • What is the rent which the commercial unit next door was rented out for last year?
  • What are the forecasts for residential prices in secondary locations of Lisbon?
  • What are the benchmarks for ancillary costs for office space?

If you came to Portugal from one of the countries with a high level of transparency in the real estate market, like England, France, Australia or the USA, you probably have already unsuccessfully searched for data on these or similar questions.

Despite Portugal’s recent evolution in market transparency, foreigners from more transparent countries should take extra care of understanding and managing the differences.

Although real estate market transparency cannot be changed much by an individual, every buyer should familiarise themselves with the market environment they act within. Knowing what you are getting into before logging in your capital is crucial. In many countries, and Portugal is no exception, foreigners often make naïve decisions and enter unnecessary risk and costs.

Transparent markets vs. opaque markets

In one sentence, the difference between transparent and opaque real estate markets is the availability of information.

In transparent markets you will easily find reliable, detailed and standardised information for the present and past. In opaque property markets that information is rare, often has no standardised definition or underlying calculations, refers to wider geographies rather than to micro locations and the historic equivalent is only available for a few years rather than two or more decades. The leading publication to evaluate and report on the transparency level of the worlds real estate market is JLLs Global Transparency Index. The main factors it assesses reflects quite well what makes the difference:

Table listing 14 transparency topics or criteria classified into 6 sub-indices: performance measurement, market fundamentals, governance of listed vehicles, regulatory and legal, transaction process and sustainability.
Source: JLL Global Transparency Index, 2022 by JLL, LaSalle, 2022

Market participants often notice differences for the first time when they get in contact with real estate professionals. More transparent markets are much more professionalised, have higher access barriers for advisors, tighter regulations of provided services and higher clarity and efficiency in all aspects of service delivery.

Why does it matter for you as a buyer?

As mentioned in various posts on Real Estate Bricks, real estate investment is all about risks and returns. Market participants need to understand and try to minimise an investments risk while figuring out and trying to maximise the respective returns.

An investor, who prepares to make an investment, for instance, will do a thorough analysis of the market, the potential investment, its tenancy as well as the expected costs and income in the future. To do this data on all aspects will be needed. The more reliable data there is, the better and more realistic the analysis will be.

Reversely, this means that, in an opaque market, the assessment of risks and returns becomes vague and often nearly impossible. This creates market inefficiencies and risk for all market participants.

This does not necessarily mean that you should only invest in transparent market. Great gains can be made despite and often because of opacity. However, you should always understand as much as possible about a potential investment, its market and how it relates to your personal risk-return-profile.

What is the level of transparency in the property market in Portugal?

Portugal has been categorised by JLL as a transparent market (second best of five categories) market for the past 12 years. It was on place 19 of 81 in 2010 and currently holds 24 of 94.

However, what should be noted is that Portugal improved its score from 1.82 (2010) to 2.37 (2022) on a scale of 1.00 to 5.00 with 1.00 being the best.

On one hand this is in line with the global trend – most countries’ transparency score improved. On the other hand, this is also the result of measures and trends specific to Portugal, as, for example, improvements in laws and regulations, increasing foreign investment and a constant rise of market activity.

Here are some of the countries from which people have moved in high numbers to Portugal in comparison:

Rank (1-94)CountryScore 2022
1United Kingdom1.25
2United States1.34
16Hong Kong SAR1.98
30China (Shanghai and Beijing)2.54
Source: JLL Global Transparency Index, 2022 by JLL, LaSalle, 2022

Note that within all countries, there can be significant differences between sub-markets. A sub-market could be, for instance, a geography (e.g. London City) or a real estate asset class (e.g. residential Netherlands).

Those differences of transparency within countries are often results of a high number of listed companies or funds (since they are obliged to collect and publicise lots of information) doing many transactions and maintaining portfolios of specific assets. Another factor is foreign investment, since investors from more transparent markets not only demand more information, but also produce (through transactions), collect and share more information when they enter the more opaque markets. Within Portugal, the more transparent sub-market are Lisbon and the Algarve with residential, offices and hotels being the most transparent use-types.


Real estate market transparency can vary a lot between countries. Overlooking these or not taking them seriously can create unnecessary risks to your investment. It is important to understand that many of the factors that impact this are macro factors, meaning they are not very obvious when analysing a single apartment or building, but the impact can be large and long lasting.

As an investor, you should always be aware and work out your appropriate risk-return-profile.

Also, keep in mind that the less transparent a market is, the more experience and informal information matter. Therefore, try to work with experienced local advisors, because their skills and knowledge can reduce gaps that publicly available knowledge leaves.

If you would like to understand your personal risk-return-profile and if investing in Portugal is suitable for you and your investment goals, we can assist or refer you to an expert.

Contact RCP to discuss a potential service proposal or get linked to respective experts.

In case we put you in business with 3rd-party servicers we may collect a referral fee from them.

Further reading on the topic in English

The above combines the references publication with the authors primary and secondary research as well as his professional experience.

A good read (in English) on the topic is:

Link: JLL Global Transparency Index