Portugal and Spain are two neighboring countries on the Iberian Peninsula with rich cultural heritage, beautiful landscapes, and a favorable climate. These characteristics make them an attractive destination for tourists and expats looking for a place to invest in real estate.
However, while they share some similarities in their real estate markets, there are also some notable differences. In this article, we will compare and contrast the Portuguese and Spanish real estate markets.
Property prices
Property prices in Portugal are generally lower than in Spain, although this varies depending on the region. According to the Portuguese Real Estate Professionals and Brokers Association, the average price per square meter in Portugal in 2021 was €1,437, while in Spain, it was €1,900, according to the Spanish National Institute of Statistics.
Both countries have experienced a significant increase in property prices in recent years. In Portugal, property prices have risen by an average of 10% annually since 2014, while in Spain, they have increased by 4.5% annually since 2015.
Taxes
In Portugal, property owners pay an annual property tax (IMI) based on the property's value. The tax rate varies between 0.3% and 0.45% for urban properties and up to 0.8% for rural properties. In addition, there is a one-time stamp duty of 0.8% to 6% depending on the property's value.
In Spain, property owners pay an annual property tax (IBI) based on the property's value. The tax rate varies between 0.4% and 1.1%, depending on the municipality. In addition, there is a one-time transfer tax of 6% to 10% of the property's value, depending on the region.
Foreign buyers
Both Portugal and Spain offer attractive investment opportunities for foreign buyers. In Portugal, non-residents are not subject to any restrictions on purchasing property. In Spain, non-residents can purchase property, but they must obtain a Foreign Identification Number (NIE) and a Spanish bank account.
In recent years, there has been an increase in the number of foreign buyers in both countries, particularly from the UK, France, and Germany. This has led to a rise in property prices, particularly in popular coastal areas.
Rental market
The rental market in Portugal is characterized by a high demand for short-term rentals, particularly in tourist areas such as Lisbon, Porto, and the Algarve. This has led to a shortage of long-term rental properties, with rental prices increasing by an average of 5% annually since 2014.
In Spain, the rental market is also characterized by a high demand for short-term rentals, particularly in cities such as Barcelona and Madrid. However, long-term rentals are more widely available, with rental prices increasing by an average of 3.5% annually since 2015.
In conclusion, the Portuguese and Spanish real estate markets offer attractive investment opportunities for both local and foreign buyers. While both countries have experienced a significant increase in property prices in recent years, Portugal generally has lower property prices than Spain. Both countries also have different tax regimes, with Portugal having a lower property tax rate than Spain. The rental market in both countries is characterized by a high demand for short-term rentals, although Portugal has a shortage of long-term rental properties.
Overall, both countries offer a range of investment opportunities in their real estate markets, and buyers should carefully consider their options and do their research before making a purchase.