Buying Property in Portugal Series (#4 of 4): Tips and Tricks

Updated: Feb 13, 2020

So you’ve studied the market, established a team, and gone through the process of purchasing your property in Portugal. What else should you be thinking about?

The impact the shift in property prices has had upon Porto and Lisbon cannot be discounted. Some call it ‘gentrification’. Others call it a ‘bubble’. Either way, developers, homeowners and governmental organisations are benefiting from the influx of capital, the taxes such property investment provides, and an improved valuation of properties more in line with global property prices. That said, local governments are actively legislating ways to make sure that developers and investors don’t ride roughshod over local property markets. Let’s take Porto as an example.

A must-know: If the intention of the purchaser is to rent the property, either short-term or long-term, it is better to legally register the property as an Alojamento Local, or ‘local accommodation’. Registration will allow you all the legal benefits of renting for profit. Your real estate team can help you register with the local authorities, and, following registration, inspection and payment of any and all fees, your property will be registered as an Alojamento Local.

Due to the housing boom in Portugal, there is a trend toward limiting the number of Alojamento Local, in protection of the rights of owners, and as a way to help limit competition in urban areas. For example, July 2019 saw further restrictions in Porto of the áreas de contenção, or containment areas, specifically for the purpose of restricting the number of short-term rental properties. Full implementation will take place as of January 2020.

The containment areas include:

Conditioned Containment Area– includes a 50% pressure level of short-term rentals. Licenses in these areas will be limited to 2 years, with the option of subsequent renewal. These are the areas most in demand in the city.

Areas of Preventative Containment– includes a 37-50% pressure level of short-term rentals. Licenses in these area will be limited to 4 years, with the option of subsequent renewal.

Areas of Contingent Containment– includes a 25-37.5% pressure level of short-term rentals. Licenses in these areas will be limited to 6 years of more.

These restrictions are intended to protect short-term renters, as well as the general property market in Porto. Some of the benefits include: greater accountability of Alojamento Localhosts, introduction of an Alojamento Local mediator, and implementation of a Code of Conduct and Good Practices Guidelines. These bureaucratic necessities help ensure the areas are regulated, while facilitating growth. Planning around the barriers to entry this new legislation creates will be a necessary component in determining your investment strategy.

We can probably write more ‘tips and tricks’, but for now, these considerations are at the top of the list, especially since the legal changes are so recent. So be aware!

by @dahungryhubs

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