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Portuguese Property Market Update - Summer 2020

Portugal, a highly popular holiday, second home and retirement destination, has recently been widely praised for the way it has handled the coronavirus pandemic. The country went into lockdown early and has kept the number of cases and death rates relatively low compared to other European countries. So, how is the Portuguese property market doing?

Portuguese Economy: Impact of COVID-19 and Recovery

Portugal's central bank predicts that GDP will contract by 9.5% in 2020, the largest drop since the Great Depression. Assuming restrictive measures continue to ease, however, the bank expects that the economy should rebound from Q3 2020 onwards, with rates of growth of 5.2% in 2021 and 3.8% in 2022. The bank has stated that residential real estate should be only lightly impacted.

Portuguese Property Market Update

One of the Safest Places for Overseas Investors

‘European Best Destinations’ included Portugal in its top 21 European countries for holidays during summer 2020.

Portugal is therefore currently being mooted as one of the safest places for overseas investors. After the property crash in 2008 residential property sales volumes fell by up to 30%. But midway through 2014, when prices bottomed out, the trend moved in the opposite direction. According to property portal Idealista, when comparing the average price in 2015 with the average price in 2019, prices increased by 78%.

Up It Goes

In June 2020 year-on-year prices went up 7.1%, bucking the trend in Spain which saw prices drop in June 2020 for the first time in more than three years. In Faro (the gateway to the Algarve), prices registered a 6.6% increase to €2,295 per square metre. In Lisbon, prices went up by 4.9% to €3,317 per square metre. Since June 2015, prices in the area of Lisbon have increased by 141% and in the Faro region they have increased by 62%, to the end of June 2020.

Pandemic Should Have Limited Impact

Portugal’s Central Bank expects a fairly limited impact on real estate in the coming years, despite the pandemic, with the construction sector being one of the least affected. The EU commission is predicting a seventh year of growth for Portugal’s property market in 2020 and is expected to continue throughout 2021. Forecasts have made some adjustments, taking into account the impact of COVID-19, but demand for property so far does not seem to be wavering and many believe there will be bounce-back later this year.

Fiscal Benefits

Aside from the well documented benefits of climate, culture, gastronomy, more than 350 Blue Flag beaches and excellent quality of life, there is a key fiscal reason why Europeans and non-Europeans alike are keen to invest in the Portuguese property market. In 2009, with the aim of encouraging foreign investment and to get the economy back on its feet, the country introduced a range of tax benefits known as the Non-Habitual Residence scheme (NHR) for both EU and non EU citizens. Banks are also offering very low interest rate packages.

The Golden Visa scheme – a form of citizenship via investment for non-EU citizens – came into force in 2012 and has since brought 34 Billion Euros (Cushman & Wakefield, 2019).


Both the Golden Visa and NHR schemes, as well as favourable tax rates on pensions and a 0% inheritance tax for all descendants of an investor make Portugal very appealing. Changes in the recent Portuguese budget mean that the country now taxes pensions for non-residents at 10% but this rate is still much lower than other locations.


These schemes have created numerous foreign-owned businesses especially in IT related industries. The country is attracting an educated international workforce who speak English and who are also willing to take a cut in salary for the lifestyle that Portugal affords them.


Many predict that the attractions of Portugal for property investors – whether it be weather, lifestyle or fiscal – will be more or less the same post-Covid as they were before. The country is expected to attract more ‘conservative’ investors (as opposed to opportunists), who have a long-term strategy. This kind of investor profile is what the sector most values when looking to the future.

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