What are the annual costs for a property in Portugal?
How much do I spend on owning a Portuguese property.
The cost of owning Portuguese property is often lower than in Spain, and consists of three parts: general costs, financing costs and taxes. Pedro explains these below. These costs are important for the return on your Portuguese property.
General costs (residential property)
General costs include:
Utilities
Costs for water, electricity and possibly gas vary greatly depending on consumption, but keep in mind an average of €1100 to €2200 per year.
The exact cost may vary by region, municipality and especially the season! The amounts are only indications.
Common costs
This is the case, for example, in an apartment complex. Compare it with VVE costs (or service charges). These can vary widely, but count on €500 - €1500 a year, depending on the facilities and the size of the complex.
Insurance
Although not compulsory, it is wise to take out contents or buildings insurance. Consider €200 to €700 a year for buildings and contents insurance.
Financing costs (e.g. mortgage)
Have you financed your home with a Portuguese mortgage? Then of course you have to deal with monthly repayments. This depends on your mortgage amount and mortgage conditions.
Taxes
Taxes include:
IMI (Imposto Municipal sobre Imóveis)
This is the property tax payable annually. Rates vary by municipality, and are usually between 0.3% and 0.45% of the assessed value of your real estate.
Waste tax
This is often included in the water bill and amounts to around €50 - €100 per year.
Wealth tax
Portugal does not have a direct wealth tax as we have in the Netherlands, but does have the "additional property tax" (AIMI, or Adicional ao Imposto Municipal de Imóveis)
It is levied on owners with Portuguese property worth more than €600,000. You pay 0.7% on the property value and 1% for a property value above €1 million.
Capital gains tax
This is not levied annually, but will be collected when you sell your Portuguese home. This is similar to a "capital gains tax". You pay 28% tax on the "profit" (i.e. sales value minus purchase value) of your property when you sell it.
Tax on rentals
If you rent out your Portuguese property, you will pay a tax rate of 28% on the rental income.
Are you still achieving returns in Portugal?
As you can see, there are quite a few costs involved in having a property in Portugal.
Want to know about whether you can still make a good return? Then do our rental yield check: