What could be better than leaving the doom and gloom behind as you travel to southern Portugal’s sunny Algarve? Perhaps you’re taking a well-earned holiday. Or maybe you’re contemplating taking the plunge and finally buying that dream home in the sun. Either way, once you touch down in Faro, you’re no more than one hour’s drive from any part of the Algarve.
With over 300 days of sunshine a year, it is said that the sun is shining somewhere in the Algarve every day. The beautiful clean beaches beckon, and the wonderful Portuguese food and wine will give you an appetite to explore the region.
The cost of living in Portugal is rising, as it is in all countries. But at today’s rate, Portugal is still about 30% cheaper to live in than the UK. And once you take into account heating bills, council tax bills and the extra clothes you have to buy to survive a British winter (or, come to that, a British summer!), that percentage gets a lot bigger.
Because of this, many people consider a second, or even permanent, home in the Algarve. But before you decide to join that group of clever people – a few words of caution.
Finding your dream property
Don’t get carried away by the promises of the man in the bar who knows he can find that dream property for you. Instead, only deal with a government-licensed estate agent. Every licensed agent has their licence displayed in their office. Licensed estate agents are carefully monitored by their governing body, and have to prove their competence periodically by taking exams.
Many property seekers will have already visited the websites of estate agents in their preferred area, and so will have a pretty good idea of what they are looking for, and what they can afford. Once you have decided which properties you would like to view, the estate agent will accompany you on the viewing. The agent will show you around the property, together with the surrounding area and its amenities.
Do not arrange to view more than three properties a day. You tend to get brainwashed.
Viewings
Make notes on all the properties you view as you are going round each property. This will help you to decide which properties you want to go back to for a second viewing. During the second viewing – if the property is an apartment – your agent will advise you of any condominium costs and also how much council tax (known as Imposto Municipal Imóveis, or IMI) is being paid on the property.
All properties have a logbook (the caderneta predial), which is, basically, the history of the property. Among other things, it will have a description of the property, describing how many rooms it has. If this number does not correspond to the property you are looking at, then it’s possible that some illegal building work may have been done. Since 1951 all properties need a habitation licence (licença de habitação). If it does not have one, then the building is illegal. The certidão will show if any mortgages or debts are on the property. These must cleared before you buy, as debts are on the property, not the owner.
If all this sounds a bit daunting, don’t worry – licensed estate agents must by law have all this information to hand before they can market the property, and a good estate agent will be able to guide you through the process.
Making an offer
OK – so you’ve now found the property of your dreams. It’s within your price range, and you decide you want to make an offer.
Before making any offer, work out your extra costs. All properties over €83,500 are subject to a property purchase tax called IMT (Imposto Municipal Transmissões), which is calculated on a sliding scale up to the value of €521,700. Property over this value is taxed at 6%. Again, your agent will be able to tell you the amount of IMT payable on the property you intend to buy.
Once your offer is accepted
You make an offer for the property, and the seller accepts your offer. The next step is to appoint an English-speaking Portuguese lawyer (advogado). Never be persuaded to use the seller’s lawyer. Most lawyers charge between 1% and 2% of the agreed selling price. Your lawyer will check all the documentation relating to the property, and will then draft a sale-and-purchase agreement – the legally binding contract between you and the seller – and arrange for the payment of a deposit, which will usually be a minimum of 10% of the purchase price.
Remember that once you have signed the contract and paid the deposit, you’ll lose your deposit if you pull out of the purchase. If the seller pulls out of the contract after signing the contract, they have to pay you double your deposit.
The next stage is to obtain your fiscal number (número de contribuinte). You must have one of these to open a bank account – which you will need to make payments of the IMI (council tax) and to arrange for setting up utilities such as electricity, water, gas and telephone. You can get your fiscal number from the local tax office (finanças). Your lawyer will normally arrange this for you, but it’s worth double-checking this with them to make sure it’s under way.
If you are not planning to live in the property permanently, it is strongly advised that you set up monthly direct debits for the payment of your utility bills. The IMI (council tax) is payable twice-yearly – in April and September – and unfortunately this cannot be paid by direct debit. If the IMI is not paid it can easily be forgotten, and there’s a danger that it will build up over time. This will mean being faced with a very hefty bill and a late payment fine. Hiring a management company to look after your property and pay your bills for you is an option. This will also ensure that when you arrive, your property is in perfect order, with everything working. If you are renting out the property, you have the additional peace of mind that everything is in order for your tenants.
By using a licensed estate agent and a good lawyer all these problems will disappear, leaving nothing for you to do except lie back and enjoy life in this beautiful sunny part of the world!
