Tax free pensions law sees property price rises in Portugal

Published:  6 Jun at 6 PM
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A change in Portugal’s tax laws has resulted in rising house prices not seen since 2008.

Always a favourite for British retirees, Portugal’s Algarve region has been something of a disappointment for the last eight years as regards capital gains on house prices. However, since a new law was enacted, property values have shown a steady increase, with last year’s averages 6.9 per cent higher than in 2014.

One reason for the increased interest is the government’s new law exempting non-resident house owners from paying tax on offshore income including pensions. To qualify, expats must be resident in the country for no more than 183 days each year, and the exemption runs for 10 years. According to upscale estate agents dealing with prime Algarve properties, realising pricing, strong infrastructure investment and cheap finance have also playing their part in the resurgence of higher market prices in the region.

Demand from French expats is strong due to the changes in pension tax laws, and the Chinese have discovered Portugal’s appeal along with increasing numbers of South African citizens and Scandinavians. Brits, of course, are still favouring Portugal over several other European retirement destinations.

A recent survey rated Portugal’s property market as the fourth most affordable behind Germany, Korea and Japan. In 2013, Algarve property prices saw an adjustment towards a realistic level, thus spurring the number of transactions and sparking an upturn in the market as a whole. Since then, the trend has continued, with investment buyers purchasing, improving and renovating properties.

Good quality properties listed at sensible prices are now selling at an increasing rate, with the Algarve the most popular region. It’s yet to be seen how the upcoming Brexit vote will affect British expats retiring or working in Portugal, but should the UK be committed as a result of the referendum to leaving the EU, many Brits may be forced to return home, causing a glut on the market.
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