The Portuguese Tax-man Can Help!

In the stroke of a few short sessions of parliament, Portugal now boasts some of the lowest real estate investment costs of any country in Western Europe. The old SISA tax has been replaced by a tax called the IMT, which is payable on a sliding scale depending on the property value, with the first Euro 80,000 ($103,000) exempt.

Better still, off-plan properties (those bought from the developer before the property is built; we'd call them "pre-construction properties" in the States) are subject to IMT only on the land value, which is typically only 10% to 15% of the overall price. This means that, while in the past a property of Euro 150,000 would have attracted a SISA of Euro 15,000, now the IMT payable if the property is bought off-plan is approximately Euro 1,219, or less than 1% of the purchase price--that's a savings of Euro 13,781!

It also means that the buyer actually owns an asset (the land) very early, providing added protection against defaults in construction by the developer, with everything subsequently built on the land being owned by the owner. Add to this the fact that developer contracts increasingly contain penalty clauses in case of late completion, and the scenario for buying off-plan property in Portugal starts to look compellingly good.

We all know the drill: The farther from the coast, the further your money stretches. This rule applies in Portugal as it does anywhere. But what often is not emphasized is that, unlike its equally famous neighbor, the Costa del Sol, the Algarve has some very reasonably priced properties almost on the beach. Choose between an older apartment in Salema containing both a three- and a two-bedroom home, and pay Euro 220,000. If you're too scared to negotiate, buy a two-bedroom refurbished duplex in a resort complex in Luz, for less than Euro 230,000, or a two-bedroom apartment off-plan for less than Euro 200,000.

By the way, these all have views of the sea, which is within walking distance. If sand and surf is less your scene, and you prefer the rolling fairways, this region has at least eight golf courses I can think of. Homes on these, while more expensive than their coastal counterparts, are certainly available for the discerning purchaser, and, ever-popular with foreign buyers, make a sound investment at steady growth rates of 10% to 15% per annum once built.

Luis Teixeira da Silva
For International Living