Investing in Portugal: An American’s Perspective

I started my journey of investing in Portugal several years ago after looking at several European and Asian options.  Visiting Europe for the last 30 years, I always felt at home there and desired to have a second home in southern Europe.  As I researched all the options, I discovered what expats from all over the world already knew, and Portugal quickly became the focus as the best investment choice for Americans looking for stability, safety, and a great Mediterranean lifestyle as described in the topics below:

Economic and Political Stability

Portugal is celebrating 50 years as a multi-party democratic Republic in 2024.  As a constitutional republic, it provides checks and balances that form a firm foundation for a strong resilient economy.  Its stable political environment and commitment to fiscal responsibility have contributed to its economic growth and resilience. Portugal continues to lead the EU in economic growth registering 6.8% GDP growth in 2022. The banking and financial sectors are well established and heavily regulated, adding even more financial security.

Portugal has a well-diversified economy as well. It also boasts low labor and operating costs that make it an attractive destination to form new businesses.  The government offers many incentives that have led to growth in technology, biotechnology and sustainable energy sectors.

Real Estate

Portugal’s real estate market has experienced significant growth in recent years, particularly in cities like Lisbon and the Algarve. Investing in real estate can offer lucrative opportunities for capital appreciation and rental income. It is still affordable in comparison to most large US markets. Also, foreigners are eligible to receive mortgages at competitive rates. There are no restrictions on expats in regard to mortgages and many large bank offer 20+ year mortgages.

Lifestyle

Portugal offers an excellent quality of life, with a moderate climate, beautiful landscapes, and a rich cultural heritage. This makes it an attractive destination for investors and Americans looking to relocate.  Be prepared for a much friendlier and relaxed way of life.  It is also the perfect place for outdoor sports like golf and tennis as there are abundant opportunities for these sports and other outdoor adventures.

Also, pick up a new sport like paddleball, boating, biking or hiking the mountain or vast coastline. Get ready to relax on a rooftop watching a magical Portuguese sunset over the glistening Atlantic.

Portugal is consistently ranked as one of the top 10 safest countries in the world, which is outlined in Global Peace Index.

Location, Location, Location

Portugal offers even more stability as a member of the EU and has a strategic location to other Schengen countries serving as a gateway as a rail, port, and air hub to Europe.  There are direct flights to many US, European, and Asian locations.

Portugal offers an affordable lifestyle with competitive housing prices with other major European destination. Other living costs, including food, healthcare, education are much less expensive in my experience compared to many US and EU locations. There are public and private health care options that offer less expensive comprehensive health care coverage and medical procedures and medications are substantially cheaper. Imagine a trip to the ER in a private hospital costing only 150 USD. Overall, Portugal is one of the lowest costs of living countries in Europe.  English is widely spoken in service industries and health care which makes for any easier transition.

Although a small country, it has diverse landscapes including large urban areas, unspoiled nature, & breathtaking beaches. You can access different areas rather quickly via highway or rail as each area is close proximity to other areas as it takes only 6 hours to go from northernmost points to beaches of the Algarve bordering Spain. Imagine having 300+ sunny days per year, this is typical in central and southern Portugal.

Multiple Residency Options

Portugal offers many immigration options for American expats where residency visas can be obtained in various ways including starting a small business (D2), passive income or retirement options (D7), digital nomad option, and other investment opportunities.

Tourism

Portugal is a popular tourist destination, attracting millions of visitors each year due to its mild climate, beautiful beaches, deep history, and rich architecture. Investing in the tourism sector, such as hotels, restaurants, and leisure facilities, can be a profitable venture due to the steady influx of tourism. Certain areas such as Lisbon and the Algarve are particularly attractive options.

Strong Infrastructure to Support Population Growth

Portugal has been investing in infrastructure development, including transportation networks, telecommunications, and renewable energy projects. Investing in these sectors can offer long-term returns and contribute to the country’s sustainable growth. Portugal is far ahead of many western countries in its adaption of renewable energy including hydroelectricity, solar, wind, hydrogen and other green technologies.

Looking back, things I will consider in my next Portuguese investment:

Real Estate Option Gives Security and Stability

Real estate is booming in Portugal with FDI increasing 20%+ in 2022 (according to BnP in The Portugal News) with impressive rates of appreciation. Overall, the combination of stability, affordability, government incentives, and tourism appeal makes real estate investment in Portugal an attractive option for many investors. With booming demand, prices are likely to continue to appreciate further. The trick is to find a developer that is a good fit and well established, profitable, transparent and, in my opinion, demonstrates the following:

• Multiple asset classes

I think it’s best to have a lot of options and work with an agent or developer that has access to various asset types.  This not only gives more options to choose from, but exhibits a developer that is well diversified. For example, touristic and residential, mixed use, etc.  Touristic offers the opportunity to have someone else responsible for the management of the property while the investor receives income and generally offers appealing yields.  Residential might be more appropriate if one is interested in a second home that later becomes a retirement home. It is a distinct advantage to have multiple projects in multiple areas to choose from.

• Track Record

With so much development in Portugal, it is a huge advantage to work with a developer that is well established and understands the intricacies of the Portuguese system as there are hurdles to permitting and specific construction codes.  A developer with a strong relationship will understand how to plan, construct, and promote their developments while adhering to Portuguese building codes and requirements. They will also have the relationships within different sectors to get things done and on time. I look for developers with multiple decades of development success, multiple projects completed & under development in different areas and one that offers different types of projects.

• Multiple price points

Developers who offer multiple price points provide consumers with more investment and purchasing options, allowing for a lower initial investment cost and the opportunity to expand their portfolio as their assets grow.

• Sustainability

Portugal is a leader in renewable energy as mentioned above.  Take advantage of developers that adhere to the green standards as it can lower costs of ownership and have more appeal for resale, and it’s great for the planet! (ISO 14001 TUV Rhineland Standards are one cert to look for)

• Attractive Locations

It’s hard to find an unattractive location in Portugal but rely on personal preferences in making an investment decision.  Urban vs. rural, coast vs interior or mountains.  It also depends on if it’s a second residence or investment property.  Appreciation and returns seem to be highest in Lisbon and surrounding areas and also the Algarve.

• Vertical Integration

Another advantage of seeking vertically integrated developers is that they offer a full range of services, which can reduce the cost of ownership and appeal to potential future buyers.  These services include civil, structural and environmental engineering, project management, construction, property management, hospitality, marketing, and renewal energy production.

In summary, investing in Portugal can offer American insiders a range of opportunities across various sectors, supported by a stable economic and political environment, favorable investment incentives, healthy outdoor lifestyle, and access to European and international markets. However, like any investment, thorough research and due diligence are essential to mitigate risks and maximize returns.