How To Get the Best Portuguese Mortgage in 2023

Portugal has been popular jurisdiction for foreign investment of all types for many years, in part due to its global connections (especially with other Portuguese-speaking countries like Brazil), talent pool, political and economic stability, competitive legislative landscape and the cost of hiring talent in the country. Of course, it also comes with lots of sunshine, beautiful landscapes and excellent lifestyle opportunities – and these is prime real estate to match.

Portugal is extremely well positioned in the global market, which – along with Portugal’s favourable visa schemes and residency rules – makes it a haven for wealthy investors and high-net-worth individuals from countries all over the world.

But what does the Portuguese property market look like in 2023? And what are your financing options if you’re looking to buy prime or super-prime property, particularly as a foreign investor?

This article gives a brief overview of the market and where to buy the top prime property, as well as some guidance on how to get the best Portuguese mortgage in 2023.

Portuguese Property Market: 2023 Outlook

Portugal has seen a post-pandemic property boom over the past few years, with average residential property prices increasing by 9.1% in 2021, and 13.9% in 2022.

Property prices are expected to stabilise in 2023, with Moody’s estimating a modest increase of 1%, and potential price correction of up to 3%. This means the market will likely return to something more akin to its pre-pandemic position, where increases of 1% were the norm.

Given the economic volatility Europe is experiencing, the total number of transactions is expected to decrease in 2023. However, demand for prime and super-prime property in Portugal is expected to continue. Why?

Investors and high-net-worth individuals purchasing prime (anything over €2 million) and super-prime property are less likely to be affected by the factors that influence other buyers’ ability and willingness to finance purchases.

They typically have more disposable income, and a larger asset base. This means they won’t be as affected by higher interest rates, or by any restricted lending criteria such as lower loan-to-value (LTV) mortgages and higher deposit requirements.

Prime and super-prime property in Portugal is also becoming increasingly popular, particularly with foreign investors. In the year ending with June 2022, non-resident buyers counted for 11.7% of the total value of Portuguese property transactions (compared to 8.9% in the previous period).

There’s also no evidence of a slow-down in sales in the prime areas popular with foreign investors. These areas saw a more pronounced spike in house prices than other areas of the market in 2022, and this is expected to continue in 2023.

Private banks and alternative lenders are tapping into this market and competitive mortgages continue to be readily available to foreign investors for purchases of prime and super-prime property in Portugal in 2023. 

Select retail bank mortgages may be available to non-residents too, but only on lower value prime properties and when more ‘traditional’ financing requirements are met.

Portuguese Hotspots in 2023

Portugal is popular with foreign investors for many reasons, including its stunning beaches, good security and high-end lifestyle opportunities.  

The Algarve

The Algarve is a particularly popular region for buyers of prime property. It is located in the south of Portugal, on a coastline spanning over 200km and it registered the highest median house prices in Portugal in 2022, pipping even Lisbon, the capital. It’s not hard to see why. 

The Algarve’s Mediterranean climate means it clocks up an average of more than 300 sunny days a year and temperatures are mild, even in the winter. It’s popular with foreign investors and locals alike for its 35+ world class golf courses, culture, lifestyle amenities, local wines and culinary delights.

Prime property is plentiful in many resorts and towns across the Algarve. There are expansive villas in the mountains with stunning pools, terraces and sea views or luxury apartments close to all the action. Both types of properties have good rental prospects too, making a purchase in the Algarve an excellent investment opportunity for non-resident buyers looking to buy Portuguese property in 2023.

Quinta do Lago

This luxury resort within the central Algarve area is one – if not the best – of Europe’s finest lifestyle destinations. It offers excellent golf, leisure and high-end dining opportunities as well as its own private beach. On land, it’s surrounded by olive groves, pine trees and a stunning nature reserve.

The resort was the most expensive location in the Algarve per square metre in 2022 and will likely retain this title in 2023. Limited properties are available. Options include garden villas and apartments in the resort’s new One Green Way development: a gated community with prime amenities along the edge of one of Quinta do Lago’s world class golf courses.

Other new, exclusive real estate offerings in the resort include apartments in the luxury Wyndham Grand Algarve 5-star hotel and some of the last virgin plots available as part of the North Grove project.

Private Bank Mortgages for prime Portuguese property

If you are looking to buy Portuguese property in 2023, private bank mortgages are often the most suitable financing option, especially for foreign investors.

Retail banks in Portugal often have strict lending criteria to follow. However, most domestic and international private banks can and do take a more flexible, case-by-case approach to mortgage applications, especially in the high-value (€2 million plus) mortgage domain.

Private banks will consider applicants based on quality, rather than residence or whether they meet traditional income structures. They’re less likely to make sweeping restrictive changes to their criteria, which means accessing these mortgages is unlikely to be any more challenging in 2023 than in previous years, provided you make a good case for it.

Private bank mortgages therefore suit non-resident investors and high-net-worth-individuals with a non- ‘standard’ financial situation. For example, if you have high expenditure levels, low income but significant assets, or substantial but unpredictable income.

Private bank mortgages are often the most competitive – or only – option for non-residents financing a prime or super-prime Portuguese property purchase. Their rates can be lower, and higher LTV and overall mortgage amounts are available, provided certain conditions are met.

To access a private bank Portuguese mortgage in 2023, you will need to have annual income of at least €250,000 and be looking to purchase a property with a value of €2 million plus. Your net worth must also usually be 1.5x or 2x more than the mortgage value.

And finally, you will typically need to place assets under management (AUM) to obtain a Portuguese mortgage from a private bank. Exceptions to this will be rare, especially if global economy growth slows in 2023. The amount of assets that you will need to place will depend on the value of your mortgage. The minimum is usually around €1 million, or at least 25-35% of your mortgage value if it is for €2 million or more.

Retail Bank Mortgages in Portugal

Portuguese mortgages for purchases of prime property may be available from retail banks in Portugal, if you meet – and have – standard financing requirements such as:

• You are employed and paid by way of a salary (rather than dividends or bonuses)
• You have evidence of substantial excess income
• You do not intend to retire anytime soon
• You have a good asset base (e.g., savings, pensions etc.) and lots of liquidity   
• You intend to purchase the property in your own name

The value of the property will also need to be between €800,000 and €1 million, and you will need to have a deposit which is at least 25-30% of the property value.

A mortgage broker can help you explore all the financing options available to you. Enness are specialists in advising non-resident buyers on high-value property purchases across the world, and in Portugal.

We can negotiate bespoke mortgages with private banks on your behalf. So, if this is something you’d like to explore in connection with a prime Portuguese property purchase, please get in touch with one of our team of brokers, who would be delighted to assist you.​​​​​

 

This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation. Financing options available to you will depend on your requirements and circumstances at the time. Any changes in your circumstances, any known likely changes, or omissions in the information you provide can affect the suitability of the options available to you. These should be communicated to us as early as possible.

If you are considering securing debts against your main home, such as for debt consolidation purposes, please think carefully about this and consider all other options available to you.

Your home may be repossessed if you do not keep us repayments on your mortgage or other debts secured on it.