Foreigners Pay 39% More for Buying Home in Portugal Than Locals

Explore the reasons behind foreigners buying home in Portugal at 39% higher prices than Portuguese buyers and its impact on the market.

In a surprising twist, international buyers are now purchasing fewer homes in Portugal, with prices dipping by 6.8% compared to last year, according to the National Statistics Institute (INE). This decline in foreign home purchases coincides with the conclusion of the Non-Habitual Residents (NHR) regime and the golden visa program, both of which previously attracted overseas investors.

Interestingly, while foreigners are now buying home in Portugal at a lower price point, they are still shelling out an average of 39% more than their Portuguese counterparts. This trend of declining sales has persisted into 2024, despite the allure of lower interest rates and inflation. INE's mid-June report highlighted that foreign buyers experienced a more significant drop in home purchases, plummeting by 17.1%, while Portuguese buyers saw a mere 3.1% decrease.

The rationale behind this contraction in the international market may be attributed to the cessation of fiscal benefits that once incentivized foreign investments in real estate. INE's recent findings reveal that in the first quarter of 2024, the average price of homes purchased by buyers with tax residency abroad was €2,248 per square meter, marking a 6.8% decrease from the same quarter last year. In contrast, local residents acquired homes at an average price of €1,616 per square meter, reflecting a 6.0% increase from the previous year.

Despite this apparent decline in prices for foreign buyers, the gap remains substantial, with homes bought by non-residents still costing 39% more than those purchased by Portuguese citizens. Notably, this disparity has narrowed from early 2023, when foreign purchases were a staggering 58% pricier than those made by residents. The price differential is even more pronounced in major urban centers, where in the Greater Lisbon and Porto Metropolitan Areas, the median prices for transactions by foreign buyers surpassed those of local buyers by 82.3% and 47.5%, respectively, as highlighted by INE.

In summary, while the allure of Portugal real estate market may be waning for international buyers, the complexities of pricing and market dynamics continue to unfold, leaving many to ponder what the future holds for this once-booming sector.