In addition to buying an existing property, buying a plot of land in Portugal is an increasingly popular alternative. You can often find an old house on the plot, which can be renovated or removed. You can buy fantastic estates, especially in the interior of the country, for very reasonable prices. On the coasts, especially in the Algarve, this is much more difficult. If you are interested in a property in Portugal, you should plan your purchase well despite the low prices and take various aspects into account when choosing. To what extent the renovation is worthwhile compared to the new building should be checked beforehand. The new building of houses is often profitable because the construction costs are relatively low, and you can realize your personal ideas.
The cost of land with a building permit varies by area. In rural areas close to major cities, prices range from €20 to €40 per square meter, whereas on the Atlantic coast, prices can go up to €120 to €180. In the Algarve, prices can even range from €400 to €1000 per square meter (and more) for a first-class property. Inland, the costs are significantly lower, and in rural areas, agricultural land can be purchased for a few euros per square meter. Depending on the quality and location, the construction costs range between €400 and €1,600 per square meter. The real estate transfer tax (SISA) is 6.5%.
The purchase of a property should not be underestimated despite the lower prices. The most crucial point is that the investor has the necessary building permit (terreno urbano) and that the property is large enough for the construction of a house or for the building you are considering. If there is already an old building on the property that was legally built, the process is much easier. Therefore, make sure that the housing inventory has been officially registered in the land register.
You should also check what exactly has been entered. It can happen that only a part of the property was legally built or auxiliary buildings were converted into living space, which can become a problem when you would want to sell the property at a later time. It is also possible to build on agricultural land. But there are strict limits for land and buildings. You can get this information from the local town hall (câmara municipal). Some properties are not suitable for construction because they are too steep or protected. Make sure that there are no restrictions through high-voltage lines, water lines, or rights of way that could affect the planning of the building. Keep in mind that the cost of providing real estate services in a remote rural area can be more expensive, and reliable water supply is required. When buying land in Portugal, you should make sure that the purchase contract is dependent on obtaining the necessary building permit.
You should get a written confirmation that the property is correctly entered in the local land register. Also, check whether the right building permit is available. Some of the plots are offered in sections for sale, although the division has not yet been officially approved. The approval should be available upon purchase or be part of the preliminary contract as an agreement. It is also always advisable to have the property officially measured before buying it. That costs about €800. If the building permit is incorrect or the old building has already been built illegally, you can expect high penalties. A new building usually has to be demolished again.
Note that it can take a long time to get a building permit in Portugal. Most of the time, it takes about six months until you get approval. Most construction companies offer package deals that include the land and cost of construction for your home. However, it is not always advisable to buy the building land in Portugal from the construction company. It is advisable to compare the different land and building costs and look out for other offers. If you decide to buy a complete package from a contractor, you should insist on separate contracts for the plot and the property. In the best case, you will receive the title deed before signing a construction contract.
When looking for an architect and construction company, the best option is to get recommendations from local friends that you trust. However, keep in mind that local real estate agents are not always the best contacts, as they usually receive a commission. Just ask your future neighbors or representatives in the town hall.
Many Portuguese architects speak English, and there are also architects from other EU countries who work in the main holiday areas. Architects' fees are usually calculated as a percentage of the total cost of construction, normally around 5%. Often architects are interested in higher construction costs. Talk about the topic clearly before the commissioning and, if necessary, set a limit for compensation. The most important aspect when building a new house is not only the reputation of the construction company but also its financial position. The construction company must conclude a guarantee of completion (garantia de conclusão).
To make sure you are choosing the right construction company, visit other houses that they have built and maybe talk to neighbours and ask if they had any problems during the construction process and if they are satisfied with the results. Building standards in Portugal vary considerably, so you should never assume that the lowest offer also has the best price-performance ratio.
It would be best if you got written quotes (citaçãos) from several builders before signing a contract. This process can sometimes take a while, and you should plan about 2-3 months for this. The following points must be included in any contract:
Before accepting an offer, it should be checked by a construction consultant. They can confirm whether it is a fair contract. You should also check if the offer (which must include a 19% VAT share) is an estimate or a fixed price, as the cost can sometimes rise sharply due to contract clauses and changes during construction. A contract must be examined by a lawyer as building contracts are often very distorted in favor of the client and grant the customer few rights.
Under Portuguese law, construction companies are responsible for minor defects up to one year after completion and structural defects for up to five years. It is not uncommon for problems to arise during construction, particularly regarding material defects. If you have issues, you usually have to be very patient and persistent. A completed building should be checked by a construction engineer for possible defects and have a problem report drawn up afterward.
If there are any deficiencies, the appraiser must determine who is responsible for it. Architects and contractors in Portugal are legally obliged to take out liability insurance. After completion, the builder must arrange a visit by the council to ensure that the house was built in accordance with the plans and building codes. After a satisfactory inspection, the municipal council issues a residence permit (licença de habitação). When this is completed, a property must be registered with the local authority, the tax office (finanças), and the local land registry (conservatória de registo pridial).
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