Renovation Project Braga

 

EXECUTIVE SUMMARY 

 

  • Apartments on a premium location with stunning views to the Biscainhos’ gardens (ref. chapter 2)
  • Full renovation with household amenities included
  • Access to 350k Golden Visa program, safe investment with the best legal support
  • Flexible investment: same sales price for the penthouse, store with patio or 2 flats (may be merged later)
  • Savings of 30 300 € (compared with similar investments)
  • Braga’s historical centre property prices trend keeps rising
  • Braga was awarded 1st Best European Destination 2021 | European Best Destinations, February 2021
  • First of ”The 20 Best Places For Americans To Live, Invest, Work In Europe” list | Forbes, November 2020
  • Ranked the 5th best European city in Quality of Life satisfaction | European Commission, October 2020
  • Portugal ranked the 3rd most Peaceful Country of the World and the 2nd in Europe | 2020 GPI, June 2020
  • Awarded 7th place on European Cities of the Future 2020/21 - FDI strategy | Financial Times, March 2020

 

Current diagnosis 

 

According to the National Statistics Institute (INE), Braga was one of the Portuguese cities with the highest rise in property prices last year, this trend is expected to continue in the upcoming years. There is a great demand for renovated apartments in the historic center of Braga, to purchase or rent (long or short term), with the existing offer being quite small. 

Braga was distinguished by the Eurobarometer as the city with the best quality of life in Portugal and the third city with the best quality of life in Europe, was considered the second Best European Destination 2019 and Bom Jesus was recently received the distinction of World Heritage by Unesco, which contributed to the increase in demand even more. 

Recently, on March 2020, Braga entered the Top 10 of the European Cities of the Future by the Financial Times magazine fDi Intelligence. The prestigious “European Cities and Regions of the Future 2020/2021 - the Best and the brightest among Europe investments destination” ranking places Braga on the Top 10 for the first time, in 7th place. This ranking evaluates the strategy for attracting foreign investment. 

 

Investment versatility | Building usage options 

 

As per project, after the renovation, the flats and store are to be converted as separate fractions, meaning that they can be sold separately at convenience. This brings great versatility to this investment, as it enables multiples usages at the same time. For instance the building owner may live on the top floor penthouse, perform short term renting of 2 flats to tourists, medium term renting one flat to University students or INL researchers, sell the other flat and rent out the store to a restaurant. 

 

Nevertheless, due to the building features and its premium location (less than 50 meters from three of Braga’s top attractions: Biscainhos Museum, Arco da Porta Nova and the City Hall), it has great potencial to be used as an Hostel or Short term renting. Additionally, the beautiful view of the Biscainhos Museum garden can be appreciated from the flats’ windows and balcony. The store on the ground floor may be used as restaurant and/or reception, moreover the inner patio may be used as lounge area or outside sitting area for the restaurant. 

 

Owner information 

 

The company is now starting the renovation of 2 buildings in the Historic Centre of Braga, that got the projects licensed recently. Company usually renovates buildings in city centres and sells the whole building to investors. Due to the recent increasing demand of the 350k € Golden VISA, the company decided to structure the offer in a different manner (described on the next section’s table), enabling the compliance of the renovation project with the 7 defined VISA requirements for rehabilitation works. 

 

 

Sales prices 

Regarding VISA purposes, the sales prices are the sum of the property acquisition costs and the renovation costs. Company ensures the management of all architecture and engineering works, project and construction monitoring process and related licensing with the competent entities, as applicable. 

 

These attractive prices below  are only possible as the company already owns the building and construction work is performed with local partners. Furthermore the contract scope includes the renovation of the whole building, maximising synergies and leading to renovation costs per apartment much lower than a stand alone flat renovation project. Additionally, buying properties at this stage (before renovation), enables customisation as per client requirement, whenever these changes are possible. 

 

Prices 

Ground floor | Store with inner patio € 350 000 

1st floor | 2 separate flats, Flat A (T1*) and Flat B (studio) € 350 000 

2nd floor | 2 separate flats, Flat C (T1*) and Flat D (studio) € 350 000 

3rd floor | 1 penthouse with mezzanine, Flat F (T2+1*) € 350 000 

 

Tax benefits and incentives 

As this building is located in a premium area, called Braga’s Historic Center ARU (Urban Rehabilitation Area), the owners of the rehabilitated building may be entitled to an extended set of benefits that will largely increase the return on their investment. Paperwork already approved for this building enables the following incentives described on the City Council's webpage: 

  • VAT - A reduced rate of 6% will be applied to urban rehabilitation works carried out in buildings located in urban rehabilitation areas delimited in legal terms 
  • 74% reduction on VAT taxation (standard VAT rate drops from 23% to 6%) 
  • Building income - Taxation at a reduced rate of 5% when the income is entirely derived from the rental of recovered properties under the urban rehabilitation strategy 
  • 82% reduction on building income taxation (conventional rental income tax drops from 28% to 5%) 
  • Capital gains on future sale - taxation at a reduced rate of 5%, when these are entirely due to the sale of renovated and recovered properties under the terms of the urban rehabilitation strategy 
  • 90% reduction on capital gains taxation on future sale (taxation drops from 50% to 5%) 
  • IMI - Municipal Property Tax is tax on the taxable value of immovable property in Portugal 
  • Exemption for a period of five years for urban buildings subject to renovation (renewable for an additional period of five years) - requires deliberation by the Municipal Assembly 
  • IMT - Municipal Property Transfer Tax is a tax on onerous transfers of properties in Portuguese territory 
  • Exemption in the first onerous transfer of the renovated fraction of an urban building destined exclusively for own and permanent housing - requires deliberation by the Municipal Assembly 
  • Golden Visa Program - Program with many benefits for investors from all around the world
  • High value appreciation in Braga for real estate- plus 3,5% since April 2020. Plus 14% since summer 2019 

 

Conclusion 

Taking in account the tax benefits described on the previous section, buyer may capitalize a substantial amount of savings, having a massive impact on the investment profitability. Furthermore, based on the data presented, the investment described in this document is highly attractive for investors willing to invest during 2020 (Golden VISA program may suffer changes in 2021). Building visits may be scheduled upon request. 

 

Please download the summary to understand the advantages of investing in Braga. 

 


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