Property Purchase in Portugal

[Boyddbookman]

In my experience, the costs associated with purchasing a property on the continent are substantially different from the costs purchasing a property in Ireland or the UK. Typically in Ireland the auctioneer fees are paid by the seller. On the continent it is the purchaser that incurs this cost. Immoblier agency fees do vary but can typically be 7%-10% of the purchase price. In addition, depending on the particular country, the stamp duty rates which are also incurred by the purchaser can be in the order of 7%. There are more cost efficient ways to purchase if done directly through a notary, which on average reduces the agency fees by 50%. In my experience, estate agents in Ireland (generally) are far more knowledgeable about the property they are selling. Not so much with agents on the continent, but again that is just in my humble experience.

The buy-in costs on the continent are expensive, especially at the higher end of the market.

Just to keep a small villa style property with pool and gardens costs between €8K-€10K per year (factoring in property tax, sanitation tax, water bills and general running costs etc., these will vary by country). The property has to be "opened up" for the season and "closed down" at the end of the season. Storm damage is a significant factor in terms of unplanned costs so it is strongly advised that there are regular security and maintenance checks performed on your behalf each week when you are not there. If the property has a pool then as its in Portugal it will need to be a heated pool for use between May-Jun and Oct. The equipment needs servicing and regular usage which can be a hassle, but not particularly expensive. Also, Europe has strict local laws enforced on boundary hedges that have to he constantly maintained, again at a cost.

Before deciding on a property, particularly if its a villa, I suggest you obtain the relevant geo-seismic maps for the area. In southern Europre over the last 5-6 years there has been quite an amount of soil "heaving" due to long hot periods (shrinkage) followed by downpours (expansion).... clay based soil is particularly susceptible to heaving. In certain European countries there are soil maps that are colour coded (similar to the termite infestation maps) that demonstrate the composition of the soil and the level of heaving experienced historically. Additionally, you will need to do research into historic flooding in the area prior to purchasing.

 

[Sue Ellen]

Thank you. We are in our early 40s. We own our own home. The mortgage is on a low fixed rate and we overpay the maximum allowed each year. We owe the bank about 20% of the value of the house. I'm in the public sector and my spouse is in the private sector. We have two children. My spouse does the top level of extra pension contribution. We have no other debt. We have savings of €370,000. After living expenses, holidays and the mortgage we have a surplus of about €50,000 a year. The idea is to use €320,000 of our savings and the €50,000 a year to buy somewhere.

Hi Barbara,

I don't think it would be possible for anyone to assess the full situation with the details above hence the reason why I gave you the template to complete in the Money Makeover format.

 

[Cervelo]

I don't think it would be possible for anyone to assess the full situation with the details above hence the reason why I gave you the template to complete in the Money Makeover format.

I'm not sure why you think the OP should do a "Money Makeover" The information given already in my eyes is enough to make the generalization that the OP has all got a fairly good grasp on their financial situation and is in a good position to move forward with their dream of a holiday home
But having said that I do question why they still have a mortgage and a large cash balance but I have realised myself over the years that there is always a reason for this and that that reason is their choice to make

Any thoughts or recommendations in terms of estate agents, banks, mortgage brokers, lawyers, etc would really be appreciated.

I don't have any experience of the Portugal holiday/housing market but I have over the last 6+ years been researching the Spanish market and though I've nailed too many nails into that coffin that it probably won't happen at this stage I do have a few pointers to think about
I presume at this stage you've picked the Algarve because you've been holidaying there for some time now and have probably narrowed down you search to a couple of key areas, so I would suggest the first thing you do is make contact with the estate agents in the area

These guys in my opinion are your first port of call, they know the lay of the land from what properties are for sale to all the people you need to deal with to make the purchase, most of them will organise a viewing trip for you where you book your flights and accommodation for a few days and they will ferry you around to a few properties that you've expressed an interest in and will bring you through the whole process of what's involved
But more importantly while there ask the agent to arrange a "meet and greet" with one of their clients that have bought through them
This is where you will really find out what's involved and if they are open and honest you'll also get the real low down on the area, what they like dislike about the area, the residents, the weather and what it's like to live there all year round
If the agent won't organise that for you don't be afraid when out for dinner in a café/bar to introduce yourself to an English speaking person and if they have made the move they generally are only to happy to tell their story and the upshot of that is if you do decide to buy in the area you've already got an introduction into the local scene
If you do decide to go with one agent they will also be able to introduce you to people in the bank and solicitor's that you will need

Three things to think about and I must stress these are things I think about when buying a property abroad and are purely anecdotal
1. How saleable is the property
It's very easy to buy a property but the holiday home market is not like the property market at home where a property normally sells within a couple of months if not weeks, abroad it can take a year if not a multiple of years to sell a property
So do your research the last thing you want is to own a property in an area you don't like and can't sell
2. How accessible is the property and the surrounding amenities
It's one thing spending a couple of weeks during the summer in a property and putting up with little inconveniences it's another thing living there full time or for extended periods where it's difficult to get to, shops and restaurants are closed during off season, the weekly shopping turns into an event as the local shop doesn't fulfil your needs and there is nothing to do when the weather turns bad
3. Climate change and what it could mean
There's no denying that climate change is happening and is happening faster then we like to think it is and while it's sociable acceptable to jet off on holidays or to second homes abroad will it be the same in ten or twenty years time or will we even be able to do it
Of the four winters I've spent in Spain last year was an eye opener for me in how bad the weather can get compared to the three winters before
Was it a blip or is it a sign of things to come I don't know but a Scottish couple I know over there said something interesting to me a little while ago, He said when we lived in Scotland we used to suffer through the winters indoors and really look forward to summer outside and flying of to somewhere like here (Mojacar) and baking in the sun for a couple of weeks.
Now that we're living here we really enjoy our winters where we can get out and do things but find ourselves suffering through the summer and it's not just a couple of weeks it's months now and if it's not the heat it's the humidity and it's becoming unbearable
And I'm hearing that type of comment from more and more people over there