As Spain considers introducing a 100% tax on property purchases by non-EU residents, Portugal's Algarve region is emerging as an increasingly attractive alternative for international buyers. The proposed Spanish tax is part of an effort to combat rising housing prices and prioritise local affordability. However, the policy is raising concerns among foreign investors, particularly British buyers, who make up a significant portion of the southern European real estate market (Source: The Guardian).
For those reconsidering Spain as a property destination, Portugal, and specifically the Algarve, offers an enticing solution, with a wide variety of properties for sale in a vibrant market.
What Is Spain Proposing?
In a move to curb foreign investment, Spain’s government has proposed a tax of up to 100% on properties purchased by non-EU citizens, including Britons. This would effectively double the cost of buying property for these investors, making Spain a less attractive market.
Prime Minister Pedro Sánchez argues that foreign investment has driven up housing prices, making it difficult for locals to afford homes. While this policy is aimed at alleviating Spain’s housing crisis, critics suggest it may have unintended consequences, including discouraging international investment altogether.
Why Portugal Is the Winner
1. Portugal’s Favourable Investment Climate
Portugal has consistently demonstrated a more investor-friendly approach. While the Golden Visa program recently underwent significant changes, excluding real estate investments from eligibility for residency, alternative investment options are still available. Investors can qualify for residency through capital transfers, job creation and contributions to scientific research or technological development.
For property investors, the Algarve remains a highly attractive region, with strong rental demand, particularly in popular areas like Lagos and Albufeira. The Algarve’s tourism industry ensures that holiday rentals continue to be a profitable avenue for generating income. Moreover, commercial properties remain eligible for investment-based residency, offering another route for buyers.
2. Competitive Real Estate Market
Compared to Spain, Portugal offers a more affordable and diverse property market. The Algarve caters to a variety of different budgets; with a healthy blend of luxury properties and more budget-friendly options.
3. Visa Options
Portugal’s D Class Visas, including the Entrepreneur Visa and Highly Skilled Worker Visa, provide an attractive route for individuals looking to start a business or work in sectors that contribute to Portugal’s economy. These visas are ideal for professionals or entrepreneurs planning to live and work in Portugal while contributing to the country’s development.
Additionally, Portugal’s Retirement Visa is another appealing option. It allows retirees to reside in Portugal, provided they can show sufficient income or savings to support themselves. This is further supported by Portugal’s relatively low cost of living in comparison to other Western European countries.
4. Lifestyle and Safety
The Algarve is renowned for its high quality of life, with over 300 days of sunshine per year, world-class golf courses and award-winning beaches. Additionally, Portugal was recently ranked among the safest countries in the world, further enhancing its appeal for families and retirees.
How the Algarve Stands Out
The Algarve offers an enticing mix of natural beauty, cultural richness and modern amenities. Key areas like Lagos, Albufeira and Vilamoura are already popular with international buyers, with demand ever-increasing.
Additionally, the Algarve’s property market has shown resilience and growth over the past decade, making it a sound investment choice. With increasing interest from international buyers, especially those reconsidering Spain, the region’s real estate market is poised for further expansion in 2025.
Summary
Spain’s proposed property tax highlights the shifting dynamics of the European real estate market. For international buyers, particularly those from outside the EU, Portugal’s Algarve stands out as a welcoming and rewarding alternative.
If you’re a non-EU investor or a British buyer feeling disheartened by Spain’s proposed tax changes, now is the perfect time to explore opportunities in the Algarve.
Moving through the start of 2025, the Algarve’s appeal as a property investment destination is stronger than ever. If you’re interested in learning more, read our Buying Guide or get in touch with our team.
