PORTUGAL PROPERTY INVESTMENT

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1 PORTUGAL PROPERTY INVESTMENT Buying guide PROPERTY. INVESTMENT. LIFESTYLE

2 Lisbon story A secure and safe place to invest your money in an unbeatable location. Property prices in Lisbon on the increase every year. A secure property market Possibly the most important reason you would want to invest is that Portugal has a proven and secure property market with an average property growth of 15% per annum over the last 15 years It s a peaceful and safe place According to the 2012 Global Peace Index rankings, Portugal is the 16th most peaceful country in the world, boasting one of the lowest crime rates in Europe. In fact, Lisbon was recently voted the safest capital city in Europe. The good life Living costs, including food, drinks, gas, electricity, water and transport, are relatively low compared to most other European cities. Lisbon has climbed four places in terms of living standards, according to the Mercer 2011 Quality of Living Survey, placing it above cities like Milan, Tokyo, Rome and Madrid. The climate is unbeatable Expect long, hot summer days cooled by the Atlantic breeze, and extremely pleasant winters. Short bursts of rain ensure that the landscape stays lush and green. With close to 300 days of sunshine throughout the year, no snow, and temperatures that never reach the freezing point, Lisbon is a truly blessed city. It s great living in a place where you can have beach days in October or March, where you can sit comfortably outside at a café terrace in February, and where you don t have to worry about the dangers of snow on the ground.

3 Buying off plan Buying at a discount to market price gives you four main benefits You gain instant equity which means the discount becomes increased equity when you sell. This locks in profit when you buy and means that capital growth becomes a bonus rather than the only way to profit. 2. Any drop in market value would be covered by the discount in price. A drop of the discount you secure would be needed before you lose money and therefore this acts as a safety net. 3. Buying at discount also acts as a leveraging tool. Capital growth is achieved on the market value of your property, not on the discounted purchase price. This means your discount has a similar effect on your capital as it would through buying with a mortgage but without the repayments. 4. Increases your cash flow. A discount means that not only will you benefit from instant capital appreciation on the property you buy but also have more cash in the bank, especially if you take advantage of leveraging. The lower the cash investment, the more you will have spare to either buy more property or invest into a different asset class to diversify your portfolio.

4 Exit strategy Tax, mortgages, lawyers Tax As with all tax systems, the rules in Portugal are complex, and you are strongly advised to seek professional advice from a tax specialist. However, here is a guide as to what you can expect. Tax payer number registration and tax representation (per person) IMT (one time tax, to determinate according to purchase price) IS (stamp Duty a one time tax) IMI (per year, to determinate according to purchase price) Public deed and registration fees The advantages of leveraging % 6.5% 0.8% 0.3 % 0.5% Along with buying under market value, using intelligent deal structuring can help to turn a good deal into a great one. Buying with a mortgage provides a large leveraging effect to your investment which can magnify your returns. Sensible leveraging allows you to minimise the amount of capital you have to input on purchase and magnifies the growth that will occur on that capital each year, increasing the return on your investment. When mortgaging properties, it is always important to get the balance right on the amount you borrow against the amount of equity you invest. You do not want to over-stretch yourself, but at the same time the smaller the amount of equity you invest, the higher your return on investment, and the more liquid assets you have remaining outside of the purchase to invest elsewhere. It is also important to note that the leveraging effect of a mortgage works both ways. While it magnifies your upside, if your investment does not perform well and loses money, then it can also magnify your downside. Mortgages It is relatively straightforward to secure a mortgage in Portugal and the process is much the same as it is in the UK. All Portuguese mortgages are full status and proof of income will be required. Portuguese mortgages can be arranged for acquisition, renovation and construction and the mortgage is secured on the property in Portugal. Portuguese lenders assess eligibility for a loan on the applicant s ability to service the loan and not potential rental income from the property. It is possible to obtain an 70% LTV. Interest rates are around the 3.5 4% mark, depending on how much you borrow over what period, with a minimum loan of 50,000. Up to 30 year repayment mortgages are available, maximum age is 75.

5 Exit strategy Tax, mortgages, lawyers Exit strategy The Amouraria development has excellent opportuni- ties for onward sale in the shortor long-term. Local demand for quality property is strong. Amouraria is a boutique highend development, that makes the most of a rare and stunning buildings in the heart of Lisbon. Short-Term Flip For investors who are keen to dip in to and out of a market quickly to gain a quick return. Investors would look to buy an off-plan apartment and sell immediately following completion. Investors relying on a quick sale should always be able to cover their costs should they not sell on by their planned date. Buy And Hold For A Number Of Years For investors who want to buy and hold to maximise the returns generated by the high potential capital growth in Lisbon. Investors may look to refinance after completion and use rental income to help cover the mortgage costs, whilst benefiting from the underlying capital appreciation. The onward sales market would remain the local population. Lawyers When buying property in any foreign country, it is important to have a good English speaking lawyer that will guide you through the process step by step. Lawyers representing our clients must be able to accomplish the following: Act with power-of-attorney for the investor. Guide through the conveyancing process until completion. Provide a good level of service especially around busy times, such as completion, keeping theinvestor up to date with what stage they are at. Provide an English-speaking key contact who can respond to enquiries by or phone. Provide receipts for all disbursements or out-of-hand expenses. Include within fees the cost of all notarisation, apostils, postage, tax registration and other legal paperwork that will need to be done in Portugal. With these points in mind we have instructed a legal firm called Legal Square from Lisbon to guide you through all the legal aspects of buying an apartment in this development in Portugal. The charge for the legal services is around 2,000 for the purchase of a unit. They will tailor make the quote based on individual clients needs. www. legalsquare.eu

6 Exit strategy Tax, mortgages, lawyers Payment schedule Timing What for? Amount Immediately Deposit 5% of purchase price Within 30 days of reservation Legal fees 2,00 approx. Within 30 days of reservation 1st payment exchange of contract 20% of purchase price During build process 2nd payment 25% of purchase price On completion Additional costs 25% of costs On completion 3rd final payment 50% of purchase price Although 50% of the purchase price needs to be paid during the build. A mortgage can be obtained for 70% of the purchase price at completion, so money will be paid back to you at the signing of the deed (completion).

7 Contacts 45 Holmead Road, London SW6 2JD +44 (0) athenaadvisers.com