Published on and written by Cyril Jarnias
Real Estate Investment in Europe: Portugal vs. Its Neighbors
In a rapidly evolving European economic landscape, choosing the best real estate investment becomes crucial. Portugal, with its enchanting climate and attractive tax policies, stands out as a prime destination. However, how does it compare to its neighbors?
This article offers a detailed comparison between buying real estate in Portugal and in neighboring countries such as Spain and France, analyzing key aspects including:
- Rental profitability
- Current legislation
- Growth opportunities
Discover the unique advantages of the Portuguese market compared to its neighbors and make an informed choice to optimize your investment.
Real Estate Market Analysis in Portugal and Its Neighbors
Comparative Analysis of Real Estate Market Trends in Portugal, Spain, France, and Italy
Comparative Table of Average Prices per m² (2025) and Growth Forecasts
| Major City | Portugal (Lisbon) | Spain (Barcelona) | France (Paris) | Italy (Rome) |
| Average price per m² | €5,922 | ~€5,000 | €10,560 | €7,200 |
| Secondary cities | Porto: €3,628 | Seville: €3,100 | Lyon: €5,950 | Milan: €8,100 |
| Expected growth | +4.3 to +5%/year | +2 to +4%/year | +1 to +2%/year | +2.9 to +4.4%/year |
Spanish and Italian figures are averages from regional data; France shows slight stagnation in Paris but dynamism in some major provincial cities.
Economic Factors Influencing Each Market
- Portugal
- Purchasing power: On the rise thanks to economic recovery, supported by the National Recovery and Resilience Plan funded by the EU.
- Interest rates: Expected to drop from 3.5% to 2.75% in 2025, improving access to mortgage credit.
- Taxation: Attractive tax system for foreign residents, notably the NHR (Non-Habitual Resident) regime.
- Government initiatives: Modernization of infrastructure (new airport, metro expansion), renovation support, and incentives for energy transition.
- Spain
- Purchasing power: Varies by region; strong foreign demand on the Mediterranean coasts.
- Interest rates: Slight easing in 2025, improving credit accessibility.
- Taxation: Many advantages for non-residents and foreign investors.
- Initiatives: Promotion of foreign investment, simplification of administrative procedures.
- France
- Purchasing power: Under pressure in major cities due to stagnant incomes and high prices.
- Interest rates: Slowing increase in 2025 but credit conditions remain strict.
- Taxation: High tax burden, but incentive schemes (Pinel, LMNP) for rental investments.
- Initiatives: Policy supporting new construction and energy renovation.
- Italy
- Purchasing power: Improvement in 2025 due to rate easing and slight income growth.
- Interest rates: Marked decrease, easing credit access conditions.
- Taxation: Favorable regimes for retirees and foreign investors, especially in the south.
- Initiatives: Focus on energy efficiency and strong demand for renovation.
Differences in Demand by Real Estate Segment
- Residential
- Portugal and Spain: Strong demand in major cities and tourist regions, driven by foreign investors.
- France: Strong demand in Paris, but affordability tension; dynamism in mid-sized cities.
- Italy: Widespread rebound, upscaling in new builds and interest in renovation.
- Commercial
- Portugal: Rise of coworking and urban logistics.
- Spain: Revival of retail in tourist centers.
- France and Italy: Gradual recovery, but caution amid economic conditions.
- Vacation
- Portugal: Strong appeal (Algarve, Lisbon, Porto), gross rental yield of 5–7%/year.
- Spain: Coastal areas and Balearic Islands highly sought after, market driven by foreign demand.
- France: Côte d’Azur, Brittany, and the Alps remain safe bets.
- Italy: Tuscany, northern lakes, and Puglia in high demand.
Challenges and Opportunities by Country
- Portugal
- Opportunities: Sustained growth, attractive taxation, rental dynamism, political stability.
- Challenges: Limited supply in major cities, risk of local overheating, dependence on foreign demand.
- Spain
- Opportunities: Profitability of seasonal rentals, regional diversity, improving credit conditions.
- Challenges: Bubble risks on coasts, regional volatility, sometimes complex regulations.
- France
- Opportunities: Mature market, legal security, rental investment incentive schemes.
- Challenges: High prices, heavy taxation, sometimes restricted credit access.
- Italy
- Opportunities: Attractive prices in the South, rising renovation demand, favorable credit conditions.
- Challenges: Heterogeneous market, administrative slowness, variable regional economic stability.
Key Takeaways
Portugal stands out with robust growth and strong appeal for foreign investors, supported by proactive policies and favorable taxation. Spain remains very dynamic, especially in tourist areas. France offers security but suffers from high prices and heavy taxation. Italy charms with its regional diversity and restored credit accessibility, with strong demand for renovation and energy efficiency.
Good to know:
In Portugal, the real estate market is dynamic thanks to government initiatives favoring foreign investment, such as the Golden Visa, and attractive tax policies. Loan interest rates are competitive compared to its neighbors, boosting household purchasing power. Comparatively, Spain sees strong demand for secondary and vacation homes, especially in Andalusia, although its major cities like Madrid show higher prices. In France, demand is mainly urban with Paris at the forefront, despite relatively stable interest rates but less flexible tax policies. Italy, meanwhile, presents a contrasting market, with opportunities in the south cheaper than in the north. Average prices in major Portuguese cities, like Lisbon, are growing moderately, whereas France expects slight stabilization. Forecasts indicate continued growth in the Portuguese market; however, each country faces challenges such as short-term rental regulation or urban sustainability, creating both obstacles and opportunities for investors.
Tax Advantages for Buyers in Portugal
The main tax advantages offered by Portugal to real estate buyers are distinctly more favorable compared to those in Spain and France, making the country a preferred destination for foreign investors.
| Tax Advantage | Portugal | Spain | France |
|---|---|---|---|
| Regime for new residents | NHR (until 2023/2024): Exemption or reduced rate on foreign income. IFICI (since 2024): Flat rate of 20% on certain Portuguese income, exemption on foreign income (excluding pensions). | No such broad regime. Some regions offer local reductions. | No specific tax regime for new foreign residents. |
| IMI exemption | 3-year exemption for primary residence. 3 to 5 years for urban rehabilitation. 10 years for certain business investments. | Limited exemptions, often conditional on use or property size. | Temporary exemption possible when buying off-plan (new housing), but more restrictive. |
| Reduced IMT rate | Progressive rate, allowances and reductions for primary residence or social rental investment. | Progressive rate, no specific reductions for non-residents. | High transfer taxes, few exemptions for non-residents. |
| VAT on renovation | 6% on renovation in certain urban areas. | Reduced VAT on some work, but lower caps. | VAT at 5.5% on energy renovation, 10% for other work. |
| Capital gains | Harmonized rate with potential optimization via tax treaties. | High rate, little optimization possible for non-residents. | Taxed at progressive rates, allowances after several years of ownership. |
Concrete Examples and Case Studies
- A French retiree moves to Portugal under the NHR regime (before 2024): they benefit from a tax exemption on their French-source pension for 10 years. In Spain or France, the pension would be fully taxed.
- An investor buys an apartment to renovate in Lisbon:
- Portugal: benefits from a reduced VAT rate of 6% on renovation work and an IMI exemption for 3 to 5 years.
- Spain: possible reduced VAT but less advantageous, no comparable property tax exemption.
- France: VAT at 10% (or 5.5% depending on the type of work), property tax exemption rarer and limited.
- A couple purchases a primary residence in Porto:
- Portugal: 3 years without IMI, reduced IMT rate based on property value.
- Spain and France: No automatic property tax exemption for a primary residence purchase.
Main Differences in Tax Attractiveness
- Portugal stands out for the duration and scope of its exemptions (up to 10 years for certain investments, 3 to 5 years for primary or renovated homes).
- The regimes for new residents (NHR, then IFICI) offer unique attractiveness in Europe for high-income profiles or international investors.
- Transfer tax rates and capital gains taxation are more easily optimized in Portugal, especially thanks to tax treaties, compared to neighboring countries.
In summary, Portugal offers highly competitive tax incentives for real estate purchases, particularly for foreigners, with specific regimes, property tax exemptions, and optimized taxation on income and capital gains, which contrasts sharply with Spain and France.
Good to know:
Portugal offers attractive tax advantages for real estate buyers, notably through the Non-Habitual Resident (NHR) tax regime which allows favorable taxation of income for ten years, often at a 20% rate. Additionally, new constructions or renovated properties may benefit from temporary exemptions from the municipal property tax (IMI), while real estate transfer tax (IMT) rates can be reduced for certain buyers, such as those purchasing their first primary residence. Unlike Spain, where wealth taxes and inheritance taxes can be higher, or France, where tax burdens are sometimes heavier for non-residents, Portugal stands out with a more flexible tax approach to attract foreign investors. For example, a foreign retiree under the NHR status could combine deductions on their pension while enjoying moderate taxation on other income, creating a tax-advantageous framework compared to its European neighbors.
Comparison of Real Estate Regulations in the Iberian Region
| Country | Real Estate Purchase Taxes | Property Rights | Restrictions for Non-Residents | Administrative Process | Financing Requirements | Incentives for Foreign Investors | Recent Developments |
|---|---|---|---|---|---|---|---|
| Portugal | Notary fees, stamp duty (0.8%), progressive IMT up to 8% depending on price and property type | Full property rights for residents and non-residents | No significant restrictions. Easy access via Golden Visa from €500,000 (or €350,000 for renovation) | Standardized procedure, often fast. Requires NIF (Portuguese tax number) and local bank account | Financing possible for non-residents, often up to 70% of price, subject to conditions | Golden Visa, NHR regime (Non-Habitual Resident) with flat tax of 20% on certain income for 10 years | End of Golden Visa in major cities, refocusing on inland regions and productive investments |
| Spain | Notary fees, registration fees, ITP (6–10% depending on region and property type) | Full property rights for residents and non-residents | No restrictions. Golden Visa from €500,000 in real estate investment | Procedure varies by region, NIE (Foreigner Identification Number) required, administrative steps sometimes longer | Financing possible for non-residents, up to 60–70% of property price | Golden Visa, tax regime for new residents, regional tax advantages | Reforms on wealth taxation in some autonomous communities, tightening of capital gains tax for non-residents |
| Andorra | No real estate purchase tax; minimal administrative fees (approx. €100/year for a large property) | Full property rights, but residency required for certain benefits | No quota, but minimum purchase of €350,000 to benefit from passive residence | Simplified process, but source of funds verification; residence application facilitated for owners | Financing mainly via own funds; limited bank offers for non-residents | Exemption from wealth, inheritance, and gift taxes; income tax capped at 10% | Strengthened AML (anti-money laundering) controls, maintaining a very attractive tax environment to lure foreign investors |
Key Points on the Impact of Regulations on Local Markets:
- Portugal: Tax incentives (NHR, Golden Visa) have strongly boosted foreign demand, especially in Lisbon and Porto, driving up prices. The refocusing of the Golden Visa aims to rebalance the market toward inland areas.
- Spain: The market remains attractive for foreigners due to stable property rights and the Golden Visa. Regional differences in taxes (ITP, wealth tax, inheritance) create disparities in purchase costs depending on location.
- Andorra: The near-total absence of purchase taxes and very low direct taxation favor a niche market highly sought after by those seeking tax optimization. Easy access to residency attracts a wealthy international clientele.
Administrative and Financial Requirements Differences:
- In Portugal and Spain, obtaining a tax number (NIF/NIE) and opening a local bank account are mandatory for any purchase.
- Administrative delays are generally shorter in Portugal and Andorra than in Spain, where they can vary by region.
- Bank financing is more accessible in Portugal and Spain than in Andorra, where transactions are often made without credit.
Recent Legislative Developments:
- Portugal: Restriction of the Golden Visa in major cities, priority to productive investment and low-density areas.
- Spain: Adjustments to capital gains tax and evolution of regional tax regimes.
- Andorra: Maintenance of an attractive tax environment, but tightening of controls on source of funds and international compliance.
Summary of Incentives for Foreign Investors:
- Golden Visa Portugal and Spain: residency against substantial real estate investment.
- Portugal: NHR regime (flat rate 20% on certain income, exemptions on pensions).
- Andorra: very low taxation, especially for high incomes, no wealth or inheritance taxes.
Good to know:
In Portugal, real estate purchase taxes, known as IMT, range from 1% to 8%, depending on the property value, while stamp duty amounts to 0.8%; purchases by non-residents are unrestricted, offering an attractive market for foreign investors. In Spain, purchase taxes include ITP, generally around 6 to 10%, with regional variations, and although non-residents can acquire properties, they must declare them for tax purposes. Andorra, meanwhile, imposes a transfer tax of 4%, but requires non-resident investors to obtain government authorization before purchase. Administrative processes are simpler in Portugal thanks to the “Balcão Único” initiative, a digital platform facilitating procedures, unlike the complex formalities in Andorra often requiring an intermediary. Spain offers tax advantages to foreign investors who commit to sustainable development, which can influence purchase decisions. Finally, recent developments include tax reductions in Portugal for renovations in historic areas and an increase in tax incentives in Spain to attract green investments, while Andorra eases some financing restrictions to stimulate foreign capital attraction.
Economic Impact of Real Estate Investment in Portugal and Spain
Comparison of Legislation and Tax Policies on Real Estate Investment
| Criterion | Portugal | Spain |
| Access for foreigners | No barriers to purchase for non-residents. | Recent proposals for major restrictions on non-EU non-residents (100% tax under consideration). |
| Rental taxation | Flat rate of 28% for non-residents, option to choose progressive scale. | 19% on net income for EU/EEA residents, 24% on gross income for non-EU non-residents. |
| Specific advantages | Attractive NHR status but diminishing (exemption on foreign income being phased out). | Tax advantages declining, especially for real estate companies (SOCIMI). Reduced allowances on rents. |
| Tourist rentals | Specific regime, effective rates between 8.75% and 12.5% depending on the city. | VAT increased to 21% on tourist rentals, impacting profitability. |
Advantages and Disadvantages for Foreign Investors
- Portugal:
- Advantages: simplified purchase process, still competitive taxation, tax treaty with France (avoids double taxation), possible allowances on rental income, attractive tax regime for certain profiles.
- Disadvantages: gradual removal of NHR status benefits, rising rates on some transactions, increasing taxation on capital gains and short-term rentals.
- Spain:
- Advantages: more attractive taxation in some regions (Madrid), possibility of deductions on net income for EU residents, tax treaty with France.
- Disadvantages: proposed restrictive measures for non-EU non-residents (100% tax), increased taxation on tourist rentals and reduction of advantages for real estate companies, highly variable regional taxation (heavier in Catalonia).
Recent Real Estate Market Developments
- Portugal:
- After strong post-2015 growth, the market has slowed since 2023, impacted by rising interest rates and the gradual removal of tax incentives.
- Post-COVID-19 measures: maintaining some attractiveness for foreign investors, but tightening tax advantages to limit speculation and protect local residents.
- Property prices rose 8.7% in 2023, with an expected slowdown to around 5% in 2024.
- Spain:
- Solid recovery after the pandemic, but tensions on affordability in major cities.
- The 2023 Housing Law introduced measures to regulate rents and reduce tax allowances.
- Property prices increased 6.5% in 2023, with a slowdown forecast to 4% in 2024.
Profitability Trends and Attractiveness of Major Cities
| City | Price Growth 2023 | Gross Rental Yield | Attractiveness |
| Lisbon | +9.1% | 5.5% | Strong tourist demand, rental tension |
| Porto | +8.3% | 5.8% | Good price/yield ratio |
| Barcelona | +6.2% | 4.2% | Rent control, tight market |
| Madrid | +7.0% | 4.5% | Advantageous regional taxation |
Lisbon and Porto remain attractive for investors, despite growing regulation of short-term rentals and price pressure.
Barcelona and Madrid see their rental profitability eroding, partly due to rent controls and increased taxation, but remain sought after for their economic dynamism.
Impact on the Local Economy
- Job creation: Real estate investment stimulates the construction, property management, and tourism sectors. In Portugal, real estate accounts for about 13% of GDP, in Spain nearly 12%.
- Infrastructure development: Real estate projects often come with investments in transport, retail, and public facilities.
- Effect on the local population:
- Rising housing costs, tension on access for residents, especially in urban centers.
- Risk of gentrification and loss of local residents in central neighborhoods.
- Regulatory policies implemented to limit speculation and protect the local social fabric.
Recent Statistics
- In 2024, the share of foreign investments in new residential construction reached 25% in Lisbon and 18% in Barcelona.
- The rate of available long-term rental housing has dropped 30% in Lisbon since 2020.
- The real estate sector employs about 400,000 people in Portugal and over 1 million in Spain.
Summary of Economic Factors Influencing Investment Decisions
- Portugal: Taxation still attractive but evolving, market stability, easy access for foreigners, profitability risks to monitor (regulation, increased taxation).
- Spain: Tax advantages declining, uncertainty on legislation for non-EU non-residents, limited appeal of major cities due to regulation and regional taxation, but appreciation potential in some regions.
- Key factors to monitor: evolution of tax policies, rent controls, political stability, local market dynamics, impact of post-pandemic measures on rental supply and asset appreciation.
Key takeaway: Portugal retains an advantage in accessibility and legal security for foreign investors, while Spain presents less predictable taxation and tightening regulations, particularly for non-EU non-residents.
Good to know:
Tax legislation regarding real estate differs between Portugal and Spain, with Portugal offering an exemption on certain income for non-habitual residents, while Spain applies a higher property tax. After the COVID-19 crisis, the Portuguese real estate market saw price growth of over 6% in 2022, supported by Lisbon’s appeal, compared to a 4% increase in Spain, particularly in Catalonia. Investors benefit from attractive rental yields, with Lisbon offering around 5% per year. These investments fuel the local economy through job creation in construction and tourism, developing infrastructure but potentially exacerbating price pressure on the local population. In 2023, economic prospects favor Portugal for its tax incentives and political stability, although Barcelona remains an appealing choice for continued growth and cultural diversity.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
