Which city to choose to buy property in Portugal?

For years, the world has known Portuguese real estate through just two cities - Porto and Lisbon - and the huge tourist draw, the beaches of the Algarve.

Lisbon used to be one of Europe's sleepier capitals. Property there is still inexpensive compared to London, Paris or Madrid - but the market has seen prices rise 10% and more a year over the last decade. Meanwhile Porto has seen property prices rising at 15-20% a year, with strong demand for city centre properties for AirBNB rental.

But have Lisbon and Porto got too successful for their own good?

The Portuguese government obviously thinks so - it's just redesigned its Golden Visa property investment scheme to try to route interest away from these two cities, as well as away from the coastal Algarve.

Some buyers have also switched their interest, according to Alfredo Valente of IAD Portugal. He's seeing a lot more demand for rural areas, where buyers can get a bigger property for less. If it's within an hour of a main international airport, buyers are prepared look beyond the city boundaries.

Median house prices (m²) in Portugal

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buy home in evoraSo which areas to consider if not Lisbon or Porto?

For example, between Lisbon and Prato, there's the Costa de Prata Atlantic coast, great for surfers and walkers, with the delightful town of Aveiro on its two canals (not quite Venice, but equally charming in its own way). South of Lisbon, there are the little towns of Azeitão and Comporta, part of Setúbal municipality, both with extensive woods as well as attractive coastline.

One big reason is the relatively high prices now being seen in Lisbon and Porto, which are actually squeezing locals out of the housing market. In May 2020, the average property in Lisbon cost EUR 592,709; in Porto, EUR 318,735; and in Beja, a small town in Alentejo, EUR 130,151.

Guess what? Buyers who think Lisbon and Porto have become a bubble market are looking elsewhere at a vastly reduced price.

More remote areas have remained under the radar, but now more buyers are prepared to consider them. For instance, Alentejo, with its rolling plains known as the breadbasket of Portugal, has charming whitewashed villages as well as the stunning town of Evora (56,000 population).

Evora is seeing some of the best price growth in Portugal at the moment, with the average asking price increased from EUR 177,814 to EUR 215,045 over the year to March 2020. But despite Evora's popularity, properties elsewhere in Alentejo remain priced below their peak values of 2007, unlike real estate in Lisbon and the north. Minor towns like Portalegre and Beja have seen very soft pricing over the last couple of years, so there are certainly bargains to be had.

In the north of Portugal there's a lot more than just Porto. The Alto Douro wine region is strewn with beautiful farms, from large modernised properties at EUR 500,000 or so to renovation properties at just EUR 40-70,000. You can even buy a vineyard, or a farm complex that will allow you to enter the thriving market for rural tourism. Or you could head to the cities of Guimaraes and Braga, which despite recent growth have prices about half what you'd pay in Porto.

On the Costa de Prata, prices are 30% lower than on the Algarve. You'll also find many towns and villages have a much more distinctively Portuguese feel, particularly inland; if you prefer local colour to golf clubs and Irish pubs head inland or to the smaller fishing villages. But there are also resort areas like Praia d'El Rey, if that's what you're interested in, and you'll still get that discount to the Algarve.

golden visa scheme Golden Visa requirements are changed

The Golden Visa programme, which gives a residence permit for a EUR 350,000 investment in property, has now been tightened up to exclude Porto and Lisbon. Instead, it's focusing on the interior, on areas with low density population and on secondary cities. The Azores and Madeira are also included as potential investments.

If you invest in the right areas, or in renovation projects, you can even benefit from a lower required investment - EUR 280,000 instead of EUR 350,000. Rather than buying just one property, you might be able to purchase a small apartment building or a number of apartments or small townhouses to renovate. Alternatively, you could look for a larger property with agrotourism or rural tourism potential. Cycle touring, hiking, and even canoeing and white water rafting are all popular holiday sports in the interior.

There are a few difficulties in your way, however. Many property websites, news sources and agents concentrate just on Lisbon, Porto and the Algarve. You're going to have to go a bit off the beaten track even if you fancy buying in Coimbra - a big university city with a thriving digital and healthcare tech sector. If you're buying in the Alto Douro it will be even less easy to get a good feel for prices and to find adequate information.

What we think about the future?

And while many Portuguese do speak excellent English, you might find that English-speaking agents aren't well represented in areas outside the capital, the Algarve, and Porto. Agents in rural areas will be more used to dealing with locals. But this is likely to change - as it has done, for instance, in France, where over the years agents who started up in the very popular Dordogne have now moved into the neighbouring, but less expensive areas of Charente-Maritime and Limousin.

Our bet is that the Alentejo will get an increased profile. The weather's delightful, the villages are as pretty as anything you'll see in Andalucia, and prices are still low. We're not sure whether it will be the Tuscany of the 2020s… but it will certainly increase its fan club.