Buying in Lisbon

Part 2 of my reply to Pierre about buying a ruin in Lisbon

“We want to move to Lisbon permanently early 2013 and found several nice rentals.
But we also found an old house in Lisbon, on the border with Alfama. It needs very serious renovation (practically RECONSTRUCTION). But once done, we would have a T2 for ourselves, and 2 T1 for daily/weekly rental with great views (including the river). Total costs aprx. 250K. Would you consider this a risky investment?”

In part 1 of my reply I looked at the general economic outlook in Portugal. It is not good. However, let’s now look at the particular deal.

If this deal was anywhere else in Portugal I would say it was way too expensive. I must admit I dont know what house prices or rentals go for in Alfama. It certainly would appear to be a great spot overlooking the estuary. You really do need to check other prices in that area. A quarter of a million just for a ruin sounds crazy. Let me put it like this. I have a three bed apartment in London. It is close to several tube stations, and there is a massive amount of work available for good pay within walking distance. It is worth about the same amount.

Lisbon wages are not as high as London wages, so why is a ruin worth so much money? Something sounds not right here. I can in that area find for sale a property split into two apartments ready to move into for €150,000 (that’s half the price of your project) so unless the one you have your eye on has spectacular views from the top of the hill with courtyard and garden I have no idea why it costs so much.

A capital city should have a proper rental market, but you really do need to tramp around the streets and see what deals you can find, then get back and get out the spreadsheet and do your homework. Down here in the Algarve you’d have to be a total idiot to buy anything with a view to renting it out. You can rent a 1 bed apartment for €50 a week. For twice that you get something really nice. Lisbon should be much better, and at least Alfama is a hip place to be.

On the other hand, to put things into perspective, in this week’s Unique Members’ Bulletin there is a hotel in Cumbria going for £35,000. That is the price in a well known beauty spot in a wealthy country. You have a home and a business for a pittance. You cant get that kind of value in Portugal. Wages here are about €1,000 a month. That’s less than half what they are in the UK. House prices have to fall considerably in Portugal. They are still extortionately high.

I have been asked to look at Turkey and Sicily next. Let’s see what turns up.

john

15 thoughts on “Buying in Lisbon

  1. By the way, where in the Algarve can I rent that REALLY NICE apartment for 100 Euro’s a week?
    I would have a few months available soon.

    • I thought I’d responded to this. This blog is so slow and inefficient, I shall have to move it.
      Apartments for 100 euros a week are everywhere here. You can even rent the cottage next to me for that much depending on how long you would want to stay.

  2. Pretty nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed surfing around your blog posts. In any case I will be subscribing to your rss feed and I hope you write again very soon!

  3. I just read somewhere that the property taxes in some parts of the Algarve have gone up 500%. Is that a fable?
    Of course, percentages don’t mean much without the underlying basis. Those who paid 40 Euro a year for the past 15 years, may now have to pay the indexed 240 Euro. that is still very low, and no reason to complain.
    So what is the reality. When will these new numbers apply. Are they the same in each city, who establishes them, and how.

    • Hello Maria,

      This is Portugal you are talking about so nothing is clear. Muddle is a synonym for Portugal. Local taxes are raised through a tax on the house you live in. The underlying value of the house is to be brought up to date, whatever that may mean. The values given to any particular house are quite arbitrary and in many cases have no basis in commercial reality. That is normal here in Portugal. I know of one property that was bought less than a year ago for €125,000 that has been valued at €300,000. There are stories of other wild anomalies.

      The official view is that property values will rise by about 300%. What that means in actual payments varies drastically from area to area. I and my neighbour currently pay about €500 a year. For what we get in return that is already astronomical. I know of no-one paying anything remotely close to €40, unless it be for a hectare or two of waste land.

      The revised rates come into force on January 1st 2013. That will mean I should be paying somewhere in the region of €1,500 a year in rates. Extortionate!

      For the record I live out in the country at the end of a dirt track, so I have no road support, no street lights, no pavement. I have no children so dont benefit from any school facilities. I pay for police and hospitals and so on through normal taxes. The only local amenity that I get for my local tax is a weekly rubbish collection from a wheely-bin at the end of our track. That bin is shared by 12 houses and two businesses.

      I estimate that the cost to the camara (local council) for emptying that bin plus depreciation on the lorry, petrol, my share of running the tip, and so on has to be less than €1 a week. That means I will be paying €1,500 in local taxes for the privilege of the council taking away roughly one plastic bag’s worth of rubbish every week. That’s €30 a bag.

      However you look at it, Portugal is an extremely expensive country to live in. Take away the corruption, and rates could probably go down to €100. The place is a nightmare. I, like so many ex-pats, am considering leaving. This is not a country to buy property in. Rent, or go somewhere else.

      I hope that helps.
      john

  4. http://www.sovereigngroup.com/portugal/downloads/newsletters/Tax_news_issue_8_Dec_2011_sovereign_portugal_newsletter.pdf makes interesting reading.
    And it does not even describe the measures likely to be taken for 2013.
    It is sad that the Government never bothered to index then then reasonable IMI taxes. As a result some home owners, who got away with 80 or 90 Euros a year during the past 10 or 15 years, now suddenly pay 200% or 300% more. Still ‘nothing’ compared to some countries in northern Europe, but still – increases like this may come as a shock to some. Why waste money on taxes when you can also use it for Port Wines, a holiday or fancy dinners out?!

    • You shouldn’t pay much attention to the Sovereign Group, they are just seeking to get customers, and their advice is not that good. I’m currently suing them for appalling service.

      The government doesn’t give a damn about you or anyone else, and they have no idea how to run a business and so cant run the country. The country’s main businessmen have offered advice on how to deal with the current mess and they’ve been told to clear off. The current government is only concerned with handouts for themselves, and they are systematically wrecking the economy through blatant stupidity. It’s a disaster.

      john > > New comment on your post “Buying in Lisbon” > Author : Maria (IP: 177.135.18.143 , 177.135.18.143.dynamic.adsl.gvt.net.br) > E-mail : Miep.Visser@hotmail.com > URL : > Whois : http://whois.arin.net/rest/ip/177.135.18.143

  5. Ooppss…..
    I pressed the button too early.
    The taxes you are quoting in the Algarve seem, indeed, extraordinary.
    Surely people can combine forces, take a lawyer and fight those taxes?

    The low tax rates of 40 and 80 Euros were quoted by estate agents who offered me a few dilapidated properties in Lisbon.
    And they still try to tell me that I ‘don’t have to worry – it may take years before ‘these people’ will do a proper evaluation in Alfama …….

  6. Hello John, i found your posting most interesting as i’ve been looking at all sorts of property websites for Portugal. If we end up with the same government here next year then i’m off, not necessarily to Portugal though.
    As for pay being an average of more than £2000 a month in England – where did you get this fiction from ? In Torbay one would have to be a heavy duty solicitor or prostitute to earn anything even approaching this and even the latter go bankrupt under our regime of austerity !

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