Retiring in style: Portugal
Sunday October 1st 2006Alexander Garrett
Portugal is the third most popular location in Europe after Spain and France for Britons to own property and that includes a significant complement of retired people. The obvious comparison is with neighbouring Spain: the climate is similar, but Portugal has a more exclusive image, having largely avoided the overdevelopment that is rife on the Spanish costas.
The vast majority of British retirees are based in one region, the Algarve, where there is a number of upmarket resort developments, generally based around golf courses. The best known are Quinta do Lago and Vale do Lobo, where luxury villas have soared in value in recent years to pass the £1m mark in many cases.
The western Algarve has recently been opened up by the construction of a new motorway, which connects Lagos to the airport at Faro. And there is increasing interest in the rest of Portugal outside the Algarve. The Silver Coast, around Lisbon, is beginning to take off ? one big resort development, Praia D?El Rey, is seeking to emulate the success of those on the Algarve. Prices there start at around £100,000 for a small apartment. The Costa Verde, around Porto, is also attracting interest.
Both these areas might prove a better investment than the Algarve, which is now looking expensive with prices having risen consistently at 10% to15% a year for the last five years. The island of Madeira is also worth considering ? it is very popular with retirees because of its extremely pleasant year-round climate.
The costs of buying property in Portugal are quite high: if you buy from an estate agent you may have to pay 5% to10% in commission, and there is a transfer tax called SISA, equivalent to our stamp duty, which is on a sliding scale up to 6% for properties above ?500,000 (£346,000).
As for personal taxation, there are six bands of income tax, ranging from 12% to 40%. The threshold for the top rate of tax is ?53,000, so the amount of tax you pay is probably similar to the UK. Portugal also has a capital gains tax, which is a flat rate of 25% of the uplift unless you are resident, in which case only 50% of the property?s value is taken into account.
Portugal has a reputation for being extremely bureaucratic, and its health service is regarded as inefficient, which may mean private health insurance is a better option. The cost of living in Portugal is still low.
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