10 tips for buying property in Madeira
The southwest coast of Madeira has developed strongly in recent years. Luxury projects and upscale gastronomy are attracting a new group of buyers to the island.
The real estate boom of other European holiday destinations has not yet reached the island. However, Madeira is positioning itself better and better against international competition. The number of holidaymakers is rising. Well over a million tourists come to the island every year. Far from the conflicts and problems in Eastern Europe and North Africa, Madeira presents itself as a safe destination with excellent tourist infrastructure. Construction activity has increased significantly in recent years with the demand for housing. Locations with a sea view or inland in a beautiful landscape setting are particularly popular. Those who do not want to build a new house or want to build according to their own ideas should look around on the resale market. There are many bargains to be had at the moment. In the medium and long term, building and house prices in Madeira are likely to rise, and with them the resale values.
Who is allowed to buy a holiday home in Madeira?
EU citizens are allowed to purchase real estate without restrictions, except in protected agricultural zones. However, as the purchase is subject to the payment of taxes, it must be registered with the tax office - i.e. the buyer needs a corresponding Portuguese tax number. The so-called "Golden Visa" programme introduced for residents of non-EU countries in 2012 continues to apply to Madeira. Under certain conditions, it entitles the holder to a residence permit in the EU state of Portugal when purchasing a property worth at least 500,000 euros.
Regions and prices
By far the most popular region is the capital Funchal. It is the centre of the island and has by far the highest property stock. However, even flats in good locations can cost several hundred thousand euros. The suburb of São Martinho is particularly popular with buyers of a second home, as it offers a good tourist infrastructure.
Those who want to live a little closer to nature outside the capital will prefer the small villages along the coastal regions. The southwest coast around Ribeira Brava, Ponta do Sol, Calheta or Prazeres is popular because of the consistently good weather. But the east coast also has its charms and some very nice properties. For good locations with a beautiful view and a property that offers privacy, prices range from half a million to beyond the two million mark.
Incidental purchase costs
When buying a second home, a real estate transfer tax (IMT) of 0% up to 8% on the transaction value is due. Different tax rates apply to the purchase of primary residences or investments by a company resident in Portugal, with some attractive discounts. Generally, a stamp duty (IS) of 0.8% of the transaction value and legal fees (approx. 2 to 3%) are added. The brokerage fee is usually borne by the seller.
Running costs:
In addition to running costs such as electricity, heating and water, the buyer must pay an annual property tax (IMI). The property is recalculated on the basis of various factors, and 0.2 to 0.5% tax is then levied on this value. The calculated value is usually significantly lower than the purchase price.
What you should consider when buying a property:
Only work with state-licensed brokers who have a so-called AMI number.
The land registry at the competent district court keeps the land register. It documents the legal relationships (owners, mortgages, encumbrances). Heritable building rights and condominiums have their own land registers.
A valid building and housing permit must also be available. When acquiring building land or converting a property, the permissibility of the building project should be checked by the responsible municipality.
The contract negotiations and the review of the documents should be done by a lawyer if the buyer does not speak Portuguese.
After the conclusion of the purchase contract, the new owner is usually registered immediately in the land register. This should also be accompanied by a lawyer.
The seller must be registered in the land register. In any case, consult a lawyer specialised in real estate transactions to clarify the ownership situation in a legally secure manner.
Have the property's freedom from encumbrances confirmed by an extract from the land register and the tax office. These documents must be available when the contract is concluded.
In Portugal, preliminary contracts are common. These are already legally binding without notarisation, so the content should be specified as precisely as possible. Here, too, the consultation of a lawyer is strongly recommended.
The "final" purchase contract is notarised by a notary. It can be freely chosen. Here, too, legal counsel should be present.
A prerequisite for the legally valid purchase of a property, even for secondary residences, is the possession of a Portuguese tax number. Without this, no purchase transaction can take place. In addition, the annual property tax (IMI) is paid via this number. The tax number is also required for holiday rentals, which are possible in Portugal.
