How to buy a house during Portugal's housing crisis?

Access to housing in Portugal, Europe and the US is becoming increasingly difficult. Families are faced with high house prices and high interest rates on housing loans. What's more, their purchasing power is still pressurised by inflation. All these factors have cooled house sales over the last year. But property experts interviewed by Bloomberg believe that there are alternative solutions worth considering for those who want to buy a house or invest in a property. Find out what they are.

Buying land to build a house

With house prices rising much more than salaries in Portugal, as well as in the US, it is becoming increasingly difficult to buy a home. Another option should be considered: buying a plot of land to build a house on, say the experts. There are several plots of land outside the major urban centres at more attractive prices, which means paying less IMT(Municipal Property Transfer Tax). And then the house can be built by you and your family with a contractor, and in stages depending on the savings available.

In addition, there are construction mortgages that have the advantage of starting to pay interest on the loan while the property is being built (i.e. having grace periods on the capital. And this modality can also have longer terms, which allows you to reduce the house instalments you have to pay each month (beware that you can pay more interest here).

But there are more than just advantages. Of course, you'll have to deal with all the bureaucracy involved (such as the licensing processes, which are slow) and you'll need to have your own capital to go ahead with the construction loan capital to go ahead with the construction loan (banks in Portugal only finance a maximum of 90 per cent of the total value).What's more, the loan capital is released in instalments as the work progresses and on visits from the bank's expert.

Buying a house to rent

Some people decide to buy a house and then put it on the rental market. In Portugal, the profitability of this business has been rising, but so have the investment risks, as the Idealist study points out. The big advantage is that you have the tenants paying part or all of the instalments on the house, if there is a loan, and you can also earn extra income. On the other hand, you have to consider that being a landlord also comes with costs, such as house maintenance. And you also run the risk of tenants failing to pay their rent and entering into lengthy eviction procedures.

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Borrowing money from parents

If you really want to buy a house but don't have enough money to pay for all the costs involved (such as the IMT and other taxes, the deed, the mortgage, etc.), you can turn to your family savings. If your parents have savings that they don't need, they can donate that money to help you buy a house. And the good news is that cash donations from parents to their children don't have to be declared in the IRS.

Renovating and extending the family home

Another way of having your own space and not living far away from your family is to go ahead with work to expand your parents' house, for example. This way you create your own space, save money and don't have to take out a large mortgage. But of course you need to have a healthy family relationship to go ahead with the house remodelling project and your parents' permission. You should also make sure you have the necessary licences to do so.

Buying a house in a cheaper municipality

If you're mostly teleworking or thinking of changing jobs, this tip is for you. It's true that houses to buy are expensive near the big urban centres of Lisbon and Porto, as well as in the Portuguese district capitals. But if you travel to the interior of the country, you'll find the 10 cheapest municipalities in which to buy a house, where you can buy your home and take out a mortgage with a much lower effort rate. But all this would mean a change in your life, so you could be further away from work, family and friends, as well as the cultural dynamism and services that big cities offer.

Article seen on (Bloomberg)

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