Is it better to buy or rent a house in Portugal in 2023?

Thinking of moving to Portugal in 2023? But Is it better to buy or rent a house in Portugal? This is the question that many people ask when moving abroad, for example. And the answer is not easy to give, it is not conclusive, and there are several factors to take into account when making a decision. One thing is certain, house prices have risen a lot in recent times (although price drops could be on the horizon), as well as the rent that landlords ask for from tenants. In this article we try, with Deco's help, to guide you to the answer that best suits your situation.  

Buying a house in Portugal: what to know and what to consider?

Buying a house in Portugal is the dream of many, but it is far from being a straightforward one. This is mainly because, almost certainly, you will have to resort to a mortgage, thus facing a lengthy and bureaucratic process that requires you to have a good financial cushion for the costs involved. But this is the main advantage of buying a house: the possibility of paying off an asset which at the end of the contract will become yours.

The first aspect to take into account is your financial situation. Choosing to buy a house in Portugal in 2023 means evaluating your income: is it guaranteed and stable, or is it very volatile? You'll need to have a firm answer, because the repayments on a mortgage cannot be left behind.

Then calculate your effort rate, and you should only consider buying when it does not exceed 35%. To make this calculation, you should take into account all the credit payments that you have and not only the mortgage.

Once you have made this decision, if you get the green light, you can go ahead, but banks will only lend you 90% of the value of the house, some will only lend up to 80%, so you need a down payment to make the deal happen. In the case of non-residents in Portugal, this percentage of financing could be even lower. 

And the down payment or deposit is not the only amount you need to have available for the purchase. You also need to budget for the deed and registration of the house, stamp duty and council tax.

• Find property for sale in Portugal

Renting a house in Portugal: what to know and what to consider?

Especially for younger people, who have not yet had the opportunity to save enough for an initial mortgage deposit and the costs inherent in the process, renting a house can be the solution. Consumers who do not want charges beyond the rent may have here for their exit, an equally good choice for those who are not committed to moving to Portugal long term.

If you have a professional life that implies constant changes, namely geographic, renting may be the best solution, since the process of leaving a house and renting another one is much simpler than the buying and selling process.

Although, at first sight, it seems more advantageous to rent, you must be aware that being a tenant you will depend on the will of the landlords to renew your contract or not. Moreover, you will be limited to the authorisation of the landlord to carry out work and refurbishments in the house, which, in the long run, can mean as much investment as buying a house.

In terms of financial planning, renting will require some analysis of your financial situation, on the one hand, because it is common to ask for a couple of months rent in advance, as a guarantee of good performance of the contract. And on the other hand, because given the average price of the rental market, especially in areas with high population pressure, this requirement represents some financial power, even though it is less than the capital invested in the purchase of a house.

• Find property for rent in Portugal

Buying or renting a house in Portugal: conclusions

To sum up, both buying and renting a house have advantages and disadvantages. Your decision should always include a good analysis of your current and medium-term financial situation and an awareness of the obligations that each deal entails.

Ultimately, whether you should buy or rent a house in Portugal depends on your personal situation and priorities. If you plan to stay in Portugal for a long time and have the financial means to purchase a property, buying a house may be a good investment. However, if you value flexibility and don't want to be tied down to a specific location or property, renting may be a better option.