Portugal's Real Estate Investment Opportunity
Real estate investment remains an attractive option for those with savings seeking steady returns. In Portugal, buying property to rent out is particularly appealing as rental prices continue to rise amid a shortage of supply in the residential market. According to Idealista, the gross rental yield reached 6.9% in the last quarter of 2024, one of the highest levels in recent years, only slightly below the 7.3% recorded a year earlier.
The shortage of rental properties, coupled with high demand, has driven up rental prices while limiting the growth of new rental agreements. This trend is further influenced by the rapid rise in property sale prices, which outpaced rental price growth towards the end of 2024.
Portugal offers lucrative real estate returns, but investors should beware of tenancy laws favouring tenant protections.
City-level analysis reveals significant variations in profitability. Castelo Branco offers the highest rental yield at 9.4%, though it carries higher risks, such as difficulty in finding tenants or potential property depreciation. Other high-yield cities include Santarém (7.5%), Coimbra (6.5%), and Braga, Setúbal, Évora, and Leiria (all 5.9%). Lisbon, Funchal, and Viana do Castelo offer lower yields (4.6% to 5.2%), but with reduced risks and greater chances of property appreciation and tenant retention.
Other real estate investments also perform well, with offices yielding 9%, retail spaces 8.4%, and garages 5.2%. These insights, derived from Idealista’s analysis of Q4 2024 data, provide a solid foundation for investors evaluating opportunities in Portugal's real estate market. The study calculated gross rental yields by dividing average property sale prices by rental costs, offering a clear snapshot of the market for potential investors.
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