Invest in Portugal: 7.2% Yield from Rental Properties

Discover why buying to rent in Portugal offers a 7.2% yield, making it a smart investment choice for savvy property investors.

Idealista's most recent analysis reveals that the gross return on investment for purchasing a residential property to rent out reached an impressive 7.2% in the third quarter of 2024. While this figure represents a slight decline from the 7.4% recorded during the same period last year, it is noteworthy that the current return surpasses the 5.7% observed three years prior. 

A meticulous examination of the 13 district capitals, utilizing representative samples, indicates that Santarém emerges as the most lucrative locale for property investment in the summer of 2024, boasting a gross return of approximately 8%. However, potential investors should be cognizant of the elevated risks associated with this market; challenges such as difficulties in securing tenants or fluctuations in property value over time may pose significant hurdles.

Following Santarém, the list of cities offering promising returns continues with Coimbra (6.9%), Leiria (6.3%), Évora (6%), Setúbal (5.9%), Braga (5.8%), Porto (5.7%), Viseu (5.3%), Aveiro (5.3%), and Faro (5.1%). Conversely, the least favorable returns are found in Lisbon (4.7%), Funchal (4.9%), and Viana do Castelo (4.9%). It is essential to note that while these cities yield lower returns, they also present reduced investment risks, as the likelihood of properties remaining unrented is considerably diminished.

Beyond the gross profitability of real estate investments, it is imperative for prospective buyers to conduct a thorough analysis of ancillary expenses, including taxes associated with property acquisition (such as IMT and Stamp Duty) and taxes on rental income. A comprehensive evaluation of both expenses and income is crucial for accurately calculating the net return on such investments.

Furthermore, this study has facilitated an exploration of the profitability of alternative real estate products at a national level. Notably, office spaces yield a remarkable profitability of 9.3%, retail shops follow closely at 8.4%, while garages provide a more modest return of 5.3% in the third quarter of 2024. In summary, the landscape of real estate investment in Portugal remains dynamic, with varying degrees of profitability and risk across different regions and property types.