Is buying a property in Alfama a good investment?

Last updated on December 29, 2023

Yes, the analysis of Lisbon's property market is included in our pack

If you've marveled at the historic streets and traditional culture in Alfama, you might consider owning property in this Lisbon district.

Is it a good idea though? What's the current state of the real estate market in that area? Are property values appreciating or depreciating? Are investors seeing returns on their real estate investments? How's the demand for rentals?

We'll answer all these questions for you! When building and updating our property pack for Portugal, our team has been researching and surveying this area. In fact, there is significant customer interest in investing there. Therefore, we believe it would be beneficial to include some information about it in our property pack.

Why do property buyers like investing in Alfama?

Alfama, nestled in the heart of Lisbon, has a charm that's hard to resist, especially if you're in the market for property.

It's like stepping back in time with its narrow, winding streets and historic buildings, offering an experience unlike most contemporary real estate markets. This uniqueness is a significant draw for property buyers, and here's why.

First off, Alfama's historical significance sets it apart. It's one of the oldest districts in Lisbon, filled with traditional architecture, colorful tiled facades, and Fado music echoing through the streets.

This cultural richness isn't something you'd easily find in modern neighborhoods, making Alfama a treasure trove for those who value history and culture.

Comparatively, while other areas in Lisbon offer more modern amenities and might be more suitable for those seeking a contemporary lifestyle, Alfama attracts those who are captivated by its timeless appeal.

The district has seen a surge in popularity, especially among international property buyers, over the past decade. This rise in interest is partly due to Lisbon's growing reputation as a vibrant and culturally rich city, and Alfama is at the heart of this allure.

Well, given its unique attributes, Alfama seems to have a lasting appeal. The district's charm is not something that fades with trends. It's rooted in history and culture, elements that stand the test of time.

Moreover, Lisbon's ongoing efforts to preserve these historical neighborhoods further add to Alfama's enduring appeal.

As for the type of people it attracts, Alfama is particularly appealing to those who appreciate a slower pace of life and a sense of community. It's popular among artists, history buffs, and those looking to immerse themselves in Portuguese culture.

This isn't the place for someone seeking a bustling, modern city environment. It's more about savoring the laid-back lifestyle and rich cultural tapestry.

Yet, it's essential to acknowledge some potential downsides. The very features that make Alfama charming can also be seen as drawbacks. The narrow streets, while picturesque, are not always practical, especially for modern transportation. Parking can be a nightmare, and navigating the labyrinthine alleys can be challenging for newcomers.

Moreover, the historical nature of the buildings means that many properties might lack modern conveniences or require significant renovation.

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Why is Alfama a nice place to live?

Alfama is like a hidden gem offering a unique blend of old-world charm and modern conveniences.

Living here, you're not just buying a property; you're embracing a lifestyle steeped in culture and history.

It's known for its narrow, cobblestone streets lined with colorful houses, and the sound of Fado music fills the air. Life here moves at a slower pace, encouraging you to soak in the surroundings.

It's common to see locals chatting on street corners or enjoying a coffee at a sidewalk café. This area is steeped in tradition, making it a perfect place for those who want to experience authentic Portuguese culture.

The expat community in Alfama is thriving. Many foreigners are drawn to the area's charm and history, and you'll find a supportive network of people from all over the world. This diversity adds to Alfama's allure, making it a melting pot of cultures and experiences.

Cost of living is a significant consideration. While Alfama is not the cheapest area in Lisbon, it offers value for the experience it provides. Rent and property prices can be high, especially in the most picturesque locations.

However, day-to-day expenses like groceries and dining out are relatively affordable compared to other major European cities.

Safety in Alfama is generally good. Like any urban area, it's wise to be cautious, especially at night or in less crowded streets, but residents often speak of a strong sense of community and looking out for one another.

In terms of amenities and facilities, Alfama may not have large shopping centers, but it boasts plenty of local shops, cafes, and restaurants. For larger shopping needs, the more modern districts of Lisbon are not far away.

As for healthcare, there are several hospitals and clinics nearby, like Hospital de São José and Santa Marta Hospital. Schools in the area cater to different age groups, offering a mix of local and international curricula.

The infrastructure in Alfama reflects its history. Some streets are narrow and not designed for heavy traffic, which adds to its charm but can be impractical. Public utilities and internet connectivity are generally reliable. However, due to its historical nature, some buildings may not have the latest in modern amenities.

Accessibility is one of Alfama's strengths. It's well connected to the rest of Lisbon. Although it's a bit hilly, getting around on foot is a pleasant experience.

For longer distances, the area is served by various public transportation options, including buses, trams (like the famous Tram 28), and metro stations like Santa Apolónia, which is also a major train station. This connectivity makes traveling to other parts of Lisbon or to major transport hubs like Lisbon Airport relatively easy.

How much does it cost to buy real estate in Alfama?

If you need a detailed and updated analysis of the prices, rents and yields, you can get our full guide about real estate investment in Portugal.

Buying a property in Alfama is an experience that's as unique as the neighborhood itself.

The real estate landscape here is diverse, offering everything from quaint apartments to more spacious houses, catering to a variety of tastes and budgets.

In Alfama, you'll mostly find apartments, given its historical nature and urban setting. These range from charming, traditional units in old buildings to renovated, modern apartments.

The demand for properties in Alfama is particularly high for those looking for a blend of historical charm and city living. This area appeals to those who appreciate the rich cultural heritage of Lisbon, making well-preserved or tastefully renovated properties particularly sought after.

When it comes to new developments, Alfama primarily consists of resale properties due to its status as a historical district. There's a limited scope for new constructions, which adds to the uniqueness and value of properties in this area.

The buildings here are often centuries old, with many undergoing renovations to meet modern standards while preserving their historical essence.

Now, let's talk numbers. The price range for properties in Alfama can vary significantly based on factors like the property's size, condition, and exact location. On average, you might find prices ranging from approximately €4,000 to €6,000 per square meter. However, for properties with unique features or prime locations, prices can be higher.

Over recent years, property values in Alfama have seen an upward trend. The neighborhood's growing popularity, both among locals and international buyers, has played a significant role in this.

As Lisbon's tourism industry flourishes and the city's global profile rises, areas like Alfama become increasingly desirable.

Looking ahead, there are no major new developments or city planning changes specifically announced for Alfama, as its status as a historical area limits extensive redevelopment.

However, any city-wide improvements in infrastructure or amenities could indirectly impact property values here.

Predicting the future real estate market in Alfama involves considering several factors. The neighborhood's historical charm, coupled with Lisbon's growing popularity, suggests that demand for properties in Alfama will remain strong.

This demand, especially in a limited-supply market like Alfama, could lead to further increases in property values.

Factors indicating potential increases in value include the ongoing interest in Lisbon as a destination for tourism and expatriates, the limited availability of properties in historic districts like Alfama, and the continued efforts to preserve and enhance the area's unique character.

However, as with any real estate market, potential buyers should be aware that market conditions can change, influenced by broader economic trends and local developments.

Where is the best area to buy a property in Alfama?

When considering buying property in Alfama, it's crucial to understand that different parts of this historic district offer varied experiences.

Alfama is not a monolithic neighborhood; it's a tapestry of different streets and corners, each with its unique charm and character.

At the heart of Alfama, around the São Jorge Castle, the atmosphere is deeply historical. Here, you'll find some of the oldest properties in Lisbon, with narrow, winding streets that tell stories of the past.

Properties here are primarily traditional apartments, often in buildings that have stood for centuries. These are perfect for those who are looking for a genuine old-world experience.

However, be prepared for potentially higher prices due to the historical significance and tourist appeal of the area.

Moving away from the castle area, you'll encounter a slightly different vibe. Areas closer to the waterfront, like near the Santa Apolónia station, offer a blend of the old and the new. This part of Alfama has seen some rejuvenation in recent years, making it an up-and-coming area.

The properties here might be a mix of traditional and modern, appealing to those who want a taste of Alfama's history but with more contemporary comforts. Prices here can be more varied, offering options for different budgets.

If you're considering where to buy, look towards the areas around the Lisbon Cathedral (Sé) and Largo das Portas do Sol. These areas strike a balance between accessibility, views, and the quintessential Alfama experience.

You're close enough to enjoy all the cultural offerings of Alfama, yet the areas are not as congested as some parts closer to the castle. The properties here range from charming apartments to more spacious units, accommodating a variety of preferences.

On the contrary, some areas in Alfama might be less advisable for property buyers. The very heart of Alfama, while picturesque, can be impractical for everyday living.

The streets here are often extremely narrow, making access difficult. If you're reliant on a car or value ease of access, these central areas might not be the best choice.

Also, some streets closer to popular tourist spots can get quite crowded, which might detract from the living experience for those seeking a quieter environment.

Here is a summary table to help you visualize better. If you need more detailed data and information, please check our property pack for Portugal.

Area	Atmosphere	Property Types	Price Range	Notes
Near São Jorge Castle	Deeply historical	Traditional apartments	Higher due to historical significance	Ideal for those seeking an old-world experience
Near Santa Apolónia	Blend of old and new	Mix of traditional and modern	Varied, options for different budgets	Up-and-coming area, rejuvenation in recent years
Near Lisbon Cathedral (Sé) and Largo das Portas do Sol	Accessible, balanced	Range from charming apartments to spacious units	Mid-range, accommodating different preferences	Balance between accessibility, views, and Alfama experience
Central Alfama	Picturesque but impractical	Varies, mostly smaller and older units	Dependent on exact location	Not advisable for those reliant on a car or seeking quiet

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Is there a strong rental demand in Alfama?

In Alfama the rental market is indeed vibrant but it's essential to understand the nuances of demand in this historic neighborhood.

The demand primarily leans towards short-term rentals, thanks to the area's popularity with tourists seeking an authentic Lisbon experience. This doesn't mean that long-term rentals don't have their place in the market.

The short-term rental market is buoyed by tourists and visitors who are attracted to Alfama's unique charm, its narrow streets, colorful buildings, and rich history. This demographic typically includes solo travelers, couples, and small families looking for a cultural experience that hotels often can't provide.

They are usually drawn to properties that offer a blend of traditional architecture with modern amenities. Think of well-maintained apartments that retain their historical character but are equipped with modern conveniences like Wi-Fi, updated kitchens, and comfortable furnishings.

Long-term rentals, while less prevalent, also have a market in Alfama. These are often sought by expatriates, students, or professionals working in Lisbon who prefer a more immersive experience in the city.

They typically look for properties that offer a balance of traditional Lisbon living with the comforts necessary for daily life. This means apartments that are not only aesthetically pleasing but also functional for longer stays.

Specific areas within Alfama, like those closer to major transport links such as Santa Apolónia station, or cultural hotspots like the Lisbon Cathedral, tend to be more in demand. These locations offer the dual benefit of experiencing the charm of Alfama while being conveniently connected to the rest of the city.

Amenities that can help reduce vacancy in rental properties include reliable internet, modernized kitchens and bathrooms, air conditioning, and perhaps a small balcony or terrace.

These features cater to the needs and expectations of modern travelers and long-term tenants alike, making the property more attractive in a competitive market.

Regarding potential returns on investment, properties in Alfama can be quite lucrative, especially for short-term rentals. Given the high tourist appeal, you could expect a good occupancy rate throughout the year, with potential gross yields ranging from 4% to 6%.

However, it's crucial to be aware of local regulations regarding short-term rentals, as cities often adjust policies in response to tourism growth.

In terms of types of properties gaining more demand, those that have been tastefully renovated to offer modern comforts while preserving their historical charm are particularly appealing.

These properties strike the perfect balance between authenticity and comfort, which is precisely what most people seek when choosing to stay in Alfama.

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Is it easy to buy a property as foreigner in Alfama?

Before we answer the question, please know that we have an article dedicated to the experience of buying real estate as a foreigner in Portugal.

Buying property in Alfama, Lisbon, as a foreigner is generally straightforward, but there are specific considerations to be aware of.

Portugal is known for its openness to foreign investment in real estate, which has contributed to the popularity of cities like Lisbon among international buyers.

Firstly, there aren't any significant regulations or restrictions specifically targeting foreign buyers in Portugal. This welcoming stance has made it an attractive destination for property investment. Understanding the local market dynamics and legal procedures is crucial.

The purchasing process in Alfama, much like in other parts of Lisbon, involves several steps. After selecting a property, you'll typically sign a promissory contract and pay a deposit, followed by the completion of the sale at a notary office, where the final deed (Escritura) is signed. It's essential to ensure that the property has clear legal titles and no outstanding debts or legal issues.

One of the primary risks associated with property investment in Alfama is related to the condition and legal status of historical properties. Many buildings in Alfama are old and may require significant renovation.

Ensuring that these renovations comply with local heritage and building regulations is crucial. Additionally, some properties might be subject to rental agreements or have tenants with protected status, which can complicate matters for new owners.

A classic pitfall in the Portuguese property market, and particularly in historical areas like Alfama, is underestimating renovation costs. Properties may need more work than initially apparent, and navigating local building codes and heritage preservation rules can be challenging.

Another common issue is overlooking the need for legal and fiscal representation; in Portugal, every property transaction requires a notary, and it's wise to have legal representation to navigate this process.

Working with a local real estate agent or lawyer is highly advisable. They can provide invaluable assistance in understanding the local market, identifying potential properties, navigating the legal system, and ensuring that all necessary paperwork and procedures are correctly handled. They can also advise on fiscal responsibilities, like property taxes and stamp duty.

Common exit strategies for property investors in Alfama include selling the property after value appreciation or renovating and renting it out, either as a short-term vacation rental or a long-term residential rental.

The Lisbon property market has seen significant appreciation in recent years, making resale a potentially lucrative option.

However, the rental market, especially for short-term holiday lets, can also provide a steady income stream, given the area's popularity with tourists.