Buying a property in Faro: a complete guide

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

Considering buying a nice property in Faro? You're not alone!

Many people are fascinated by Faro's Algarve beauty and dream of owning a charming villa or a modern apartment in this city.

Does it make sense from a financial perspective, though? Are property prices increasing in Faro? How much does it cost? Is it wiser to invest in the Old Town or Praia de Faro? What are the taxes? Which places offer rental yields exceeding 7%?

We have the answers.

The Investropa team has done their homework and know this market well. As a matter of fact, we've organized all our findings in a pack. Get it now.

In the lines below, we'll share useful information and some practical tips.

How's the property market in Faro?

Is the property market going up or down? People have different ideas. Us? We rely on the latest data and stats for accurate answers.

Types of properties

In Faro, you can find various types of properties for sale, including apartments, villas, townhouses, and land.

Apartments are typically compact living spaces within buildings, often with shared amenities. Villas offer larger, standalone homes with outdoor spaces, while townhouses are connected homes with multiple floors.

Land listings provide empty plots where you can build your own property.

Each type of property offers different features and benefits to suit your preferences and needs.

What's better: buy or rent?

(If you're purchasing for personal use and not for renting)

Whether you've already made Faro your home or are contemplating it for the future, you might be considering whether to buy or rent a property in this charming Portuguese city.

Generally, buying is a better choice than renting in Faro due to the city's low property prices and high rental yields.

On the other hand, renting might be the better fit if you value flexibility.

Property pricing in Faro

On average, according to the last data from Statistics Portugal, purchasing a property in Faro would cost you around $5,000 per square meter.

Obviously, there are significant differences. An apartment in Faro city center might have a different price per square meter than a house in Albufeira. We actually give you a more detailed breakdown in our pack for buying property in Faro and in Portugal.

To give you a better idea, it means that, instead of buying an apartment in Paris or London, you can afford 3 properties in Faro.

Also, housing prices in Faro are 17% cheaper than in Lisbon.

The most expensive neighbourhoods in Faro are probably Estoi, Santa Bárbara de Nexe, and Olhão, while the cheapest neighbourhoods are probably Faro, Montenegro, and Conceição de Tavira.

Trends

First and foremost, we have to recognize that Portugal is, today, one of the most stable countries in the world. The last Fragile State Index that has been reported for this place is 27.5.

Remember this important aspect when thinking about the viability of buying a property in Faro.

Also, according to the International Monetary Fund (IMF), Portugal's economy is expected to soar by 7.9% in the coming 5 years, resulting in an average GDP growth rate of 1.6%.

If you want to invest in real estate in Faro it's a good thing because, usually, when the economy grows, people make more money, and this encourages them to invest in real estate, which drives up the demand and prices for properties.

Also, in Portugal, the average GDP per capita has changed by 5.0% over the last 5 years. It's a solid number.

This data is a positive signal - housing prices in Faro might soar in 2024 and after that.

Looking for more updated data? We've done a big-picture study to find out if it's a good idea to purchase property in Portugal right now.

Buying property in Faro

Buying real estate in Faro can be difficult due to a lack of reliable and up-to-date information on the market. That's why we have created the pack to buy property in Faro and in Portugal.

Buying process

In our pack, we've explained the entire process of buying properties in a detailed way. We've pointed out the mistakes to steer clear of, shared tips for finding properties that give you the best returns, and provided information about taxes and necessary documents.

Now, we're giving you a simplified version of the buying process.

This is the step-by-step process to purchase a property in Faro, Portugal:

1. Research the real estate market in Faro and familiarize yourself with local regulations.
2. Secure financing or establish a budget with an approved Portuguese bank.
3. Engage a reputable real estate agent in Faro.
4. View properties that match your preferences, considering the local neighborhood and amenities.
5. Make an offer through the agent, using a "Promissory Contract" (Contrato Promessa de Compra e Venda).
6. Negotiate the terms and price, considering the "IMT" (Property Transfer Tax) and "Stamp Duty" (Imposto de Selo).
7. Hire a lawyer specialized in Portuguese property law for legal assistance.
8. Conduct a thorough property inspection, including checking for any encumbrances or debts on the property.
9. Sign the promissory contract and pay a deposit (usually around 10% of the property price).
10. Ensure all necessary documents are in order, including the "Escritura" (Final Deed) and "Caderneta Predial" (Property Tax Card).
11. Finalize the purchase deed with a notary, where the "Imposto Municipal sobre Transmissões Onerosas de Imóveis" (IMT) is paid.
12. Register the property in your name at the local Land Registry (Conservatória do Registo Predial) to complete the process.

Also, if you're not from the country, you might want to check our article on how to buy property as a foreigner in Portugal.

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Where to find a property

Start your property search in Faro by exploring these websites.

• Casthelana Real Estate - A real estate agency specializing in property sales and rentals in Porto, Portugal, offering a variety of apartments and houses.
• Home lovers - A real estate website offering properties for sale and rent in Portugal (Lisbon, Porto, Cascais, Comporta, Madeira).
• Idealista - A property website offering over 160,769 properties for sale in Portugal, including popular regions like Algarve and Lisbon.
• Portugal Homes - A real estate agency offering a wide range of properties for sale in Portugal, including Golden Visa properties.
• Properties in Portugal - Browse over 40,000 properties for sale, including apartments, villas, lands, and commercial properties.

Also, know that we have included contacts of real estate agencies, property lawyers, moving companies, expats communities and more in our pack for buying property in Portugal.

What you can get

As mentioned before, the average price per sqm in Faro is $5,000. A 1-bedroom property with 60 square meters would cost approximately $300,000, and a 2-bedroom with 85 square meters would cost approximately $425,000.

However, the cost of properties will fluctuate depending on both their characteristics and their location.

Typically, prime neighborhoods in Faro come with higher prices. A house in Praia de Faro might be around $950,000, while a house in Estoi could be priced at $880,000.

Of course, some regions offer more affordability. You may find an apartment in Montenegro for $230,000, or you could discover one in a remote place priced at only $80,000.

Find a more detailed breakdown in our full pack for buying property in Portugal.

Mistakes to avoid

Here are the main pitfalls when buying a property in Faro, Portugal:

• Rustic land classification: Be cautious of purchasing land with rustic status, as it may limit building possibilities.
• Urban planning restrictions: Specific regulations in Faro may affect property renovations or extensions.
• Mediterranean climate challenges: Properties may require unique maintenance due to high humidity and salt air.
• Local property taxes: Understand Portuguese tax laws and potential implications for foreign buyers.
• Historic property considerations: Historical buildings may have preservation restrictions and costly restoration requirements.
• Non-resident property taxes: Additional taxes may apply to foreign buyers.
• Land erosion risks: Some coastal areas in Faro face erosion threats that could affect property stability.
• Leasehold vs. freehold: Clarify the property's tenure type to avoid ownership misunderstandings.

We don't want this to happen to you, so we have included a full checklist for your property investment in our pack of documents. Avoid these mistakes and save a lot of money.

Everything you need to know is included in our Portugal Property Pack

Living in Faro

Faro is a vibrant city with a Mediterranean climate, offering the perfect balance of city life and coastal living, making it an ideal place to buy property.

Cost of living

The cost of living in Faro is generally considered to be quite reasonable. Prices for everyday items are generally lower than those in other parts of Portugal, making it an attractive option for those looking for a more affordable lifestyle.

Here are some examples to better understand the cost of living in Faro, Portugal:

• A glass of Vinho Verde (Portuguese green wine) at a local bar: $3-$5.
• Rent for a one-bedroom apartment in the historic center of Faro: $600-$1,000 per month.
• Monthly Proximidade public transportation pass for urban zones: $40-$60.
• A bottle of Sagres beer at a grocery store: $1.50-$2.00.
• Utilities (electricity, heating, cooling) for an 85m² apartment in Faro: $80-$120.
• A pastel de nata (Portuguese custard tart) at a local bakery: $1-$2.
• Entrance fee to the Faro Cathedral, a historic landmark: $3-$5.
• Health insurance coverage for a family of four: $100-$200 per month.

Neighbourhoods

Since we want to present information in a clear and reader-friendly way, we've created a summary table outlining the different neighborhoods in Faro. For yields, prices and rents, check our property pack.

Life in Faro

Faro is the capital of the Algarve region in Portugal and is known for its vibrant economy, with the tourism industry being the main driver of its economy. The city also has a strong agricultural sector, with fishing, winemaking, and olive oil production being some of its main activities.

What expats usually like the most in Faro are the picturesque beaches and its historical city center, where they can explore the narrow cobblestone streets and find traditional Portuguese cuisine.

Faro has good access to healthcare, with several public and private hospitals and a wide variety of medical professionals.

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Renting out in Faro

This section is for you if you want to buy property solely for renting out and earning income.

Long-term

Tenant Profiles in Faro

According to the data reported by Wikipedia, the home ownership rate in Portugal is 78%, which is average.

It means that, if you decide to buy and rent out in Faro, there will be a good number of people who can become your potential tenants.

If you decide to buy and rent out to long-term tenants, you should target professionals looking for a place to live near the city center, as well as students and young professionals who are looking for an affordable option close to the university. Additionally, Faro has a large number of tourists, so you could also target short-term rentals for those looking for a vacation rental.

Here is a little summary table we've made for you.

Rental yields

Nowadays, the rental yields you get in Faro are between 5% and 7%. There are some opportunities. For a "good" rental yield, you should aim for 7% or more.

Furnished apartments located in the city centre of Faro tend to provide the highest rental yields due to the high demand for short-term accommodation from tourists and business travellers. Additionally, properties located in the suburbs of Faro with good access to public transportation offer great rental yields due to their lower prices and proximity to the city centre.

For further explanation and a more detailed breakdown, you can check the reports and analyses we have made.

Finally, be aware that rental incomes in Faro are taxed at 28%, which is relatively high.

Short-term

You could also decide to rent short-term to travelers visiting Faro for business or leisure, as well as to students attending the University of Algarve. Additionally, Faro is a popular destination for golfers, so you could also rent to golfers coming to Faro for a golfing holiday.

If you decide to go with that option, look for properties in the historic Old Town, the central Praça da República, and the beachfront areas of Faro Island. These areas are popular with tourists and offer plenty of rental opportunities.

Currently, there are approximately 1,535 active Airbnb listings in Faro, reflecting a highly dynamic and bustling short-term rental market. The average daily rate stands around $134.

You have the opportunity to generate a nice additional income stream then. According to online testimonials and analytics platform like AirDNA, Guesty and Inside Airbnb, people who offer short-term rentals in Faro can make around $2100 per month. Also, the average occupancy rate is estimated at 82%.

Is it worth buying real estate in Faro then?

Buying a property in Faro can be a smart move for those seeking both a beautiful coastal lifestyle and investment opportunities. If you're an investor looking for high rental yields, Faro offers a promising market with yields often exceeding 7%. The stable Portuguese economy and projected GDP growth make it an appealing prospect for property investments.

Additionally, retirees and expats who desire an affordable yet picturesque place to live will find Faro's Mediterranean climate and cultural richness attractive. The diverse range of property types, from apartments to villas, ensures there's something for everyone. However, it's vital to be well-informed and prepared for potential property taxes and market fluctuations.

On the flip side, if you're a short-term planner or risk-averse investor, buying property in Faro may not align with your goals. Property purchases involve significant commitments and costs, and market fluctuations can introduce uncertainty. Moreover, without thorough research and guidance, navigating Faro's property market can be challenging, given the limited availability of reliable information.

It's crucial to assess your long-term plans, financial stability, and comfort with potential risks before deciding whether buying property in Faro is the right choice for you.

Make sure you understand the real estate market in Faro

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The content provided here is for informational purposes only and does not imply endorsement or advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information, including text, images, links, or other elements in this material. Following the content and analyses presented here does not assure specific outcomes. For guidance tailored to your individual circumstances, it is recommended to consult with a professional, such as a lawyer, accountant, or business advisor.