The rental potential of Portugal

If you own property in Portugal and you're not using it throughout the year, there's a fantastic opportunity to generate some extra income by renting it out. Portugal, and specifically the Algarve, continues to be a sought-after destination for holidaymakers seeking some sun and relaxation. Why not let your property work for you and generate that additional income?

Renting out villas, townhouses, and apartments in the Algarve has traditionally been a reliable way to boost your finances. However, with the proposed changes to the short-term rental system, known as Alojamento Local, it's essential to adapt your strategy. Long-term rentals might be the best path if you're considering buying an apartment as an investment. These changes, mind you, only apply to apartments, so if you're planning to buy a villa or townhouse for holiday rentals, these rules won't affect you.

As of March 30^th, 2023, the Council of Ministers in Portugal approved new measures within the Mais Habitação programme, aimed at promoting affordable housing in the country. This programme focuses on two key objectives: supporting local families in accessing housing and ensuring more affordable housing options. The government is striving to encourage property owners with holiday apartments to move towards long-term rentals through various incentives.

Here's a summary of the proposed changes to Alojamento Local (AL) regulations:

• AL restrictions will only apply to apartments in mainland Portugal and will not be enforced in low-density municipalities.
• Apartments transitioning from short-term rentals to long-term rentals by the end of 2024 will enjoy IRS rent exemptions until December 31, 2030.
• The extraordinary tax rate will decrease from 35% to 25%, with further reductions based on the lease duration.
• New AL licenses in high-density areas will not be issued until 2030 and will only be valid for 5 years.
• Proof of active AL licenses will be required within the first 2 months after the law comes into force.

As of April 2023, no further updates have been released, leaving the industry somewhat uncertain about the final outcome of these proposed changes. If renting out your property is a primary reason for your investment in Portugal, please feel free to get in touch with us for expert advice on the best course of action.

Whether your goal is to tap into the tourist market or secure steady, long-term income, there are several crucial factors to consider when renting your property:

HOW TO ADVERTISE

Deciding whether to use a real estate agent or manage the rental yourself depends on various factors such as your property's location, your availability to deal with clients, and your capacity to handle inquiries and maintenance.

QUALITY PHOTOS, DETAILED DESCRIPTION 

High-quality, well-lit photos of your property are essential for making a strong first impression. Additionally, a detailed description, including property features, location, and your personal insights, can attract potential renters by selling them the experience, not just a place to stay.

THE PRICE IS RIGHT 

Pricing your rental correctly is paramount. Consider your financial goals, property type, quality, location, and the season. In the Algarve, seasons like peak, medium, and low affect pricing. Factor in local and international holidays for optimal rental pricing.

NOT EVERYTHING IS PROFIT

Remember that rental income is taxable in Portugal, both for residents and non-residents. Additionally, you'll need to budget for maintenance costs, household insurance, and, if you use an agent, their fees.

Renting out your property can be a rewarding endeavour, but it's essential to stay informed and adapt to evolving regulations and market dynamics. If you need further assistance or advice, don't hesitate to reach out to us. Your success in the real estate market is our priority.