Why British Buyers are Driving Up House Prices in Portugal: The Tax Factor Explained

Rising Property Prices in Portugal

Estate agents have reported that house prices in Portugal are on the rise, largely due to an influx of wealthy Britons relocating to Europe following changes in the UK tax system. According to the National Statistics Institute, property prices in Portugal have surged by over 60% from mid-2019 to mid-2024.

Factors Influencing the Move

The primary motivations for these relocations include security, lifestyle, and better weather. In addition, a new tax scheme aimed at skilled professionals has made Portugal particularly attractive.

Recent Market Trends

The latest data indicates that house prices rose by 9.8% in the third quarter of the year compared to the previous year. Zoie Hawker, managing partner of Fine & Country in the Algarve, stated that the UK remains the largest market for buyers, with demand from 32 different countries.

Impact of UK Tax Changes

Recent changes in the UK tax regime, including the potential scrapping of the non-dom tax status by former Chancellor Jeremy Hunt, have prompted many high-net-worth individuals to consider moving abroad. The Labour Party has also pledged to eliminate loopholes that benefit non-doms, which could further drive this trend.

Comparative Analysis with Other Countries

Similar trends are visible in Italy and Switzerland, where property prices are also increasing due to changes in tax laws designed to attract wealthy individuals. In Italy, a flat tax system for overseas earners was introduced, while Switzerland offers lower interest rates for property financing.

Conclusion

With higher capital gains tax and other financial pressures in the UK, many Britons are now exploring opportunities in European countries with more favorable tax conditions. As the demand for properties in Portugal continues to grow, experts predict that house prices will keep rising, driven by both local and international buyers.