Buying property in Madeira as a foreigner. Your 2024 guide

Buying property in Madeira has many upsides, as it offers stunning natural beauty, a mild climate, and a relatively low cost of living. 

However, many foreigners don't know where to start. That's why we made this helpful guide to help you through the process of relocating or investing in this paradise. 

What’s the property market in Madeira?

In 2024, Madeira's property market remains vibrant and attractive for investors and homebuyers, despite rising property prices. Popular areas like Funchal are particularly driven by a mix of international investment and local demand. 

According to Idealista, the average price of a property in Madeira in June 2024 was €3,107/m², 21.8% more than in June 2023. 

In Porto Santo, the only other inhabited island that belongs to Madeira, the price in June 2024 was €2,247/m², 16.7% more than a year ago.

Best place to buy property in Madeira

Madeira is a relatively small archipelago with four islands. Its total population in 2019 was around 250,000 people. 

Most foreigners choose Funchal when relocating or investing in Madeira. Still, there are other exciting places on the islands as well. 

Funchal

Average price per m²: €3,388

Funchal, the capital of Madeira, has a mild climate year-round, making it comfortable and inviting. First and foremost, it's a lively place with a mix of historic charm and modern amenities, featuring beautiful botanical gardens, bustling markets, and scenic coastal views. 

You can choose from modern villas and apartments to older or derelict properties that you can make nice and beautiful once again.

Santa Cruz

Average price per m²: €2,175

Santa Cruz is a cozy town on the east coast of Madeira with about 43,000 residents famous for its pebbly Praia das Palmeiras beach and a lovely seafront promenade. 

It's lined with palm trees and restaurants where all the locals and tourists get together, making it a charming place to relax and enjoy the coastal scenery.

Porto Santo

Average price per m²: €2,247

Porto Santo is a small island in the Madeira archipelago, known for its stunning nine-kilometer stretch of golden sandy beaches. If I stopped writing here, that would be enough, right? 

But even besides that, it's a perfect spot for relaxation and offers a laid-back lifestyle with beautiful coastal views and a mild climate. 

The island is less developed than Madeira and, thus, an ideal destination if you're pursuing tranquility and natural beauty.

What are the costs of buying a property in Madeira?

When buying property in Madeira or Portugal in general, consider the following taxes and costs:

• IMT (property transfer tax): 0% – 10% of the property value. Exempt up to a value of €115,509
• IMI (property tax): 0.3% – 0.45% for urban property and 0.8% for rural ones
• Stamp Duty: 0.8%
• Mortgage costs: the arrangement fees are typically 0.5% – 1.5% of the loan amount
• Notary and land registry: €1,000 – €1,500
• Legal services: 1% – 1.25% of the purchase price
• Agency fees: 5% + VAT if you're using a buyer's agent
• Insurance cost: depends on the property and other circumstances
• Surveyor fee: €100 – €500

Can foreigners buy property in Madeira?

Madeira is part of Portugal and the EU, so there are no restrictions on foreign property ownership. You can extend your property budget by getting a mortgage from Portuguese banks.

However, buying a property in Madeira may have tax implications, so it's best to consult a lawyer or accountant who knows the legislation in both Portugal and the country you're coming from.

Is it easy to get a mortgage in Portugal?

Getting a mortgage as a non-resident in Madeira, or Portugal, in general, is relatively easy if you have all the documents that are needed at hand. 

Going through the process can be almost painless if you do it online, as you're not dealing with different bank employees all the time. 

In any case, you'll typically need a bigger down payment and provide additional documents like proof of income from abroad and international credit reports.

Mortgage options

Banks are well-equipped to deal with foreigners and offer many different types of mortgages, including buy-to-let. 

Whether you're buying a permanent home for yourself in Portugal or a second home, you can choose from fixed-rate, variable-rate, and mixed-rate mortgages.

Eligibility criteria

To qualify, your monthly debt payments should be no more than 35% of your income, and banks will lend you 75% to 80% of the property's value, requiring a deposit of 20% to 50%.

Documentation

You'll need to provide payslips, bank statements, tax returns, and a Portuguese tax number (NIF), along with proof of income from your home country and documents verifying your legal status in Portugal. 

From experience, be ready to provide additional documents, and while communication is generally clear, you might need to follow up to speed up the process. 

Sending an email or calling your account manager, broker, or lawyer every week to get an update about the mortgage is what I can wholeheartedly recommend. 

How Homevest can help you secure the best deal for your property in Madeira 

When embarking on the property buying process in a foreign country, having the right support can make a huge difference. 

Homevest simplifies the mortgage process for international buyers in Portugal. Partnering with Reorganiza, a leading digital mortgage broker in Portugal, Homevest helps non-residents get top bank offers within a week.

Suranga contacted Homevest at the beginning of his property journey. He wanted to understand the mortgage process for a UK citizen before starting his search in Portugal. After finding a property that met his dream home requirements, the next step was to find the right mortgage for his profile. 

With Homevest's help, Suranga received multiple offers and secured the best deal for his needs.

“There were many unknown things compared to the UK, but we had good guidelines and help throughout the process. Because of that, the journey was simple and easy," mentions Suranga.

What are the pitfalls of buying a property in Madeira?

The island's unique microclimates can affect property conditions, particularly at higher altitudes, and its rugged terrain might make daily activities difficult without a car. 

Many older buildings were constructed with low-quality materials, so it's important to check the structural quality, especially for properties built before the 1980s. 

Some suggest researching the builders who built the property at length or getting a structural survey done, even for newer properties.

Frequently asked questions

1. Is buying property in Madeira a good investment?

Buying property in Madeira can be a smart move because the island is beautiful, has great weather, and there's a steady demand for rentals.

2. Is property cheap in Madeira?

Property in Madeira is generally cheaper compared to many parts of mainland Portugal, especially popular cities like Lisbon and Porto. 

However, prices can vary depending on the location and type of property. Funchal, the capital of Madeira, has the highest property prices.

3. Can I get a Golden Visa if I buy a property in Portugal?

As of October 2023, you cannot get a Golden Visa by buying property in Portugal, as the program no longer accepts real estate purchases and real estate-related funds as qualifying investments. 

Whether you're seeking a vacation home, retirement spot, or investment property, Madeira offers a variety of options to suit your needs. 

Remember to consider factors like microclimates, walkability, and structural quality of the buildings, and always seek professional advice for legal and financial aspects.

Homevest makes finding a mortgage quick and easy by matching you with banks that fit your needs. 

You can apply for a mortgage through Homevest completely online to access top Portuguese banks all in one place and receive multiple offers and compare them based on what works best for you.

Sources used and checked in July 2024:

1. Goldcrest
2. Idealista Price Report Madeira
3. Idealista Price Report Porto Santo
4. Idealista Price Report Santa Cruz
5. Idealista Price Report Funchal
6. PwC
7. Purchase and sale of real estate in Portugal
8. Purchase costs in Portugal
9. IMT Calculator
10. Get Golden Visa
11. Own Property Abroad

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.