Take Advise if Buying or Thinking of Buying a Property in Madeira

At the start of a property search in Madeira?

I asked Robert Webb to share some ideas on preparation and getting ready to buy a property in Madeira.

I know people and have heard many horror stories from people who have fallen in all kinds of traps and lost money after money after money, please don’t let that be you… If in doubt always ask a second opinion or seek other advice.


If you planning to buy a property in The Madeira Islands or are in the early stages of thinking about exactly that, then you will be at the start of an exciting journey. I run the marketing campaigns for Bespoke Villas here in Madeira and come into contact with many overseas people who are already well down the path of either currently purchasing a property or are actively in the market seeking a property to buy. Irrespective of looking to make a residential move or purchase a holiday home, potential buyers should be well organised before the search starts, so I have listed 5 preparatory steps to help orientate property buyers to keep their feet on the ground and avoid later mistakes.

1)      Talk to an economist in Madeira


Buying a property in Madeira as a holiday home or a permanent residence will have tax obligations in Portugal. Before you start seriously looking for a property, I would recommend seeing a local Madeira based economist to discuss your personal finances, as here you will be informed of any potential benefits. For instance, Portugal has the Non-Habitual Residence regime or NHR, this offers qualifying individuals a low tax or tax free holiday period lasting 10 years. Currently, under the recently revised NHR rules, foreign-based private pensions will soon be subject to a 10% personal tax level. The NHR is not just for private pensions it can also affect currently owned investment properties in your home country and the capital gains tax that goes with a time structured property sale. For instance, In the UK some second properties purchased before 2015 can be sold and the capital gains tax potentially eliminated for those with the NHR status. I advise seeing a Madeira based economist to discuss your financial position to be able to structure your finances before you start to sell your properties or draw down a pension, this does involve some costs, however, the tax savings can often be really positive.

2)      Search for a good lawyer with decent recommendations


Generally, I don’t meet many potential property buyers who already have a good idea of who their Portuguese lawyer will be before they start their property search. A good lawyer will help navigate clients in a good direction and will be able to help you with asking the right questions for when you find that perfect property. Your lawyer will also be able to quickly assist you when the time arrives in opening bank accounts and getting you a Portuguese tax number.  There are important tax and residency issues that need to be dealt with correctly at the very time of obtaining this tax number. A well-chosen lawyer will act as your agent in the purchase procedure, ensuring the purchase goes smoothly. They will actively steer you clear of avoidable errors and keep the purchase process smooth.

Some legal firms will offer an escrow account facility, I would recommend this is avoided as your own Portuguese bank account is the safest place for your property funds to be located.

3)      Buying a property that requires work.


This can be an attractive option for those who know about restoration or construction work, however, this should not be undertaken lightly on Madeira. One of the big errors I have seen in Madeira is a property being purchased from a recognised real estate agency who advised the potential buyers that the work required will cost no more than €25,000, the purchase was made. I now know the final bill for the repairs and rebuild as many times this figure. If you decide to buy a property that needs work then get some local building companies to give you a quote without the sales agent being present. It is particularly important to check the insurance documents of any builders you choose to use, should an uninsured accident take place on the site, the responsibility will fall on the legal owner of the property, this can have legal and adverse financial consequences. Currently, with the increased demand in the property market, the availability of good building companies is limited and a long wait for a good company should be expected.

4)      Car purchase in Madeira


Cars in Madeira are really expensive due to local registration taxes, for those who plan carefully some considerable savings are to be made. A car can be imported to Madeira avoiding registration tax, however, it will need to have been registered for 6 months in another EU country, by a current tax resident of the same country and in the name of the person who will be making the move to Madeira.  Those who already know they will be moving to Madeira and changing tax residence to Portugal but not within the next 6 months can consider, buying a car (with a left-side steering wheel) and duly registering the car in their home country at least 6 months before changing their tax residence to Madeira. A suitable car that has been correctly registered in an EU country could be imported free of local registration taxes. Importing a car to Madeira will still have complications as there are rules and a significant amount of paperwork and government departments to see before a car is deemed legally registered here. There are some specialised local agents who undertake this importation and registration work. An agent should be contacted well before any decisions are made with car importation. Cars that are imported without correct planning can lead to very large tax demands and some difficult decisions.

5)      Transferring foreign currency funds to Euros


For those who require Euros to make a property purchase, you need to beware of your inflated high street bank exchange rate! By far the biggest and most easily avoidable mistake is asking your bank to send, for instance, British Pounds to a Portuguese bank. This will attract very poor exchange rates and possible landing fees. Instead, use a trustable and London registered Financial Conduct Authority (or FCA for short) listed Currency Broker. This is a company who works directly in the foreign exchange markets and has access to low exchange rates. Typically a bank will charge 3% or more on a large foreign currency trade. However an assigned currency trader will get you a much lower margin on a trade, normally on a €400,000 currency transfer there will be at least €8,000 saved. If you don’t have an FCA registered currency broker, at Bespoke Villas we recommend Nu Currencies, these are the currency brokers our clients choose. we recommend registering with them at the very start of your property search so you can be ready to send funds quickly without using your bank. You can register easily here on this link. An account first needs creating before funds can be sent.

Best of luck in all your property searches.

Content submitted by Robert Webb, Marketing Manager at Bespoke Villas


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