Note, however, that building a home in Portugal isn’t for the faint-hearted. Portuguese red tape and the often eccentric ways of doing business can make building your own home a nightmare and it’s fraught with problems. However, there are many excellent builders in Portugal (both Portuguese and foreign) who will build an individually designed house on your plot of land or will sell you a plot and build a house chosen from a range of standard designs.
The cost of land with planning approval in Portugal varies considerably depending on the area, e.g. from around €25 to €40 per m2 for a rural location, from €125 to €140 per m2 for a rural location in easy reach of the coast and from €400 to €900 per m2 for a prime coastal plot in the Algarve (or even more for the very best locations) where there’s currently a shortage of plots. However, further inland the price may be just a tenth of that on the coast and in rural areas agricultural land can be exceedingly cheap, costing as little as a few euros per m2.
Land usually represents as much as half the cost of building a home in a prime area, although it’s still possible in many areas to buy a plot of land and build a bigger and better home for less than the cost of a resale property.
Building your own home allows you to not only design your own home, but to ensure that the quality of materials and workmanship are first class. Building costs range from around €500 to €1,500 per square metre in resort areas, depending on the quality and the location. SISA at 10 per cent is payable on building land.
Buying a Building Plot
You must take the same care when buying land as you would when buying a home. The most important point is to ensure that it has been approved for building and that the plot is large enough and suitable for the house you plan to build.
It may also be possible to build on agricultural land, but there are strict limits on plot and building sizes. You can obtain this information from the local town hall in a usage licence ( licença de utilização). Some plots are unsuitable for building, as they’re too steep or require prohibitively expensive foundations. Also check that there aren’t any restrictions such as high-tension electricity lines, water pipes or rights of way which may restrict building.
Bear in mind that the cost of providing services to a property in a remote rural area may be prohibitively expensive and it must have a reliable water supply. When buying land for building, you should ensure that the purchase contract is dependent on obtaining the necessary building licence (licença de obras). Obtain a receipt showing that the plot is correctly presented in the local property register and check for yourself that the correct planning permission has been obtained (don’t simply leave it to the builder).
If planning permission is flawed or a building is built illegally, you can be heavily fined and a building may even need to be demolished! Note that it can take a long time to obtain planning permission in Portugal.
Most builders offer package deals, which include the land and the cost of building your home. However, it isn’t always wise to buy the building plot from the builder who’s going to build your home, and you should shop around and compare separate land and building costs. If you do decide to buy a package deal from a builder, you must insist on separate contracts for the land and the building, and obtain the title deed for the land before signing a building contract. If you’re having a home built on an existing urbanisation, you must ensure that the urbanisation has been approved.
Finding an Architect & Builder
When looking for an architect ( arquitecto) and builder ( construtor) it’s best to obtain recommendations from local people you can trust, e.g. an estate agent ( notário) neighbours and friends. Note, however, that estate agents and other professionals aren’t always the best people to ask, as they may receive a commission.
You can also obtain valuable information from local residents and from owners of properties in an area that you particularly like. Many Portuguese architects speak English and there are also architects from other EU countries working in the main resort areas. Architects’ fees are usually calculated as a percentage of the total costs of the work, usually around 10 per cent, which doesn’t encourage them to cut costs.
The most important consideration when building a new home is the reputation (and financial standing) of the builder. An architect should be able to recommend a number of reliable builders, who must be registered and have a permit ( alvará), but you should also do your own research. However, you should be wary of an architect with his ‘own’ builder (or a builder with his own architect), as it’s the architect’s job to ensure that the builder does his work according to the plans and specifications (so you don’t want their relationship to be too cosy).
Inspect other homes a builder has built and check with the owners what problems they have had and whether they’re satisfied. Building standards in Portugal vary considerably and you should never assume that the lowest offer is the best value for money.
It’s imperative that the builder has an insurance policy (or ‘termination’ guarantee) to cover you in the event that he goes bust before completing the property and its infrastructure, which must be specified in the contract. An agreed court of arbitration should be included in the contract in the event of a dispute.
If you want a house built in Portugal exactly to your specifications, you will need to personally supervise it every step of the way or employ an architect or structural engineer as a project manager. This will add around 5 per cent to the total building cost. Without close supervision it’s highly likely that your instructions won’t be followed.
You should obtain written quotations ( citaçãos) from a number of builders before signing a contract. One of the most important features of a home in Portugal is good insulation (against both heat and cold) and protection against humidity.
The contract must include a detailed building description (down to the last detail such as light switches and power points) and a list of the materials to be used (with references to the architect’s plans); the exact location and orientation of the building on the plot; the building and payment schedule, which must be in stages according to building progress; a penalty clause for late completion; the retention of a percentage (e.g. 5 to 10 per cent) of the building costs as a guarantee against defects; and how disputes will be settled.
Ensure that the contract includes all costs, including the architect’s fees (unless contracted separately). Note that architects’ fees are set by the Architects’ Association with whom all architects must be registered. Landscaping (if applicable); all permits and licences (including the costs of land segregation, the declaration of new building, and the horizontal division for a community property); and the connection of utilities (water, electricity, gas, etc.) to the house, not just to the building site, should be included in the contract.
Before accepting a quotation, it’s wise to have it checked by a building consultant to confirm that it’s a fair deal. You should check whether the quotation (which must include IVA at 19 per cent) is an estimate or a fixed price, as sometimes the cost can escalate wildly due to contract clauses and changes made during building work. It’s vital to have a contract checked by a lawyer, as building contracts are often heavily biased in the builder’s favour and give clients few rights in law.
Under Portuguese law, builders are responsible for minor defects for one year after completion and for structural defects for five years (less than in many other countries). It isn’t uncommon to have problems during construction, particularly regarding material defects. If you do have problems, you must usually be extremely patient and persistent to obtain satisfaction.
You should have a completed building checked by a structural surveyor for defects and a report drawn up, and if there are any defects, he should determine exactly who was responsible for them. Architects and builders in Portugal are required by law to have indemnity insurance, although many still try to avoid claims.
Habitation Licence & Registration
When a property has been completed the builder must arrange for an inspection ( visitoria) by the local council to ensure that it has been constructed according to the plans and building regulations. After a satisfactory inspection, the local council issues a habitation licence ( licença de habitação) and the final payment is due only after this has been issued. When this has been completed a property must be registered with the local authority (the plot must be registered before building work commences), the local tax office ( finanças) and at the local land registry ( conservatória de registo predial).
This article is an extract from Buying a Home in Portugal. Click here to get a copy now.