Last updated: October 2026
Yes, on average. In the second quarter of 2026, buyers who are tax resident outside Portugal paid a median €4,143/m² for homes in the Algarve, against €3,368/m² for Portuguese residents: about 23% more. Most of that gap reflects what foreigners buy, not a higher price for the same home.
Those numbers come from INE, Portugal’s statistics office, and they landed on 23 October. If you are a British or American buyer looking at Lagos somewhere between €500k and €900k, the headline sounds like a warning. It is more useful than that. Read properly, it tells you exactly where the real extra costs are, and where you have room to push back.
Do foreigners pay more for property in the Algarve than Portuguese buyers?
On paper, yes. INE splits every quarter’s sales by the buyer’s tax address. In Q2 2026 the Algarve was the second most expensive sub-region in Portugal, with a median of €3,500/m² across all buyers. Buyers with a tax address abroad paid €4,143/m². Buyers tax resident in Portugal paid €3,368/m².
What surprised me is how small the Algarve gap is next to the cities. INE puts the premium paid by buyers from abroad at 47.0% in Greater Lisbon and 37.5% in the Porto metropolitan area. In the Algarve it is roughly half the Lisbon figure.
| Median price paid, Q2 2026 | €/m² | Premium for buyers taxed abroad |
|---|---|---|
| Algarve, buyers tax resident in Portugal | €3,368 | Baseline |
| Algarve, buyers tax resident abroad | €4,143 | About 23% |
| Algarve, all buyers | €3,500 | n/a |
| Greater Lisbon | n/a | 47.0% |
| Porto metropolitan area | n/a | 37.5% |
Why the gap is mostly about what foreigners buy
A median is a middle point, not a like-for-like comparison. Two buyers paying different prices per square metre are usually buying two different things. INE does not adjust for the type of home, so the 23% mixes in three things that have nothing to do with being charged more:
- Location. International buyers concentrate on the coast: Lagos, Praia da Luz, Carvoeiro, the Golden Triangle. Residents buy across the whole region, including inland towns where prices are far lower.
- Age and spec. Newer builds, renovated townhouses and homes with pools and sea views cost more per square metre, and they are what most of my international buyers shortlist.
- Purpose. A second home or a retirement home is chosen for views and walkability. A family’s main home is often chosen for space and price.
So when someone tells you “foreigners overpay by 23% in the Algarve”, the honest reply is: compared with what? A British couple buying a renovated two-bedroom near the Lagos marina is not paying 23% more than a Portuguese couple buying the same flat. They are paying the going rate for a different, more expensive kind of home.
Where foreign buyers genuinely do pay more
There are real extra costs, and they are worth more of your attention than the INE headline.
The flat 7.5% IMT. Since Decreto-Lei 97/2026 took effect in May, anyone buying a home who is not a Portuguese tax resident pays a flat 7.5% transfer tax, with no progressive scale. The test is tax residence, not nationality, so a Dutch or Irish buyer is treated the same as an American. I covered the detail in Portugal’s 7.5% IMT: there is no 1 September deadline.
| What changes | Buyer tax resident in Portugal | Buyer tax resident abroad |
|---|---|---|
| IMT on a €500,000 second home | €27,300 (progressive scale) | €37,500 (flat 7.5%) |
| IMT on a €750,000 second home | €45,000 | €56,250 |
| Stamp duty (Imposto do Selo) | 0.8% | 0.8% |
| Annual IMI | Same municipal rate | Same municipal rate |
| Can the extra IMT be recovered? | Not applicable | Yes, on application, if you become Portuguese tax resident within two years of the deed |
On a €500k or €750k purchase the 7.5% adds roughly €10,000 to €11,000. You can run your own numbers in the SunnySteve closing cost calculator. If you are planning to move here on a D7 or D8, map the two-year residency window at offer stage, because it can turn that extra into a refund.
Paying asking price. This is where buyers from abroad actually lose money. In September idealista put average asking prices in the Faro district at €4,216/m² and in Lagos at €4,729/m². INE’s transaction median for the whole Algarve was €3,500/m². Asking and achieved prices are different numbers, and a buyer flying in for a week, short on time and comparables, is the one most likely to treat the asking price as the price.
How to make sure you are not the one overpaying
Take an example. A British couple with a €650k budget find a renovated townhouse in Lagos old town listed at €690k. Here is what I would tell them to do before making an offer:
- Compare sold prices, not listings. Ask your agent for recent sales of similar homes on the same streets. Portal listings tell you what sellers hope for.
- Price it per square metre against its own kind. A townhouse in the old town should be compared with other old-town townhouses, not with the Algarve median. See what a specific home is worth today with the SunnySteve property valuation.
- Budget the IMT correctly. At €650k as a non-resident, IMT alone is €48,750 before stamp duty, notary and legal fees.
- Watch the currency. On the ECB’s 23 October reference rate, £500,000 bought about €597,200, roughly €4,600 more than a week earlier. With the ECB deciding on rates on 29 October, it is worth speaking to your currency broker now.
- Use someone who works for you. In Portugal the listing agent is paid by the seller. A buyer’s agent, or at least an independent valuation, closes the information gap that the 23% partly reflects.
One more thing from the same INE release: nationally, prices were still up 18.4% year on year in Q2, while the number of sales fell 9.0%. Fewer sales at higher prices usually means well-priced homes still sell and overpriced ones sit. That is your negotiating room, whatever passport you hold.
Frequently Asked Questions
Do non-residents pay higher property taxes in Portugal?
Yes, on the purchase. Since May 2026, anyone buying a home in Portugal who is not a Portuguese tax resident pays a flat 7.5% IMT instead of the progressive scale. Stamp duty at 0.8% and the annual IMI rate are the same for residents and non-residents.
Can I get the 7.5% IMT back if I move to Portugal?
Yes, if you become a Portuguese tax resident within two years of the deed. You apply to the tax authority, which can cancel the difference between the 7.5% and what the normal rates would have produced. Plan the timeline with your accountant before you sign, because two years passes quickly during an international move.
Are Algarve house prices still rising in 2026?
Yes, but at different speeds. Nationally, INE recorded transaction prices up 18.4% year on year in Q2 2026, while sales fell 9.0%. In Lagos, idealista’s asking prices were up 5.3% over the twelve months to September 2026, at around €4,729/m², so the Western Algarve is rising more slowly than the national headline.
Is the Algarve more expensive than Lisbon?
No. The Algarve was the second most expensive sub-region in Portugal in Q2 2026, at a median of €3,500/m², behind Greater Lisbon. Buyers from abroad also pay a smaller premium in the Algarve, about 23% against 47.0% in Greater Lisbon.
Buying in Lagos or the Western Algarve and want to know whether a price is fair? Tell me what you are looking for and I will show you what similar homes actually sold for.
