Rental Profits Drop Across Portugal
According to Idealista.pt, in the final quarter of 2024, the average gross profit for buying and renting out a home in Portugal fell to 6.9%, a slight decrease from 7.3% in the same period of 2023. Despite the decline, this figure remains higher than the 5.5% recorded at the end of 2021, according to data from the property website Idealista.
Lisbon, Funchal, and Viana Do Castelo Rank Lowest
Among district capitals, Lisbon, Funchal, and Viana do Castelo rank as the least rewarding cities for property investors. Homes rented out in Lisbon provide a return of just 4.6%, while properties in Funchal and Viana do Castelo offer slightly better rates at 5.2%.
Profitability in Funchal at 5,2%
Implications for Real Estate Investment in Madeira
For real estate investors, Funchal’s low rental returns may discourage inclusion in their portfolios, particularly those focused on maximizing profits. While Madeira remains an attractive destination due to its climate, natural beauty, and tourism appeal, the limited financial upside from residential rentals could steer investors toward other locations or property types. The trend might also signal that demand is outpaced by high purchase prices, leaving a narrower margin for profitable returns in the region.
Castelo Branco Leads as Most Profitable
In contrast, Castelo Branco stands out as the most profitable city, with a return rate of 9.4% on rental properties. Other cities with above-average returns include Santarém (7.5%) and Coimbra (6.5%). Larger cities such as Porto (5.7%) and Faro (5.4%) hover near the national average.
Office Spaces and Commercial Properties Offer Better Returns
The study also revealed that commercial properties tend to bring higher returns than residential rentals. Office spaces lead with a 9% return, followed by retail spaces at 8.4%. Garages, often overlooked by investors, offer returns comparable to Funchal's residential rate at 5.2%.
Source: JM-Madeira
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