Is Spain or Portugal better for retirement?
Spain may have overpowered Portugal to knock them out of this year’s FIFA World Cup, but which of the Iberian neighbours is the best place to retire to?
These countries share so much in geography yet are so different. Great coastlines at the western fringe of Europe, fabulous Mediterranean lifestyles and a lower cost of living than the UK are the most obvious commonalities. Language, population, politics and culture are clear differences.
But both offer superb lifestyles, great golf courses and good healthcare, so have been loved by British retirees for the past 50 years. It’s worth taking a closer look at how they weigh up: which one might suit you best?
Is Spain or Portugal better for lifestyle and getting around?
Spain has nearly five times the population of Portugal and is about 5.5 times larger. For pure diversity, it’s an outright winner, whether you want mountains, islands, cities or a variety of coastal resorts.
In Portugal’s defence, its size makes it more manageable – you can drive from the Algarve to Lisbon in 2.5 hours. Spain offers a highly developed high-speed train network that makes getting about easier – and you’ll find a greater choice of flights into Spain from the UK.
Which offers a better quality of life: Spain or Portugal?
A recent buyer in the Algarve reports that he found Spanish tourist locations too ‘crowded’. The fact that Portugal is less of a visitor magnet works in its favour for some retirees.
The Algarve has not seen the anti-tourism protests of the Spanish coastal cities or islands – and the ‘warm welcome of the Portuguese’ is a frequent comment.
Portugal always rates more highly than Spain in ‘quality of life’ indexes for safety and security.
Yet what does liveability mean for you? If you want high levels of infrastructure, padel courts and shopping malls, then numerous Spanish Costas (or its islands) may float your boat.
In terms of the appeal of island life, we must not forget that, like the Canaries, Madeira offers winter sun and a slightly different Portuguese feel.
Culture vultures might find the Algarve too tame, or too limited, yet they can hop on a train to Lisbon. Others find that it is still too seasonal for full-time living, but that has been changing as remote workers and families discover the benefits of life around the central Algarve’s ‘golden triangle’.
Is Spain or Portugal cheaper to live in?
Averages are of limited use, but overall, Portugal is viewed as more affordable than Spain, whether comparing capital cities or prime coastal areas.
On paper, Spain is 5.7% more expensive than Portugal, according to numbeo.com, while restaurant prices are 18.5% higher. But across both locations, you can buy lunch somewhere off the tourist track for €10-€15 per head.
The latest report by the Post Office puts the Algarve top for the best-value European beach destination, looking at local travel, restaurant and accommodation costs. Yet Spain does offer comprehensive discounts on travel and entertainment for OAPs.
Annual property taxes are way lower than in the UK in both locations, with IBI (Spain) or IMI (Portugal) generally between €300-€900 per year.
Is it easier to retire to Spain or Portugal?
Spain’s retirement visa (the NLV) requires a passive income of €2,400 a month, compared to Portugal’s D7, which is €920 per month. This divergence reflects the difference in average national wages.
In both cases, this passive income can be pensions, buy-to-let income or investment dividends, but Portugal’s D7 is more flexible in allowing this passive income to be supplemented with remote working earnings than Spain’s NLV.
Both visas require private healthcare unless you have an S1 Certificate, and both offer a good-quality national health system that is partly subsidised.
Is Spain or Portugal better for tax in retirement?
Neither country offers specific tax perks for retirees, unlike Cyprus, Italy, Greece, Malta etc.
Portugal has no wealth tax, inheritance tax or gift taxes between spouses, children and parents, but what you pay in Spain depends on the autonomous region where you are based, as they set their own taxes.
For inheritance tax, the best regions are Madrid, Andalusia and the Canary Islands, which offer near-total tax relief of 99% or more for close family members.
In terms of income tax rates, you may end up paying a slightly higher rate in both countries than in the UK – take advice from a tax adviser to help best structure your finances.
Is property cheaper in Spain or Portugal?
Portugal has historically restricted development of its coastlines to a greater extent than Spain, which means a smaller supply and higher prices. Well, that’s the broad overview if you compare the Algarve with the Costa Blanca, for example, but of course there are local differences.
Certainly, in the Algarve you do not find the big urbanisations that characterise the Spanish Costas, so no, you won’t find a big choice of townhouses for €150,000 as you might on Valencia’s Orihuela Costa or in Murcia – you will need to dig deeper into the interior to find more value.
If you only have €100k to buy a property on the coast – and often €200k – you probably won’t be looking in Portugal. Not worried about the beach? Then look north to areas such as Coimbra, Castelo Branco or Tomar, or a little inland on the Algarve to villages away from the tourist resorts.
Purchase costs? Allow up to 10% in Portugal, and 10-14% in Spain, depending on which region.
Spain or Portugal: which is right for you?
Both Spain and Portugal offer plenty for British retirees, from sunshine and a lower cost of living to established expat communities and good healthcare. The right choice will ultimately depend on your budget, the lifestyle you want and where you can picture yourself spending your retirement.
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