Currencies are volatile, so investing in overseas property requires damage limitation. Consultants are tipping European capitals for long-term returns that will survive the market's ups and downs.

Porto, the second-largest Portuguese city, is on the River Douro, in the north of the country where port is produced. Recently Unesco recognised the city's historic centre, the Ribeira, as a World Heritage Site. Porto was the 2001 European Capital of Culture. Last summer the Government introduced a scheme to encourage tourists to visit Portugal during the low season (October-May) for a city break; Porto is set to gain improved infrastructure, transport, hotels and air access. There are at least 25 golf courses in the area.

House prices in Portugal have not increased as rapidly as they have elsewhere in Europe. Figures from the Global Property Guide suggested that house price inflation was only 17 per cent between 1995 and 2006. In the same period prices in Spain increased by 100 per cent.

In 2006 house prices in the Norte region, which includes Porto, dropped by 0.28 per cent. Property is cheaper there than in Lisbon. José Maria Magalhães, a consultant at CB Richard Ellis, says: “Prices are at least 25 per cent less than Lisbon, sometimes going as low as half the price.”

Prime locations, near the sea or river, will command prices as high as £3,000 per sq m. However, you can pick up property for as little as £1,500 per sq m in the city centre. “Many of the old buildings in the centre are now being refurbished as part of the urban rehabilitation,” Magalhães explains. He still believes that there is money to be made on property here. “This is a growing market because the old town is still quite cheap, particularly compared to Lisbon.” He believes that the increase in year-round flights to Porto from low-cost airlines will bring more tourists.

Some older houses are at risk of collapsing and conservation and restoration of such buildings has become a priority only recently. Do your research thoroughly. Buyers in Portugal must have a tax card, a fiscal number and a Portuguese address when they apply to purchase a home. When buying in the city centre be aware that some properties may be owned by more than one person.

Property in Porto

www.sunshineestates.net ; www.propertyworld.com ; www.pureportugal.co.uk ; www.hotproperty.co.uk

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers