By Stephen Anderson firstname.lastname@example.org
Stephen Anderson is the Managing Director of Infinito Real Lda and has a broad knowledge of the real estate industry in Portugal. Having held senior positions in a number of companies around the world, he now lives in Portugal with his family.
In keeping with the recent trends this year, an awful lot of potential buyers are being restricted by the ever increasing lending criteria imposed by the banks.
A number of the Portuguese banks have more or less stopped all non-resident mortgages completely, with the majority of others imposing highly restrictive limits on their amount of exposure in the lending market.
However, this should be a short term problem. With the bailout now approved and the funds being prepared to be released, this should free up a lot of “lending” funds for the banks, who have been effectively crippled by the high cost of the government bonds they were forced to buy during the last 24 months.
After June, we would hope there will be an opening up to lend more freely. There can be no complaints regarding the tightening up of lending banks, after the last few years saw the banks lose millions of Euros in unpaid mortgages, however there is also the danger of tightening up too hard as well.
Of course the effect this has had on potential buyers, and sellers, is quite clear. If you have access to the funds for your purchase outside of Portugal, you will be able to buy your property and complete very quickly. As we approach the summer, people want to take advantage of the high rentals and the good weather for themselves.
There have been a lot of buyers seeking finance from the UK or Ireland, and using that to buy with “cash” in the Algarve, with the view of refinancing the Portuguese property at a later date, when the lending criteria is not so harsh.
Although there has not really been any decrease in the enquiries into purchasing a property in the Algarve, there is most certainly a fall in the number that are able to qualify for a mortgage here, and it is for this reason that the sales have not picked up this year.
While the number of properties offering large discounts are dwindling, a lot of buyers who have been holding off, waiting and waiting for lower prices, are starting to realise that these types of bargains will not last forever.
Comparisons to our neighbour’s property market in Spain are now, and always were, just wishful thinking, I’m afraid.
Offering 50% below the original prices is just not an option, and for either party of the transaction this is in fact a good sign. It takes a long time for a market to recover from such drastic price drops.
The Algarve does and always will command strong prices, strong rentals and strong investment potential.
You are unlikely to double your money overnight, which some people managed in years gone by in certain countries.
However, in the main, for every person that made a killing, there were 10 others that suffered at the opposite end of the spectrum and ended up losing their savings.
The summer months in the Algarve will prove pivotal in kick-starting the property market again, with high hopes that the bailout money will be put to good use to help the country turn around the position it finds itself in now.
Our advice for anyone looking to buy somewhere in the Algarve is: find out how much of a mortgage you can qualify for, and whatever you do, don’t commit to something without knowing for sure that you will get a mortgage.
It is not uncommon to sign a promissory contract here with a 10% deposit prior to arranging a mortgage. If you are declined the mortgage, it is highly unlikely you will see this again. Better safe than sorry – most sellers are agreeable to this as they understand the problems with the banks.
Stephen Anderson can be contacted on telephone/fax + 351 289 313 325.