After the release of their latest survey The Algarve Property Market Report 2015, Andrew Coutts, managing director of the ILM Real Estate Group, says there is “a real dynamic in the market, a feel-good factor”. He spoke to the Resident about the launch of new resorts and investment opportunities in Algarve.
Algarve Resident: In The Algarve Property Market Report 2015, 90% of respondents said that market confidence in the first half of 2015 was higher than in the same period of 2014. Do we have reasons to be optimistic about the Algarve property market?
Andrew Coutts: We can’t forget history. People are scarred by history, and we have had five or six years of hideous history in the market. People are looking for good news and are tired of the negative environment. I think that this confidence was given by enquiries, leads, by the market itself. We can say there is already a return and there appears to be a real dynamic in the market, a feel-good factor.
We are involved with two developments, and in the last three weeks they had more than 20 sales. It hadn’t happened since pre-crash. The transactions are factual.
A.R.: The report suggests there is a shortage of quality properties in the Algarve’s Golden Triangle. Which areas do you believe will be the next to be developed?
A.C.: That is going to change with the launch of resorts such as The Keys (a gated resort community comprising 48 villas and 24 ‘island’ residences overlooking the Quinta do Lago golf course), which will be completed in the last quarter of the year. Also, we have the Conrad Residences, which we don’t know when they will be ready, but with these alone we have 120 units coming into the market.
These are the laws of supply and demand. If there is more demand, developers will come into the market. The challenge is, there is not a lot of equity capital to come to a developing situation. But there is nothing better than frustrated demand to please developers. Each area of the Algarve is very different; they provide different experiences and have different price points. When a market comes out of recession, history has shown that prime parts of the market come back first, hence the demand in Quinta do Lago.
A.R.: In which ways has the Algarve buyer profile changed? Are buyers more demanding?
A.C.: The NHR (Non-Habitual Residents) tax regime means there are different people buying in Portugal. They are very demanding consumers, who have been through austerity and want to spend their money wisely. Also, because sales are happening, sellers feel more confident in not accepting discounts. The Algarve market has always been a UK market, but there are now more Swiss and French buyers, as well as Chinese.
A.R.: In your opinion, which programme has benefitted the Algarve the most? The Golden Visa or the NHR tax regime?
A.C.: Without a doubt, the NHR. But they have impacted different parts of the market. The NHR attracted more French and Swedish buyers, but the bulk of the demand is for properties that cost €300,000 or less. That profile of stock is not the same that sits with the Golden Visa Programme market. These clients are not users of the properties; they want to make a good, solid investment to acquire the visa. The easier it is to buy, the better. That is why established resorts, such as Pine Cliffs (Albufeira) and Martinhal (Sagres), have made packages successful. Even these developments are running out of stock. It was working really well, but there are some challenges to the programme, such as longer processing times which will make it less competitive in the future.
A.R.: The report mentions the Algarve’s discreteness and authenticity. Does this help the property market?
A.C.: The Algarve is not a mass tourism destination. It’s all about scale: the Algarve is about 10% of the size of the Costa del Sol. The region has a boutique scale, which brings the opportunity for a higher market positioning. Relatively speaking, the environment has been preserved, particularly in the Eastern Algarve, and that is quite rare in the European development environment.
A.R.: The report mentions some new resorts, including The Keys and Ocean View. Is this a turning point for the Algarve?
A.C.: A number of turning points have happened for the Golden Triangle and Quinta do Lago over the last three years. There has been a phenomenal investment with the Conrad Hotel and now with The Keys. Quinta do Lago is beginning to take advantage of the return of the market. This was one of the places in Europe in the 1980s and 90s. And it’s happening again. This is very positive because it attracts a different profile of tourists, who will see it, experience it for themselves, and then buy property.
A.R.: Has the Vale do Lobo scandal affected the image of the Algarve property market?
A.C.: The question is, to what extent has the situation become common knowledge in key source markets. I would like to think that large newspapers such as The Guardian are not focusing on that story. But it’s not positive either, and the sooner it is resolved the better.
A.R.: Do you believe that this positive market trend is set to continue?
A.C.: We have to think about how sustainable this momentum is. The UK has been a primary market for the Algarve for decades. There are new markets now and what you have to do is take your hat off to the Portuguese government for creating these programmes. They are serving their purpose and attracting investment. There is no reason to think this will cease. Also, we have to consider the power of word of mouth, because when clients go back home for six months they create a new dynamic just by talking about the country, what they ate, what they saw… I believe the same thing has happened in China. If we have 5,000 Swedish and French buyers, they will be talking about Portugal to at least 5,000 people when they go back home – it’s the power of word of mouth. That is very positive and will keep this dynamic going.
The ILM Group specialises in providing strategic advisory, development and asset management services for the international hospitality, leisure, tourism and heritage sectors.
By ANA TAVARES [email protected]