The property market in the Algarve is booming and is likely to remain on an upward path as travel restrictions ease and prices catch up with other prime European real estate markets.
Back in February 2020, as the scale of COVID-19 became apparent, prospects for housing markets around the world appeared dire. Eighteen months or so later and the pessimists have been confounded. Residential markets are booming, with the Algarve among the most buoyant.
Indeed, Alison Hojbjerg, who has been selling high-end properties in the Algarve for 24 years, says she has “never seen anything like it”, describing the market as “exceptionally hot”.
Alison, and her sister Kerstin, runs QP Savills, which specialises in million-euro-plus properties and has four offices in Quinta do Lago, Vale do Lobo, Loulé and at the W Residences Algarve in Galé, where it is an exclusive agent. QP Savills is seeing strong demand “across the board” from villas, building plots and renovation schemes to apartments.
Robert Edwards, Director and Partner at Cerro Novo, one of the longest-established estate agencies in the Algarve, agrees that the market has been “exceptionally strong” with many buyers chasing fewer and fewer properties.
Paulo and Joana Martins, owners/associates at ProjSul, an architecture and engineering firm based in Lagoa, cite a lack of skilled labour and the soaring cost of building materials for the dearth of supply.
“Many construction workers left the country after the severe economic crisis that began in 2011 and, with a building boom underway from 2017 onwards, it is taking time to train new workers. Meanwhile, factories supplying building materials closed last year in the wake of the pandemic, and they are struggling to catch up with resurgent demand.”
Buyers moving away from the coast
Paulo and Joana Martins have also noticed a significant shift in where people are looking to buy: “Increasing restrictions on development as the government seeks to protect the coastal landscape are restricting the supply of properties near the beach. However, more and more people are also looking inland because they can find properties which offer greater space, privacy, and peace and quiet than those near the coast.”
Indeed, Kenneth Laidlaw, Senior Real Estate Advisor at Engel & Völkers in Portimão, says space is becoming the new luxury on top of quality and exclusivity. He explains that the lockdown experience of many clients has led to an “unprecedented” increase in demand for properties closer to nature, i.e., rural villas or quintas in the countryside or the hills, thus reversing the previous trend towards urban centres. He adds that “large plots are preferred by those who are seeking to live an alternative lifestyle”.
Christina Hippisley from the Portuguese Chamber of Commerce in the UK, which runs the ‘Moving to Portugal’ events, has also noticed that buyers are looking further inland. She explains: “Several guests at our Moving to Portugal webinar asked about the inland regions of the Algarve – we notice buyers are becoming more and more savvy about their visa options and good investment returns, so they often look first at the Algarve due to its established record for price rises and good rental yields. There is constant demand, especially for second homes suitable for family life year-round, post pandemic.”
Where are the buyers coming from?
According to Alison Hojbjerg, “everybody is buying, from the Brits and the Irish to the French. I haven’t seen many German clients over the past 20 years, but a lot of wealthy Germans are now looking to invest outside their homeland, possibly because of fears that the federal elections in September could result in a left-leaning government that hikes taxes.”
Meanwhile, Zoie Hawker, Managing Partner at Fine & Country Algarve, which has offices in Carvoeiro, Almancil and Tavira, says the agency registered a 90%-plus increase in enquiries in May compared to the same month in 2020, adding that the UK is still their biggest market, accounting for around 30% of sales, followed by Germany, France and the Portuguese.
Robert Edwards says Cerro Novo has seen a large increase in Portuguese buyers from Lisbon and the north of the country, mainly investing in villas. In addition, the agency has sold property to buyers from the UK, Ireland, France, Netherlands, Belgium, Switzerland, Germany, Sweden, North America, South Africa, Brazil and India.
Sold sight unseen
Virtual sales have taken off during the pandemic. Zoie Hawker sums up the remarkable change that has taken place over the past 18 months or so: “If you had asked us a year ago if we thought we could sell a villa to someone who had never physically seen it, and often not even been to the Algarve, we would have said no. This year we have made numerous virtual sales of villas, some of them priced around and over €1 million. This has been driven mostly by the Golden Visa deadline.”
It is a similar story at QP Savills, according to Alison: “Out of 19 properties that we sold during lockdown, 11 were viewed virtually, and pretty much unseen physically.”
Meanwhile, Wilfrid Hoos, Managing Partner at Engel & Völkers in Portimão, says: “We started with virtual visits, performing live video tours through properties for the clients and were one of the first agencies to acquire professional equipment for 3D-presentations whereby you can visit all aspects of the property from the comfort of your home and at your own pace. We have been able to sell properties on this basis and believe that even when Covid eventually subsides, these techniques will represent the new standard in our industry.”
What’s driving demand?
Apart from specific factors, as in Germany, Alison cites a number of factors that are driving this robust demand: “The pandemic has caused many people to re-evaluate their lives. They think, ‘Why work from a cramped city apartment if you can work in a luxury home in the Algarve?’ Others have come to the conclusion that the trend to remote working means they could even look abroad, including in the Algarve. So, they are buying villas here with fast internet and home offices.”
In addition, Alison says that financing a property purchase is very attractive right now due to low interest rates, while leaving money on deposit in a bank has little appeal.
Kenneth Laidlaw adds that, following the pandemic, many clients are looking for larger properties than would previously have been the case. He explains that “working from home has now really become very much a way of life, allowing you to work in a safe environment without having to commute on a daily basis and allowing you more quality time with your loved ones. For coastal properties with sea view and/or proximity to the beach, we are observing an increased demand and an above-average price growth (appreciation) due to the scarcity of supply. This is particularly true for houses and apartments with generous outdoor space, e.g., large gardens or terraces. Indoors, the demand is also for larger open-plan areas with new layouts, office space or an extra bedroom that can be used as home office.”
Clear skies ahead
Prices increased by around 5% to 6% in the Algarve last year and have risen by a similar amount in the first six months of this year alone, according to Zoie. Although Alison is unable to give a figure on how much prices are rising by, she does say that “we are achieving very good prices for vendors”.
Alison can’t see demand slackening any time soon: “Cheap money is here to stay and we might even get a repeat of the ‘roaring twenties’ with people taking more risks.”
Alison, who, along with her sister Kerstin, lived in the Algarve as a child and has lived all round the world, couldn’t imagine living anywhere else and says many buyers have come to the same conclusion.
“Our clients look everywhere. They start searching in the Algarve and then take a look at the south of France, and other places such as Majorca, but return to buy here because prices are still relatively attractive and offer the greatest potential for further gains. Add in factors such as the high quality of life here with low crime, world-class healthcare, fantastic cuisine, good education, the still-unspoiled nature of the region and fantastic transport links and you can see why people decide this is the place to be.”
The perception of Portugal as safe is certainly a draw, says Zoie: “We are seeing an increase both in younger families with or without kids relocating so that they can work remotely from here and also more and more retirees.”
She adds that the non-habitual residency tax regime is a major draw. Looming changes to the Golden Visa, which grants Portuguese residency and eventually citizenship to those who purchase property over €500,000, are also encouraging people to bring forward their plans to buy, especially Brits.
From January 2022, Golden Visa investors will be blocked from buying properties in high-density areas like Lisbon, Porto, and the Algarve – they can still buy in inland areas of the Algarve. However, Zoie points out that there is a lot of confusion about residency and those who “want to live here full time and become Portuguese tax residents can take out the D7 visa instead, without the high costs of the Golden Visa”. The D7 Visa allows foreign citizens to obtain a residence permit, provided that they can prove they have sufficient income.
With cheap money here to stay, possibly for many years to come, increasing demand and a lack of supply pressuring prices upwards, now might just be the best opportunity you will get to buy that dream home in the Algarve.
By Anthony Beachey
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Anthony Beachey is a former BBC World Service journalist now working on a freelance basis in Portugal, where he specialises in economics and finance.