By Stephen Anderson [email protected]
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.
Since the start of 2010, the property market has been in a state of limbo, with no one knowing exactly when it will start to pick up again.
Many people are still interested, but not willing to commit to purchasing until there is some resemblance of normality in the world’s financial market.
With the market in Portugal, and the Algarve especially, consisting of a high volume of UK and Irish buyers, who have been bombarded by constant negative media day and night, the number of active buyers has been, unsurprisingly, substantially lower than pre-crisis 2008.
However, the good news for anyone who made the decision to buy during the last 12 months is they will almost certainly have bought at the bottom end of the market, and they will have had the choice of some of the lowest mortgage rates since the start of the decade. With rates at around 1.5%, these rates were a key factor for those making the decision to buy this year.
For many, the lure of large discounts coupled with attractive mortgage rates was enough to convince would-be buyers that the time really is good for them. It’s been said many times before that we’re in a “buyer’s market”.
However, that has never more so been true than the last 24 months. We have seen drastic price cuts by some sellers desperate to unburden themselves from their mortgage commitments and willing to accept losses, and it is here that the market has mostly been active.
Finding the right property for prospective purchasers used to be about location, views, the surroundings and the “wow factor” and although this is still a large part of the decision-making process, a lot has changed in relation to the levels of finance available to buyers.
In particular, the opportunity to buy properties with minimum amounts of their own capital, which in turn alleviates the risk of investing large sums of cash at a time of uncertainty.
It’s here that the market has been able to present options to buyers that are truly one-offs. This popular concept has clearly been used by many developers to attract buyers.
However, the banks which had previously been quite frivolous with their lending are now much sharper when it comes to releasing mortgages without some substantial investment from buyers.
Towards the end of 2010 these types of deals were becoming harder and harder to find with the loan to value’s available being reduced by most banks from 80% down to 70% and the rates for larger loans increased by up to 1.5% to try and “persuade” buyers to opt for smaller loans at more attractive rates.
One of the positives that has come out of this year is that there are still a huge number of people looking at the Algarve as a safe and sound investment for a second home.
The number of enquiries from would-be buyers has in fact not changed at all, just the time frame for buying.
Most are now waiting to be reassured that the world isn’t going to collapse into a financial meltdown before they purchase a new property in Portugal, and this should be positive news for anyone in the Algarve.
2011 will most likely not see a resurgence of years gone by, but it does look better than the start of 2010.
There’s more stability in the market place now and people are starting to realise that. There should certainly be an increase in overseas investors looking at the Algarve for 2011, with even this year proving that, in these hard times, tourism was still be a huge income provider for the region, and prices have not plummeted like some other European countries.
Stephen Anderson can be contacted on telephone/fax + 351 289 313 325. For more information about Infinito Real, please visit www.infinitoreal.com