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Steady property growth in Algarve

By Stephen Anderson

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.

This month has finally seen Portugal succumb to the requests for a European bailout.

Much has been reported on the actual need of this bailout, not just in Portugal but throughout the world. Many believe that it is not necessary at all; in fact, a recent article in the New York Times outlined many reasons why the idea that it was needed were flawed and we were forced into making this request without actually expending all other options.

However, when all is said and done, the request has been made and the IMF has been in the country to analyse and prepare an austerity plan for Portugal.

This will of course be a more expensive austerity programme than that proposed by José Sócrates recently, which the opposition party rejected and forced the prime minister into resigning and requesting EU help.

The good news for any potential buyer OR seller of property is that this has little effect on the tourism market.

In fact, the banks were also instrumental in pushing this through as a bailout will relieve some of the pressure on the rising costs of borrowing.

Until the actual bailout money is confirmed and paid, there will be a little uncertainty in the non-resident mortgage market. However, towards the end of summer, it should become easier for non-residents to know where they stand.

The fact is that tourism is certainly unaffected, with Easter seeing the Algarve packed full, even if the weather was a bit hit and miss!

For anyone wondering what will happen to the property market, well, it’s quite simple really – very little.

The country has been a part of the worldwide recession for the last two years or so, and there is no chance of any dramatic drop in property prices now.

The Algarve has seen a steady property growth without ever experiencing a “boom” situation, which has affected many other countries.

There is no drop in tourism, if anything it seems this is increasing since last year. So far, owners’ rental income is remaining constant and for owners on variable mortgages, the repayments have come down in many cases, so there is little reason for prices to drop drastically.

We have seen one or two developers struggling financially, which have resulted in a reduction of property prices, but this has been the case since 2009 – nothing much has changed to this point.

Over the last month or so, there has been an increase in clients looking for a long-term holiday home, or retirement property, and funding the purchase in cash.

Since 2009, this figure has trebled and a new trend is evident. Rather than selling up at home and using the money to buy in the Algarve, many clients are opting to rent at home instead with the view to moving here permanently. This is actually a great idea, as while the property here is only a holiday home, the rental income can be quite substantial, and certainly more than enough to cover all the running costs of the property. Buying now gets you much more for your money so when retirement comes around, your property is here paid for and there is no need to sell before you can move.

The rest of 2011 will see some changes for those of us working here but for those who are just looking for a holiday home, in the nicest place in Europe, then there is relatively little to worry about.

The place will still be overrun with tourists and the sun will still be shining.

Stephen Anderson is the Managing Director of Infinito Real Lda and has a broad knowledge of the real estate industry in Portugal. He can be contacted on telephone/fax + 351 289 313 325.