Algarve records price growth for first time since 2008
Widening pool of buyers searching for property on Algarve, including the Chinese
8 June 2016, Malaysia – The Algarve, Portugal’s southernmost region, is back on the radar of second home buyers. Realistic pricing, the availability of cheap finance, strong investment in infrastructure and tax initiatives have led to renewed confidence. Prime prices increased by 6.9% from December 2014 to December 2015* and sales volumes climbed by 32% in 2015 compared to 2014 according to Knight Frank’s west Algarve office.
The Algarve is a second home destination and a luxury purchase. Buyers are drawn to the Algarve for the long rental season it offers. People, who want their holiday home to make money when they are not using it, can reasonably expect to rent out their properties from Easter to late October. The Algarve’s 37 championship golf courses are responsible for over 50,000 rounds of golf a year and their season extends beyond that of the traditional summer rental period, running from February to May and again from September to November.
Alex Koch de Gooreynd, Partner and Head of Knight Frank’s Portugal Network, says, “In 2013 we saw vendors start to adjust their prices, keen to progress sales which led to an upturn in transactions and by 2015, the Algarve recorded its first annual increase in prime prices since 2008. Buyers are investing in the Algarve again. They are buying, extending and improving. Increased liquidity is now returning with good quality stock offered at sensible prices selling quickly.”
Foreign buyers along the Algarve
UK, Irish and German buyers are still evident along the Algarve but French, Scandinavian, and non-European, including South Africans and Chinese, are increasing in number. The surge in French interest has been notable in the last 2-3 years with many citing Portugal’s Non-Habitual Tax Residency** regime as a key incentive.
Another initiative, Portugal’s Golden Visa – by far the most successful of the European schemes in existence – has seen inward investment focus on the Lisbon area rather than on the Algarve. To date Chinese buyers account for 79% of the 2,853 visas granted since 2012.
Driving factors for price recovery
What set the Algarve apart during the downturn was the continual investment in infrastructure. The upgrade of the coastal A22 motorway (stretching to Lagos and opening up the western Algarve), the improvement to the E1 (to Lisbon and Porto) and the €32m expansion of Faro Airport have helped boost economic confidence. Further development is planned at Vilamoura and Quinta do Lago.
Faro Airport is now served by over 47 airlines with a notable increase in flights from secondary cities in northern Europe. Total passenger numbers arriving at Faro Airport increased by 35% in the decade prior to 2015 and journey times from the airport to the western resorts of Lagos and Luz have been cut to c.55 minutes.
Prices vary widely across the coast. A good-quality three/four-bed villa with a pool on Quinta do Lago will cost around €2.5m, whereas in the Western Algarve – including Lagos and Luz – €500,000-€1m will stretch to something similar with a sea view. Whilst unsurprisingly, the €500,000-€1m bracket is the most active due to numerous buyers drawn to the Non-Habitual Residency regime.
* INE data – Portugal Statistics Office (tracks upper quartile prices across Algarve as a whole. From Dec 14 to Dec 15).
** Introduced in 2009, the Non-Habitual Tax Residency regime exempts non-residents spending 183 days in year in Portugal (or those with a primary residency in the country) from income tax on non-Portuguese incomes, including pensions, salaries and capital gains for a period of 10 years (if subject to tax in the country of source).
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Notes to Editors
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