Where next to invest? We profile the world’s top property hotspots, detailing everything an investor needs to know.
7.6% in Q4 2016 (Portugal, INE)
3.8%. (Global Property Guide)
1 in 3 Portuguese enquiries (Q1 2017, TheMoveChannel.com)
Where is it?
The Algarve is on the south coast of Portugal. The region is known around the world for its golden beaches. Indeed, the area is the most popular in Portugal for tourists, drawing millions of visitors every year to lounge on its stunning coastlines, soak up its history and relax in its bars. That means that the area is also one of the most sought-after for property buyers, both for holiday homes and buy-to-let investments.
Who lives there?
Around 400,000 people live in the Algarve all year round, but that population surges during the peak holiday season, with hundreds of thousands of seasonal residents flocking to enjoy their vacation properties. Northern Europeans, in particular, are high in number, thanks to the Algarve’s more welcoming Mediterranean climate, with British expats and second home owners also a notable presence. Foreign workers from around the world are drawn to the area too, thanks to the strong agricultural, fishing and tourism industries.
Between its beaches, beautiful holiday homes and booming tourism sector, the reasons to invest in the Algarve’s property market need no introduction. At the start of 2017, though, they have rarely been so compelling.
The country’s economy has fully recovered from the global financial crisis, exiting its recession in 2014 largely without the need for austerity measures and growing for 13 quarters in a row. In 2016, it grew 1.4 per cent, with its budget deficit dropping to a record low of 2.1 per cent of GDP. Wages have also risen, with the unemployment rate falling to approximately 10 per cent, after hitting a peak of 18 per cent in 2013.
Tourism is at a record high, with the number of foreign visitors to the country as a whole jumping by double digits to exceed 10 million for the first time.
The result is a more appealing market than ever in which to invest, with confidence among agents at its best level since 2010, according to the latest RICS/Ci market report. A lack of landlord instructions continues to underpin rental growth, which means that returns are improving for buy-to-let investors. Capital growth is also strong: according to official statistics, house prices in Portugal rose 7.6 per cent in 2016, up from 5 per cent in 2015. Agents expect price increases in the coming 12 months to be led by the Algarve.
Price growth is being fuelled by a limited supply of homes in the face of sizeable demand from buyers. Sales of real estate in Q4 2016 jumped 8.9 per cent quarter-on-quarter and 15 per cent year-on-year. On TheMoveChannel.com, Portugal was the fourth most popular country in 2016, holding on to that position in Q1 2017. The Algarve is the beating heart of that activity, accounting for one in three of all enquiries for Portuguese property.
Portugal’s Golden Visa scheme (offering residency in exchange for an investment of €500,000) has been a major factor in the country’s real estate recovery, bringing in wealthy investors from outside of the EU, particular from China. While investors in the Golden Visa scheme prefer Lisbon over the Algarve, though, it has nonetheless seen a rise in the number of non-EU investors in recent years. On TheMoveChannel.com, Portugal accounted for 10 out of the Top 50 most searched-for hotspots in Q1 2017, with the Algarve accounting for two of the Top 10 (Alvor and Albufeira).
Aside from buy-to-let income and capital growth, Portugal also offers investors a highly favourable tax environment, with a special rate for non-habitual residents. The regime is available for individuals who reside in Portugal for more than 183 days a year, offering them a reduced 20 per cent tax rate on local salaries and business income and exempting them from tax on foreign income. Furthermore, wealthy investors are then available to pass on their wealth or their real estate assets without inheritance or gift taxes. On top of all that, the Algarve’s beaches are a bonus.
British buyers remain major players in the Algarve, thanks to the region’s holiday homes, while Northern European house-hunters also looking for warmer weather are a significant presence. The country’s Golden Visa scheme, though, has widened Portugal’s appeal to an increasingly diverse global array of investors, including those from China, Russia, Brazil, Lebanon and, particularly in the last 12 months, South Africa.
“The Algarve’s appeal needs no explanation, but the timing for property investors has rarely been better.”
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