Is Portugal’s property coming out of the doldrums?

Photo credit: Melenama

On a small scale, the figures reported by Global Property Guide suggest the market has taken positive steps this year, with property prices in Portugal climbing 0.2 per cent in the second quarter of 2013 compared to the first quarter.

At the same time, Portugal’s economy grew 1.1 per cent between April and June, driven by a 6.3 per cent rise in exports and an improving tourist industry. Indeed, 10 per cent more people from the UK visited the country’s popular Algarve region in the first half of the year compared to 2012, according to the Algarve Hotels and Tourism Entrepreneurs.

That strong tourist sector has supported the holiday market, which remains a popular target for investors. Much like holiday home bargain hunters, lower house prices can make Portugal’s property more attractive to those in search of strong yields. Indeed, as of May 2013, the 34-country OECD (Organisation for Economic Co-operation and Development) has listed Portugal as one of the most favourable countries in the world to buy and own real estate.

The low costs have boosted the country’s price-to-rent ratio (a measure of the profitability of owning a house) and the price-to-income ratio (a measure of affordability), making it one of the most attractive destinations in continental Europe, according to the OECD.

Compared to the past, explains property search company Meravista, housing is 7% cheaper and earnings from renting are 13% more favourable.

As prices appear to be slowly recovering, real estate’s affordability and investment potential may be enough to drive overseas buyers back to the Algarve’s golden beaches – even if domestic buyers are sluggish.

“There does not seem to be any momentum in the domestic market at present,” admits Paul Stubbs of Perfect Portugal Property.

“However, overseas buyers and investors are entering the market in increasing numbers,” he adds, noting that wealthy buyers are still keen on the country.

“The type of property they are interested in seems to be more about location than budget. High end villas and condos on the Lisbon coast and The Algarve and renovation projects inland seem to be most prevalent at the moment.”

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