With the UK’s recent vote to leave the European Union, much has been written about the impact of Brexit upon property in the UK. But what about Portugal’s property market, where British buyers are regular customers?
According to boutique estate agency Ideal Homes Portugal, there has been no significant change in the nationalities buying in Portugal, with the same mix of overseas clientele as always.
In the run-up to the referendum, buyers remained as keen as ever, with enquiries for Portuguese real estate on TheMoveChannel.com unchanged in Q2 2016 from Q1 2016. Enquiries for property in Azores rose 25 per cent, while interest in the Algarve rose 13 per cent. Enquiries for property in Leiria doubled quarter-on-quarter.
Portugal appeared to suffer from immediate uncertainty among British buyers, though, following the vote: it fell two places in TheMoveChannel.com’s monthly Top of the Props rankings in July 2016, down from fourth place in June. Portugal was also ranked sixth in May, however, with its share of enquiries at 3.21 per cent in July 2016, up from 3.02 per cent in July 2015, when it was ranked eighth.
On a regional basis, enquiries fell 21 per cent for property in the Algarve in July, but have already overtaken that level in August, as buyers appear to be returning with a vengeance following the brief post-Brexit blip.
“The UK’s vote to leave the EU hasn’t made it harder for Brits to get mortgages in Portugal”
One concern that could be causing caution among some Brits is the weakened pound, which has effectively raised the cost of property overseas.
Chris White, Founding Director of Ideal Homes, though, says that lenders are being especially lenient at the moment, buoyed by the country’s own economic conditions, rather than those of the UK.
“The UK’s vote to leave the EU hasn’t made it harder for Brits to get mortgages in Portugal. The banks here are still financing and the mortgage process has thus far been unaffected by the whole Brexit development,” he explains. “In fact, as the market here has picked up, the banks have become more lenient when it comes to their lending criteria, so if anything it’s becoming easier for UK citizens to obtain Portuguese mortgages.”
The company says that around half of their clients are buying with mortgages, with the agency offering its own low-rate mortgage product with 90 per cent loan to value. Many of those opting for loans to finance their purchases are investors looking to pick up one or more properties in the tourist mecca of the Algarve. Indeed, the Algarve is the most popular region of Portugal, thanks to its mix of lifestyle appeal and buy-to-let potential.
“The combination of 90 per cent mortgages and low rates means that buyers don’t need a large deposit and the monthly repayments are really affordable. We’re finding a lot of people are looking to Portugal in order to obtain an income from their holiday home as well as to use it for themselves.”
As with many overseas destinations in the wake of the Brexit vote, there are a number of British owners now looking to sell their properties. With the pound weak against the euro, following the Bank of England’s decision to cut interest rates to a new record low, Ideal Homes has also found a way around any currency conversion worries.
The company has launched a scheme that allows British buyers and sellers to complete their transaction entirely in pounds. Both parties save money on currency exchange services and Brexit’s impact on sterling is taken out of the equation.
“We’re working with our clients to offer them a way to avoid being stung when it comes to the exchange rate over the coming months,” says White. “Many of our vendors – over 200 of them, in fact – want to sell their homes in Portugal and then access the proceeds of the sale in the UK. At the same time, we have buyers in the UK whose sterling is suddenly worth less if they convert it to euros. As such, we’re offering a win-win to both parties.”
People “love” the service, once they get their head around it, he adds.
While the agency is being flexible with currency, British sellers are also becoming more open to negotiation: they are now dropping asking prices by as much as 15 per cent to secure a sale. Non-British sellers, though, are offering less room for manoeuvre.
Chris notes he is fortunate that he is so well-established that he has many British sellers on his books – for some agencies, it is not the same and they are finding it harder.
Portuguese house prices have now risen for 19 months in a row
Time to Buy?
While the UK housing market is currently subject to conflicting predictions of rising or cooling prices, Portugal’s property has an undoubtedly positive outlook.
The latest RICS/Ci housing market survey shows an acceleration in house price growth reported by agents in June 2016, with the index recording its highest reading since the survey was launched six years ago. Portuguese house prices have now risen for 19 months in a row, as the country’s real estate continues to recover.
This “should be viewed in the context of a persistent period of falling house prices between 2010 and 2014”, notes the RICS, but values are enjoying steady growth, with agents expecting house prices to rise around 3 per cent in the coming 12 months – and 4 per cent in the Algarve.
“There’s still a lengthy journey ahead in terms of the process of the UK disengaging from the EU, but one month in, the property market – both at home and overseas – seems to be handling Brexit far better than many expected,” comments White.
Whether you’re buying a holiday home with a view to making capital gains over the course or your ownership, or a rental apartment to serve as an income-generating investment, market conditions suggest that despite the Brexit vote, now remains a good time to buy in Portugal. The trick is finding the right seller.Google+