market update

THE ALGARVE HAS LONG BEEN A GEM FOR THOSE SEEKING THE PERFECT BLEND OF EUROPEAN CHARM, NATURAL BEAUTY, AND A LAID-BACK LIFESTYLE. WITH A LANDSCAPE THAT RANGES FROM PRISTINE BEACHES TO ROLLING VINEYARDS, THIS REGION CONTINUES TO BE A HOTSPOT FOR INTERNATIONAL PROPERTY BUYERS

Word: ALISON BUECHNER HOJBJERG

AT A MACRO level, the Algarve real estate market has been facing a persistent shortage of properties. Yet, intriguingly, our micro-market tells a different story. As is typical for this time of year, we are listing new, exciting properties that cater to a variety of tastes and budgets.

Despite recent legislative changes that have sparked international conversations, the Algarve’s real estate market remains surprisingly resilient. The Non Habitual Residents (NHR) programme, which has been a magnet for retirees and expats, is anticipated to be discontinued in 2024. Likewise, the Golden Visa programme is approaching its conclusion. For many, these changes may seem like ominous clouds on the horizon. Still, here in our micro-market, the impact has proven to be minimal. It’s important to note that the buyers we attract are largely motivated by the allure of the Algarve’s lifestyle, rather than visa or tax perks. Approximately only 5% of our database motivation to buy is the NHR.

Noticeable is that approximately 15% of all foreign property buyers in Portugal are now coming from the United States, which indicates an emerging market that holds huge potential. According to data from Idealista, the interest from the USA in purchasing property in Portugal surged by over 80% between 2020 and 2022. It’s a new and exciting chapter for Algarve real estate, and we believe that the numbers will continue to soar.

As we prepare to explore this new frontier, it’s worth noting that, while these international legal changes may raise eyebrows elsewhere, our existing clientele has remained largely unperturbed. The heart of the matter lies in the fact that clients don’t just buy property in the Algarve, they buy a lifestyle.

The dynamics of demand and prices

Like any other real estate market, the Algarve is not totally immune to the ebb and flow of economic tides. In 2023, we’ve observed a slight slowdown in the lower end of the market, with price increases decelerating. It’s not a unique situation; globally, rising mortgage costs and the general increase in the cost of living have started to impact the real estate sector. Yet, buyers at the higher end of the market aren’t as affected, primarily because the Algarve’s property values continue to remain stable.

Surprisingly, in a world rife with uncertainties, we’ve seen the Algarve’s property values and prices continue to rise. Whether it’s the ongoing war in Ukraine, high interest rates, inflation, or troubles in the banking world, our market remains robust, if not bullish. In fact, sales are not only on the rise in terms of numbers but also in average sale prices.

As we gaze into the crystal ball, it’s safe to say that the ongoing rapid price growth of the past few years is probably unsustainable. According to statistics, the Algarve property market witnessed an 8% price adjustment over the past year. However, this followed significant increases of more than 35% from 2020 to 2022.

One noticeable change has been the shift in buyer offers. Notably, some offers now fall as much as 15% below the asking price, whereas to date offers were approximately 5% lower than the asking price. While this may raise questions about market health elsewhere, the Algarve’s dynamics ensure that such challenges are, in essence, a result of high demand meeting low supply.

Embracing the Algarve’s resorts and developments

Over the past six months, the Algarve has witnessed a burst of energy in its real estate sector, thanks to a wave of new developments spanning from Castro Marim in the Eastern Algarve to Lagos in the West.

Notably, some heavy hitters in the real estate world are investing significant sums in the Algarve. Arrow Global, European leaders in asset management specialising in real estate are pouring €500 million into seven new projects in 2024, adding to their existing €1 billion investment. Developers are realising the advantages of incorporating hospitality brands into their real estate projects, following past success stories.

Even in areas not traditionally considered premium, such as Albufeira, there has been a noticeable uptick in developments. Projects like Masana and Quinta Dourada, though unbranded, have been shaping the landscape. More frequently than ever, developers are expressing a desire to invest in the Algarve. Funds like Bondstone, FERCOPOR, and AEDAS Homes are fuelling the region’s real estate boom.

And it’s not just about money; it’s about confidence. Developers are brimming with optimism for the Algarve. In an interesting contrast, the real estate market in major cities like Lisbon and Porto is cooling off, while the Algarve continues to grow.

Pricing: a journey through the Algarve’s luxury landscape

Serenity, a new residential apartment building project in Vilamoura, was launched on 1 September. With an average price of €7,800 per square metre, it promptly sold ten units out of 53 within 39 days. Prices in One Green Way in Quinta do Lago and Voco Formosa Park – Algarve, are averaging at €9,300 per square metre. However, it’s not just about big names and luxury resorts. Branding plays a pivotal role in determining demand. The W Residences in Albufeira sold at record pace which can be attributed to the strength of its brand. Ombria Viceroy features a price per square meter close to €6,600. Located in the interior of the Algarve, this project is a mere 20-minute drive from the beach, a reminder that the Algarve’s appeal stretches far beyond its coastline.

Stability in pricing: a silver lining

The consistent trend across resorts and developments is a lack of price reductions. Despite a surge in new properties entering the market, prices remain stable. The high cost of construction, paired with strong demand, has created an environment where developers are in no hurry to reduce prices. This stability can be seen as a reflection of the confidence in the Algarve’s real estate sector.

An interesting aspect to consider is the changing landscape of touristic developments. Some properties were previously obligated to be part of a rental pool for a set period. However, with the imminent end of the Golden Visa programme, the pricing structure may become less attractive. Consequently, this product may experience a setback, as the yields offered fall short of what is currently accessible in the financial market.

Potential global impacts: a glimpse of the future

The Algarve’s appeal extends far beyond its geographical borders. On the global stage, there are both positive and challenging factors that may influence its real estate market.

Positive Impacts

It’s worth celebrating Portugal’s continued success on the world stage. The country recently clinched the World’s Leading Destination 2023 at the World Travel Awards, a distinction it has earned six times. Furthermore, the Algarve has been recognised as Europe’s Leading Beach Destination, and Vale do Lobo as Europe’s Leading Lifestyle Resort. Such accolades underscore Portugal’s enduring appeal and its ability to attract property buyers from around the world.

Our Market

Here at QP we are seeing supply and demand which remain largely in sync. In 2023, the nationalities of our buyers continue to tell an international story. 95% of our market is composed of international buyers, primarily from the United Kingdom.

In conclusion, the Algarve’s real estate market is not just a story of numbers, trends, and statistics; it’s a tale of resilience, innovation, and enduring appeal. From the dynamic marketplace filled with luxury developments to the charming villages dotted along the coastline, the Algarve continues to cast its spell on property seekers from around the world. As the sun sets over the golden sands of this enchanting region, it’s safe to say that the Algarve’s real estate market has a story that is uniquely compelling, and one that is far from over.