Should You Invest?
The obvious choice in Portugal for both short-term rentals and
capital appreciation would appear to be golf property either on the
Algarve or Silver Coast, as this is where the majority of the
country's successful tourist and golf industry is located. Villas
with pools or apartments in attractive residential developments
with facilities such as spas and tennis courts are now more popular
with visitors than traditional stand-alone property – unless it has
a prime beachfront location.
- Prices as a whole have been depressed for several years but the
main holiday hotspots are seeing vast amounts of new investment and
development.
- In terms of second home ownership, coastal Portugal offers
secure long-term investments.
- The high season may not be as long as southern Spain but hot
summers and mild winters are ideal for attracting a wide mix of
golfers, beach lovers and those escaping northern European
winters.
- Rental prospects are good for buy-to-let investors with
Portuguese tourism bringing in 12.8m people in 2006.
- Lisbon and smaller towns such as Sintra and Oporto may be good
investments for the long term, though they have less certain
buy-to-let returns. Prices are still depressed.
- All the cities are beautiful, historic and popular with
weekenders, and are likely to see gains over several years, as
buyers priced out of other locations turn their attention to
northern Portugal.
Rental Yields
Portugal has a high rental income tax and rental yields are
generally moderate but higher in popular tourist spots. On
average rental yields in Lisbon are around 5.7%. For properties
located in less commercialised areas such as Cascais or Estoril
rental yields are around 3.9%. Portugal's rental market enjoys an
average growth rate of 10.3% annually.
Price History
There are two property economies in Portugal comprising of the
Algarve and the rest of the country. Most buyers are really only
interested in the south coast, though further north (what has
become known as the Silver Coast) is also starting to attract
interest.
The Algarve has been a major area for both construction and
sales for the second home and holiday rental market for at least 20
years. It is also the main location in which northern Europeans
buy. Prices rose quite spectacularly in the period leading up to
2003 when Lisbon saw peaks of around 18%. Following this though, a
slump set in. This was partly due to weak economic growth as well
as oversupply and changes in the law that allowed buyers to own
their property as part of an offshore company.
However the market has since picked up again and prices rose by
5.9% in the Algarve in 2006. Other locations were not so fortunate
with Lisbon only seeing rises of 1.3 – 3 % depending on location,
and the rural Alentejo area actually seeing a drop of 3.5%. Average
prices in Lisbon are currently around €2,500 per square metre.
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