Real estate is the world’s most significant store of wealth - more valuable than all global equities and debt securities combined, and almost 4 times global GDP levels. The value of all gold ever mined pales by comparison at $12.1 trillion, at just 4% the value of global property. The value of the world’s real estate has reached over $340 trillion. Growth was driven by the residential sector which is by far the largest real estate sector, accounting for 79% of all global real estate values. The strength of residential property markets shows that a home isn’t just where the heart is.
Today, just when we thought that the world was returning to business-as-usual post Covid, an atrocious, and disastrous war breaks out in eastern Europe. It is most certainly the very last thing any of us needed at this time and our hearts go out to the Ukrainian people.
These world affairs naturally affect all of us and the property market in the Algarve is not entirely immune. There has been a slight reduction in the number of enquiries and the number of sales in the lower and middle market. Some buyers seem a little less confident and property price tags possibly too intimidating for some. In the Prime Market there is no sign of demand slowing. In fact, quite the opposite.
Covid temporarily stopped all sales, only to release this pent-up demand as soon as we were all released from lockdown and not only did all the “missed sales” happen, demand increased beyond all our expectations as many people had learned to work from home and decided that life is short and why not spend more time in the Algarve and work from home in… Portugal.
Simultaneously, existing property owners on the coast were less likely to want to sell and if they did sell, it was only to reinvest in a better property in which they intended to spend more time. The obvious consequence to more demand and less supply, is the continued increase in property values. And this is where we are today.
Here in the Algarve, nowhere is this more the case than in the Prime market in which we specialise. New price heights have been recorded and values of between EUR 5 to 10m are now the norm. In 2021 we sold a truly magnificent single private home in Quinta do Lago for over EUR 18m. A record high for us at QP and indeed the country. Testament to the exceptional quality of properties which are now being created in the central Algarve and calibre of clients we have the privilege of working with.
threat of a recession and the war in Ukraine we see no sign of demand tailing
off in the Prime Market. Year to date comparison between 2021 which by all
accounts was a fantastic year at QP, and 2022 show an impressive increase in
business. Enquiries are up 10.6%, number of sales up by 57.5% and the sales
volume is up by a staggering 103% from the same period last year. So, no sign
of a cooling market here.
It is interesting to observe the recent increase again in the popularity in purchasing via corporate structures as property values in the Prime market reach entirely new levels. The average value of a private property transaction in 2021 was just over EUR 2m and of corporate owned property it was EUR 4.7 m.
Demand for top property is still very much British-buyer led. Over 70% of our buyers come from the UK, 28% from the EU and the remaining 2% from other areas. Portugal in general is attracting a more international group of buyers. AFPOP (the Association of Foreign Property Owners in Portugal) reported that in the last 12 months 34% of their new members come from the UK and surprisingly, 30% are from the USA. The strengthening Dollar will only see more Americans visit Europe this summer and on a trip to the US this June our Directors Kerstin and Alison met many who were disenchanted with their own government in the U.S. and were interested in moving to southern Europe.
It is interesting to see that few of our vendors are selling and taking their capital back to the UK or France etc but almost all are reinvesting in one way or another in the local property market. This, added to the fact that many new big buyers are coming into the Algarve also explains the phenomenal increase in demand for property, the lack of stock and increasing property values.
Virtual viewings are thankfully a thing of the past. Serious buyers may enjoy a Facetime tour of a property or a digital virtual walkthrough before flying out but an in-person viewing of the property is certainly the norm at QP before buyers commit to a purchase.
The NHR and Golden Visa schemes continue to be a popular draw for buyers throughout the country. NHR buyers make up an estimated 20% and GV buyers account for 5%. We would suggest that this is much lower than the national average. Most of our buyers in the Prime market seem to have their ducks in a row on these fronts.
So what’s next for the Algarve property market?
We are seeing a real lack of stock across the coast and at all price levels. Demand continues to increase and so our near to medium term forecast for the market is that values will continue to increase.
For those buyers who are unfamiliar with the Algarve, there is undoubtedly, initially some surprise regarding property prices. However, this inevitably recedes as those same buyers take stock of the prolific market activity and often missed opportunities whilst they watch from the side-lines before they embark on their own purchase.
New local planning laws (PDM) will be confirmed this year and we expect they will make it even harder to build new or redevelop old properties.
We welcome the enormous amount of investment from large funds wishing to invest and develop in the area. We successfully sold 90% of Marriott’s W Residences Algarve, developed by Nozul before the resort completed construction, and there are many other exciting projects taking off: Vilamoura World, Conrad Algarve, Vale do Lobo, One Green Way (formerly known as The Keys) just to name a few. The tendency is towards 5 stars, all bells and whistles and the market will absorb these with glee!
The benefits of NHR and GV, an excellent and affordable health care system, security in terms of personal and investment, the climate, the lifestyle, and ease of access make this place hard to beat. Portugal is well and truly on the Global map. It’s a solid investment and trendy.
Developers should not delay in bringing new stock onto the market. Buyers, buy now or pay more on your next visit!
Quinta Properties - +351 289 396 071 / +351 289 009 810
Quinta Properties - +351 289 396 071 / +351 289 009 810