In resort areas such as the Algarve, rising prices were fuelled by the high demand for holiday homes from foreigners. However, as the recession hit Portugal in the late 1980s and early 1990s, the stream of buyers dried up leaving developers and agents with a glut of unsold properties. During this period there were bargains around when some owners and developers were forced to sell, although prices held up remarkably well during the recession (although sales plummeted).
In contrast, prices in the major cities have continued rising due to a constant and largely unfulfilled demand for homes from Portuguese flocking to the cities from rural areas. There’s a chronic housing shortage in Lisbon and Porto, where housing costs are very high compared with the relatively low standard of living.
The Algarve property market has made a spectacular recovery from the recession in the 1990s and sales are currently booming, particularly at the top end of the market where villas cost well over €1m. In some parts of the Algarve prices have risen by as much as 40 per cent since 1999, although the average price rise is around 15 per cent a year. Experts predict that this trend will continue for the next few years and at present in most resort areas in Portugal it’s very much a seller’s market. Demand for new and resale villas is exceptionally high and good quality properties are now in short supply.
Property prices in Portugal generally rise slowly and steadily (with the exception of the Algarve where the price rise has been spectacular since 1999), and are fairly stable, particularly in rural areas where there’s little local demand and few non-resident owners.
Apart from obvious factors such as size, quality and land area, the most important consideration influencing the price of a house is its location. The closer a property is to a major city or beach, the more expensive it will be. An average two-bedroom apartment on the Algarve coast costs at least two or three times as much in central Lisbon or Porto. Property is cheapest in rural areas, where a farmhouse with outbuildings and a large plot of land can cost the same as a studio apartment in a luxury Algarve development.
Properties for restoration and modernisation are widely available in rural areas, although you usually need to spend two to three times the purchase cost on restoration. The quality of properties varies considerably in respect to materials, fixtures and fittings, and workmanship.
Value for money also varies considerably and you should compare at least five to ten properties to get a good idea of their relative values. You usually pay a premium for a beachside ‘front-line’ property or a property situated on or near a golf course. Property on the Algarve coast is generally of a high standard and good value for money (although not cheap), particularly for foreigners paying in currencies (such as the GB£) that have made large gains against the euro in recent years.
When property is advertised in Portugal, the total living area in square metres ( metros quadrados), written as m2, and the number of bedrooms ( quartos) are usually stated. When comparing prices, compare the cost per square metre of the habitable or built area ( área de contrução), excluding patios, terraces and balconies, which should be compared separately. If you’re in any doubt about the size of rooms you should measure them yourself, rather than rely on the measurements provided by the vendor or agent.
A garage ( garajem) is rarely provided with apartments or townhouses in Portugal, although there may be a private parking space or a communal off-road parking area. Some apartment blocks have underground garages, and lock-up garages can sometimes be purchased separately for apartments and townhouses in resort areas. Villas usually have their own car port or garage. Without a garage, parking can be a nightmare, particularly in cities or busy resort towns and developments in summer.
Approximate prices for average properties on the Algarve coast (in an average resort or development) are listed below. Prices in other regions of Portugal (apart from Lisbon and Porto and a few fashionable areas such as the Lisbon coastal resorts of Cascais and Estoril) are lower than on the Algarve, while prices in Madeira are similar.
- Studio apartment - from 90,000
- 1 bedroom apartment - from 120,000
- 2 bedroom apartment - from 150,000
- 3 bedroom apartment -from 180,000
- 1 bedroom townhouse - from 150,000
- 2 bedroom townhouse - from 200,000
- 3 bedroom townhouse - from 250,000
- 2 bedroom-modernised cottage or village house - from 200,000
- 2 bedroom detached villa - from 400,000
- 3 bedroom detached villa - from 600,000
- 4 bedroom detached villa - from 900,000
It’s possible to buy cheaper properties than those quoted above in unfashionable areas of towns and in rural areas, particularly older properties. On the other hand, properties in luxury developments offering a wide range of leisure and sports facilities are much more expensive (golf properties can be particularly expensive). For example, €200,000 for a tiny studio or one bedroom apartment, from €350,000 for a two bedroom apartment and €500,000 or more for a three bedroom apartment or townhouse.
Bear in mind that the more expensive your home, the more you will have to pay in property taxes, which are based on a property’s fiscal value ( valor tributável). Community fees for a community property also rise in direct relation to the size (and value) of a property. Luxury developments generally have high annual maintenance fees, e.g. from around €2,000 for a studio apartment to over €4,500 for a three-bedroom villa.