Average prices in the Algarve region have doubled compared to three years earlier
Despite strong price growth, holiday properties in Portugal are still cheaper than other premium holiday destinations in Europe. Photo: Bloomberg LP
The property market on the Portuguese south coast was already red hot. Then came the Americans.
More people from the US are buying homes in the Algarve region this year, driving up demand for the limited supply of beachfront villas in the once-quiet area. This is pushing prices to unprecedented levels, with two of the properties listed for sale on local property sites priced at over €40 million, Bloomberg reports.
“Some of the prices are ridiculous,” commented Michael Vincent, chief executive of Portugal Property, whose average sale prices are now €1m, around 70% to 80% higher than last year. “I just shipped the best month in 50 years, and demand doesn’t seem to be slowing down,” he adds.
The average home sold in the Algarve region by consultancy Savills has reached €4m since the start of the year, double the average three years ago. Savills set a record for Portugal late last year when an eight-bedroom seafront villa with a swimming pool sold for €18.5m.
“Demand has grown beyond anything we could have expected,” commented Kerstin Büchner, co-owner of Savills’ Algarve branch. “After COVID, we’re fighting a battle to find enough inventory to feed that demand,” he adds.
American homebuyers, facing rapidly rising prices at home, have flocked to Portugal in the past year, taking advantage of the strong dollar to buy property in a country with a lower cost of living.
They are encouraged by the generous “golden visa” program, which allows participants to obtain a visa against investing at least €350,000 in real estate or €500,000 in a local venture capital fund. Demand from foreign buyers combined with housing shortages pushed house prices in Portugal to an annual growth rate of 13% in the first quarter of this year.
But the villas are still relatively cheap compared to other premium holiday destinations in Europe such as the Alps or the South of France.
“Smart investors understand that prices are likely to rise much more and are taking advantage of the favorable opportunity now,” commented Büchner.