Home prices for prime residences in the Algarve, the area in southern Portugal popular with second-home buyers, are up for the first time since 2008.
After plummeting as much as 50% in the wake of the global financial crisis in 2008, high-end home values in the beach and golf destination increased by 6.9% in the 12 months ending December 2015, said Knight Frank in a new report.
The London-based real estate consultancy attributed the growth to a combination of realistic pricing, access to cheap financing, strong investment in infrastructure, and tax incentives, all of which have renewed buyers’ confidence.
“Increased liquidity is now returning with good quality stock offered at sensible prices selling quickly,” Alex Koch de Gooreynd, partner and head of Knight Frank’s Portugal Network, said in the report.
Buyers from the United Kingdom, Ireland and Germany are still common in the area, but there is an increasing interest from French, Scandinavian and non-European clients, including South Africans and Chinese, found Knight Frank.
However, unlike the Chinese, who account for 79% of Portugal’s Golden Visa recipients since 2012 and who focus their real estate investments in the country's capital, the French are taking advantage of the country’s Non-Habitual Tax Resident status. Introduced in 2009, it exempts non-residents spending 183 days a year in Portugal from income tax on non-Portuguese incomes for 10 years.
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The report also highlights that sales volumes in the Algarve rose by 32% in 2015 compared with 2014, as the gap between demand and supply narrowed.
Luxury homebuyers are enticed by the region’s sense of security and long rental season, which usually runs from Easter to late October, and its all-year-round golfing, noted Knight Frank.