Portugal has for many years been one of the more popular expat destinations although historically it has still lagged the likes of Spain which is by far and away the more popular destination for UK expats in particular. However, there is a feeling that the economic situation in Portugal and Spain is changing and Portugal could in fact become the new “Spain” of the future. Property in Portugal is also attracting the interest of many investors, as well as expats, something which bodes very well for the future and could in fact increase Portugal’s standing in the expat arena.
Background on Portugal
While Portugal is still dominated by the holiday market it is easy to forget that there is more to this country than just sun, sea and sand. This is a country which has a history and culture which goes back many years and while the economic background in the past has been very patchy to say the least, there is no doubt that Portugal is emerging from the shadows and is no longer the “sick man of Europe”.
There were also many issues with the Portuguese political system where corruption was seen by many as a major problem and in need of reform before the economy and the country could begin to grow. However, there has been an ongoing cleanup of the Portuguese political system and even though there are still several municipalities, with effective self-regulation, great progress has been made in this particular area, to the benefit of the Portuguese economy as a whole.
The recession and Portuguese property
Like each and every country in Europe, and around the world, Portugal was affected by the ongoing recession in Europe and as such we did see property prices fall dramatically. In general the more severely hit areas were the tourist and expat destinations, also known as the “Silver Coast”, which saw property prices fall by up to 30%.
The slowdown in the Portuguese economy was a main factor in the slowdown in the Portuguese property market although surprisingly the country seems to have emerged from the recession in the second quarter of 2009 with a 0.03% increase in gross domestic product. When you consider that the UK, in the third quarter of 2009, is still in recession and shrunk by 0.4% this perfectly illustrates the difference in the performance of the economies and the potential in the short to medium term.
Is it time to buy property in Portugal?
Many estate agents in Portugal and the UK believe now is the time for investors to be looking towards the Portuguese property market, with the potential to take advantage of depressed property prices ahead of an expected further increase in economic activity. As we suggested above, property prices in Portugal have fallen by anything up to 30% with the tourist and expat areas more severely hit than many larger cities and towns.
However, as the Portuguese economy has now moved away from recession it is hoped that 2010 will see further growth in the economy, more and more tourists visiting the country and a return to an active expat market. Indeed, a number of estate agents have highlighted the potential for the “Silver Coast” (Costa de Prata) where forecast property price increases range from between 50% to 75% by 2015. While these forecast increases in property values in the region would appear to be on the high side, even if they were half the figures quoted they would still be very impressive!
Developments in the Portuguese tourist industry
Even though Portugal has long been associated with the likes of golf resorts and other leisure activities, it is only of late that we have seen a significant increase in activity in this particular area, something which is catching the attention of expats and property investors around the world. Any investor will tell you that a region needs a focal point as well as local services and amenities to keep visitors in the region and ultimately increase and improve the local economy.
Many people are now comparing the Portuguese property market today to the Spanish property market of a few years ago, just prior to a significant increase in the number of leisure facilities and tourist services in the region. Even though Spain is still by far and away the more popular of the European expat destinations there is no doubt that the Spanish economy is in trouble and is likely to remain so in the short to medium term at least.
Is there more to Portugal than the Algarve?
The Algarve has been by far and away the focal point of the Portuguese holiday and expat market for many years but now we are seeing new resorts popping up around the coast and more and more properties and leisure facilities being built. The recession had “put a spanner in the works” in the short to medium term but the increased activity in the property market should encourage more development in the country and ultimately attract the attention of more and more investors.
While this will not happen overnight, with many property developers still licking their wounds from the recession, there is no doubt that where there is demand, ultimately properties and new facilities will be built and investors will be fed.
There is no doubt that Portugal has been one of the more favoured expat destinations for some time but historically it has tended to fall into the shadow of Spain which has attracted significantly more expats, tourists and property developers over the years. However, the recession has brought the Spanish economy to its knees and surprisingly the Portuguese economy left recession in the second half of 2009, leaving behind the likes of the UK, Spain and other well-known countries.
It is this surprise strength in the Portuguese economy which is attracting the attention of would-be investors but as ever there are large variations in property price movements across the country and you need to do your homework and ensure you know what you are buying into. We may look back in 5 to 10 years and wonder why we avoided the Portuguese property market but then again if you do your homework and check the local property markets, there is no reason why you could not look back in the medium term and see a significant increase in the value of your property assets!