The pleasant climate, mature market and continuing good value all make Portugal a big draw for investors, writes Dermot Corrigan
The maturity of the property market in Portugal is a serious draw for Irish buyers looking to for long-term security, according to Alise Crossick, founder and director of Ready2invest.
“You get a mature euro economy with good infrastructure and emerging market prices,” said Crossick.
Crossick said property prices in some parts of Portugal were comparable to those in Eastern European locations such as Bulgaria or Croatia.
“The Silver Coast has the most dramatic scenery, incredibly beautiful beaches, super golf courses and great, great prices and it is also just 45 minutes from Lisbon,” said Crossick.
She said that the island of Madeira and the Green Coast around Oporto also had significant investment potential.
Irish investors have been purchasing property in Portugal for many years. Carmel Crawford, Managing Partner of Algarve Property Ireland, says that for many Irish buyers the Algarve had become a home from home.
“The Irish like the Algarve very much,” she said. “Part of it is that the way we think is very similar to the Portuguese. The people are very friendly with a good sense of humour and are very good mannered.”
The Algarve regions of Quinta Do Lago and Val do Lobo in the Central Algarve are traditionally popular with Irish buyers, due to their proximity to Faro airport, which is linked directly with Dublin and Shannon by Aer Lingus and Ryanair flights. Ryanair also flies direct from Dublin to Porto and Aer Lingus links Lisbon directly with Dublin. Flights to Madeira are generally via London Heathrow.
The cost of flying from Ireland to Portugal varies according to the airline, destination and time of year.
Flights can cost little more than the accumulated taxes and charges if you book at the right time, although flying in the summer months or at short notice can mean prices of more than €200, plus taxes and charges.
Once you get there Irish visitors are generally pleasantly surprised by the cost of living on the ground.
“Everything is only half or even a quarter of the price that you pay in Dublin,” said Crawford.
The typical Irish investor in Portuguese property is interested in finding an investment opportunity which also doubles as a worthwhile holiday destination.
“Eighty per cent of our buyers are people who are looking for a holiday home with some rental to cover their costs and a place to go when they retire,” said Crawford.
“People like investments and want to experience capital growth, but they also like to be able to personally relate to the investments because then they will know other people will want to go there,” said Crossick.
Property Prices
Property prices in Portugal can vary greatly, with a lot depending on the location and the maturity of the development chosen. A three-bedroom villa with a pool on a golf course in an emerging area such as the Silver Coast can cost €265,000, while a 2 bed apartment in the Algarve may cast approximately €300,000.
Crawford said that, even within the Algarve, there can be significant price differentials.
“Eastern Algarve prices are a bit less, but it doesn’t have the infrastructure and facilities of the Central Algarve, which is absolutely beautiful and close to the airport,” said Crawford.
She said that Portugal offered investors the potential for attractive capital growth, with prices progressively rising in recent years.
“Property has never gone down here in the last five years,” she said. “I would say there is appreciation of around 10 per cent a year, maybe more, although it all depends on where you buy.”
Crossick said that investors can find higher appreciation potential if they look carefully at their options.
“I would advise investors to have a look around, and not just go for the obvious choices,” she said. ““You can get 15 per cent growth and more in certain areas.”
Crawford said that the Vilamoura XXI project, a €750m private development by the Lusort division of Spanish developer Grupo Prasa, would make the Algarve one of the top luxury European holiday destinations. The first six star hotel in the Algarve will open in 2009.
“The Vilamoura project will make a substantial impact to the prices of property already nearby,” said Crawford.
Local Finance
Tourism and related business are very important to the Portuguese economy, with the government and financial services sector working together to entice foreign investors.
“The financial market is very open, and they are used to providing mortgages for foreigners,” said Crossick. “The rates can start at 3.5 to 4 per cent.”
Rental income earned by non-residents in Portugal is subject to tax at 15 per cent, however inheritance tax has been recently abolished and Capital Gains Tax for foreigners has been reduced to 15 per cent.
The associated costs of buying a property in Portugal are also relatively favourable.
“Legal fees in Portugal are much smaller than they are in Ireland,” said Crawford. “In general lawyers charge about 1 to 1.5 per cent. Everything involved, including your lawyer, stamp duty (IMT) and notary fees will be no more than 7 per cent.”
However, investors in properties of €1 million and over face higher charges and fees
