In the Algarve and Porto it is boom with British buyers

Meanwhile, average house values in the Algarve have almost doubled (+92%) in five years. In the last year alone, prices for prime properties have increased by more than 30%. But there is a great variation in prices: in popular areas such as Quinta do Lago and Vale do Lobo, prices can exceed EUR 14,000 per square metre. Other developments are around EUR 6,500 per square metre, still EUR 2,000 more than the Algarve average.

Porto is no different. Although it remains a predominantly domestic market, 40% of new buyers are international, mainly from North America, Brazil and Israel. More and more young families are moving to Porto, attracted by the quality of life and international schools. Rental prices in the city increased by 24.8% in 2023, with an average of EUR 1,159 per month for new one-bedroom flats in the city centre.

Despite a decrease in sales in Porto last year, property values and rents continue to rise, signalling that Porto remains an attractive option for second homes, especially for those looking for a modern European city without spending a fortune.

Increased connectivity with new direct flights from Europe and the US has attracted more international buyers to the Algarve. Although British buyers still dominate the scene, more and more young families are attracted by the healthy lifestyle, sports facilities, cost of living and international schools.

Despite initial concerns about the restrictions of the golden visa and non-habitual residency programmes, there are still many visa and investment options for international buyers. These programmes might influence demand in the cities, but in coastal locations like the Algarve, they were not the main motivation for purchase. In short, the Algarve and Porto are experiencing a real estate boom, and those dreaming of a life in the sun would do well to keep an eye on these markets.

"According to insiders, buyers who make strategic investments in Portuguese real estate today will have excellent returns as early as 2025. The Portuguese real estate market shows a complex but promising trend for the rest of 2024," they explain from Scenari Immobiliari.

The desire to reside in Portugal is strong, especially in key locations. For Lisbon, Porto, Braga and parts of the Algarve, property values are expected to grow by 5.8% in 2024. This is almost double the growth of the top ten international real estate markets in 2024. While the national market as a whole expects a slight increase of 1.2 per cent, some regions are set to exceed expectations, despite the end of the tax regime for non-regular residents (Nhr) unless they meet the safeguard conditions.

Portugal's main real estate hotspots are driving this growth, especially in the luxury real estate market. Indeed, Portugal remains a favoured choice for wealthy expatriates, particularly professionals and entrepreneurs from the UK, Canada, South Africa, Israel, Hong Kong, Singapore and other parts of Europe, and especially for US citizens concerned about the divisions and political situation in America ahead of the upcoming elections.

Driving this trend is the demand for luxury real estate from wealthy international communities and individuals, due to the lifestyle, climate, popularity, security and cost of living, which is almost 50 per cent lower than in the US alone and 30 per cent lower than in the UK and most of the EU.

These luxury areas in Portugal - which include Lisbon, Porto, Cascais, Comporta, Sintra, Vale Do Lobo, Quinta Do Lago, Benagil, Carvoeiro, Lagos, Vilamoura, Faro and the Silver Coast - continue to attract significant interest, supporting their market strength, particularly at the high end of the market. These regions are in vogue and enjoy international interest and are therefore thriving, defying the trends we observe in other developed economies and their local property markets.

"Portugal's performance is particularly noteworthy, when compared to that of other EU countries, which are projected to record an average decline of 2.5 per cent over the same period in 2024," Scenari Immobiliari points out. However, challenges remain, especially in terms of housing supply. The government's new housing law aims to increase the availability of real estate, but progress is slow'.

"In 2000, Portugal built 200,000 properties, while last year it built just 20,000. It is clear that the intention to balance demand with supply is there, but it will take several years to achieve it. Experts are confident that Portugal will continue to outperform many international real estate markets, offering attractive opportunities for both investors and residents in the coming years. Last year, in addition to the performance of sales prices, there was a 20.4 per cent surge in rental prices across the country, mainly due to the lack of supply,' report Scenari Immobiliari.

In 2024, rents in Portugal are expected to increase by a further seven per cent. This is the highest growth rate since 1994. The increase in tourism has turned many potential long-term rentals into holiday homes, putting further pressure on an already difficult market. This upward trajectory in rental costs is evident across most of the country, with 23 out of 25 regions reporting a year-on-year increase in rental values by the end of 2023 of more than 9.5 per cent on average.