The warmest region of mainland Portugal has already started the tourist season and happily welcomes guests. But what about the real estate situation there? In this article you will find out what changes have taken place in the Algarve long-term rental and purchase market this spring. There will also be an opportunity to assess the investment potential of the region with an analysis of the rental market.
In case you don't know, the Algarve is the southernmost region of mainland Portugal, bathed to the south and west by the Atlantic Ocean. Both Portuguese and foreign tourists love to spend their vacations on the local beaches. In addition, numerous golf courses attract a particularly affluent public. This is the region with the highest proportion of foreign-born inhabitants, mainly from the EU and the USA. According to the last census, there are municipalities in the Algarve where the percentage of foreign population is 26%. Imagine that: more than a quarter of the population is foreigners! Below we look at how this and other features of the region affect the real estate market.
Real estate price dynamics in the Algarve
We will begin our price analysis with Idealista.pt, one of the main real estate search websites in Portugal. Since May is not over yet, we will study the data for February, March and April.
As we can see, the prices per square meter for sale grew more or less evenly, but not at a very high rate, during the year. But rental prices varied slightly: in November last year there was a slight decline, but by spring prices returned to their previous level. This is summary data for all municipalities in the region. Next we will analyze each municipality individually.
Properties for sale in the Algarve municipalities
The table above shows the average price per square meter of property by municipality within the Algarve whose listings are published on Idealista.pt (columns 1-3). Column 4 shows how the price has changed over these three months: by how much it has risen or fallen. Column 5 shows the change over the calendar year. The municipalities in the table are arranged in descending order of average price per square meter in April 2023.
The average price per meter in the entire region in April 2023 was 3,130 euros, which is the result of growth in both 3 months (1.36%) and year (15.5%).
The municipalities whose average cost per square meter in April 2023 was between 3,000 and 3,800 euros are Loulé, Vila do Bispo, Lagos, Lagoa, Castro Marim, Albufeira and Aljezur. The most expensive is Loulé, which is located in the center of the Algarve, but belongs to the eastern part of the region. The municipality of Loulé offers all kinds of infrastructure for a comfortable pastime: beaches, tennis schools, golf courses, fitness clubs, shopping centers, churches, castles, casinos and more. For golf enthusiasts, Vilamoura is of particular interest, which is located in Loulé.
The next six most expensive municipalities after Loulé have this feature:
- 5 of them are located in the western part of the Algarve: Lagos, Vila do Bispo, Lagoa, Albufeira and Aljezur;
- Only 1 of them is in the eastern part of the Algarve (Castro Marim).
If we talk about the municipalities of this group, located in the west, most of them are known for a high concentration of immigrants (20-26% of the population). The western part of the Algarve has access to the ocean on two sides. Accordingly, this subregion has more beaches and is more attractive for recreation. Over the past 3 months, the prices per square meter in these municipalities have risen mostly by a small percentage increase, somewhere even slightly lower. But the year-over-year increase has been very significant, from 12.3 percent in Albufeira to an absolutely unimaginable 56.6 percent in Castro Marim! This last municipality is the leader in the annual increase in prices per square meter of real estate in the Algarve.
The next group of municipalities has an average price per square meter between 2,000 and 2,900 euros:
- Located in the western part of Silves, Portimão and Monchique;
- Located in the eastern part of Tavira, Vila Real de Santo António, Faro, Olhão and São Brás de Alportel.
Prices per square meter in all of these municipalities over the past three months have mostly increased by a small percentage point. The exception was the municipality of Monchique, where this quarter there was a drop of 11.64%. By the way, Monchique has become the only region of the Algarve, where the average price per square meter of real estate in the section of the year, not only did not increase, but even fell (-7.1%).
Rounding out our list of municipalities is Alcoutim, located in the northeast of the Algarve, which has no access to the ocean. The average cost per square meter there was 818 euros, which was the result of an increase in both the last 3 months (0.49%) and the year (10.1%)
Using the table with the prices in the different municipalities, we can notice a very clear pattern: mainly the most expensive areas are concentrated in the west of the Algarve.
Are Idealista.pt's statistics accurate?
The portal Idealista.pt generates its statistical reports on the basis of data taken from housing listings published on the same portal. It is clear that such data does not fully describe the situation. It is possible to sell homes without publishing on Idealista, although in the case of the Algarve this would be more of an exception. Also, there is a possibility that when the transaction takes place, its amount will be different from the price requested by the seller in the ad.
To check how much we can rely on the data from Idealista.pt, let us compare its report with the report provided by the National Institute of Statistics of Portugal (INE).
The Institute of Statistics publishes quarterly reports on real estate prices for sales and purchases. At the moment, the most recent report available is for the fourth quarter (October - December) of 2022. This report will not help us with our assessment of the Algarve real estate market in the spring of 2023, but if we compare prices for the 4th quarter of 2022 with prices for the same period provided by Idealista.pt, we can get an idea of how accurately Idealista reflects reality.
The table shows the real average cost per square meter in sales transactions according to the National Institute of Statistics (column 1), the average cost per square meter from Idealista.pt listings (column 2), and the difference between the two in percentage terms (column 3).
As we can see from this comparison, most municipalities had lower prices in real estate sales transactions than in Idealista.pt listings during the same period. Nevertheless, it is very difficult to identify any pattern. There are regions where, on the contrary, deals were concluded with lower prices than on Idealista. There are so many possible explanations for this discrepancy in the data. Nevertheless, we will use Idelista.pt statistics as a very rough estimation of the situation just because we do not have more precise instruments describing the current situation and available right now. It does not make sense for us to wait 3 months to see the report of the Institute of Statistics for the 1st quarter of last year.
When researching information from Idealista.pt, you just always need to keep in mind that the price stated by the seller is likely to change when you go out for a deal.
Long and medium term rental properties in the municipalities of the Algarve
To assess the situation in the medium- and long-term rental market, we again turn to the website Idealista.pt.
The table above shows the average price per square meter of properties whose listings have been published on Idealista.pt (columns 1-3). Column 4 shows how the price has changed over these three months: by how much it has risen or fallen. Column 5 shows the change over the calendar year. The municipalities in the table are arranged in descending order of average price per square meter in April 2023.
Over the past 3 months, housing has not been offered in all municipalities in the county, so we see a shorter list of cities in this table. The average cost per square meter of rented housing for the entire region is 12.1 euros. In the last 3 months, as well as throughout the year, this value has been increasing, and it is interesting that the rate of increase in the last 3 months (17.48%) was much stronger than for the whole year (15.1%). If we talk about the changes since February 2023, they have occurred differently in different areas. Somewhere the increase was quite modest, 1-5%. But in Albufeira and Olhão it was very noticeable (12.28 and 17.89%, respectively). In Lagoa, on the contrary, there was a tangible drop in the price per square meter rented (-6.96%).
On a year-on-year basis, prices rose everywhere except in Lagoa (-4.9%). The champion in annual growth was the municipality of Albufeira (28.6%).
Daily rent of a property in the municipalities of the Algarve
Given the tourist appeal of the Algarve, renting by the day could be an even more interesting way to use real estate in this region than a long-term rent. To assess the potential of the various municipalities of the Algarve in terms of return on investment can help, for example, service All The Rooms. It allows you to calculate the future income of a tourist rental property based on its location and size. The service has a free version, which provides some interesting data, but a detailed analysis can only be obtained in the paid version. Since I am not going to buy real estate in the Algarve, I will not buy the paid version of the service, but I will try to get the most out of what is available in the general access.
In the free version is available, for example, the number of properties rented through AirBnb, as well as the average cost per day of rent in different municipalities of the Algarve during the period from February 7 to May 7 this year. The service gives prices in dollars, and in the table below they are converted into euros at the current exchange rate.
Unlike the data from Idealista.pt and the National Institute of Statistics, which we analyzed earlier, All The Rooms is not tied to the average cost per square meter. That's why the table above shows the averages for all properties rented during that period (which can include both large villas and small rooms). Nevertheless, even this data helps to begin to navigate the situation.
Most of the daily rentals are open in the municipality of Albufeira (7,950), but the average price per night in this municipality is second to São Brás de Alpotel, where there are far fewer properties.
By the way, if you are considering buying a property for investment purposes, on our website you can contact a specialist in tourist property management in the Algarve, who will help you both use the property for vacations and generate income from it the rest of the time.
The most expensive and cheapest real estate available in May 2023
Idealista.pt currently offers 10,412 homes for sale, some of them are under construction, some of them are even in the design phase and some of them are ruins to be rebuilt. In this review I will include only completed properties.
The most expensive houses in the Algarve today
24.500.000 euros Villa overlooking the ocean on a half-hectare plot. House of 407 meters, 5 bedrooms, 4 bathrooms. Balcony and terrace. Garden with swimming pool. Energy efficiency class B. The municipality of Albufeira.
24.000.000 euros Modern architectural masterpiece on a plot of 2.906 square meters. Area of the house is 1.500 meters. 6 bedrooms, 8 bathrooms, garage, several terraces, garden, pool. Central heating and air conditioning. Energy efficiency class B. Municipality of Faro.
18.500.000 euros Villa with 5 bedrooms and 9 bathrooms. Plot area of 1.667 meters. Swimming pool. The house was built in 2017. Albufeira municipality.
Minimum prices for finished homes that you can move in immediately, without major repairs
108.500 euros studio house of 51 square meters, no plot. Freshly renovated, but the decoration is specific. Sleeping place on the mezzanine. 1 bathroom. Suitable for tourist rentals rather than long-term family life. Energy efficiency class C. Located in a village in the municipality of Loulé.
140.000 euros Nice rustic house with a modern renovation inside. Area of 54 square meters, no plot. 2 bedrooms, 2 bathrooms. Balcony with panoramic views. The house was built in 1951. Air conditioning. Municipality of Silves.
140.000 euros Another traditional house with modern furnishings. Surface area of 43 square meters. One bedroom and one bathroom. Air conditioning and central heating. The house was built in 2022 and has a license for tourist rentals (alojamento local). Municipality of Alcoutim.
If we talk about apartments in the Algarve, the portal offers 9.465 of them. As an example, let us take the studios, which can be used both for your own vacation and for renting to tourists.
The most expensive apartments
650.000 euros Penthouse of 97 square meters with 1 bathroom. Energy efficiency class B. Located in the center of Albufeira.
349.500 euros studio of 65 square meters with 1 bathroom. House built in 2022. Energy efficiency class B. Municipality of Lagoa.
290.000 euros Studio of 90 square meters with 1 bathroom. Building with an elevator. Albufeira municipality.
Cheapest studios in the Algarve
67.500 euros studio house of 25 square meters. 1 bathroom. Installed air conditioning. Municipality of Castro Marim.
90.000 euros Apartment in an apartment hotel with a developed infrastructure: several swimming pools, restaurants, kindergarten, hairdresser, medical team, etc. The area of the studio is 35 square meters. 1 bathroom,1 parking space. Energy efficiency class C. Located in the municipality of Albufeira.
Summing up the Algarve real estate market this spring
The Algarve region is the most popular holiday destination in Portugal, which naturally affects property prices. The proximity of the ocean and the interest of natives of wealthier countries influence the infrastructure that is created in the region. In turn, specific infrastructure (golf courses, etc.) attracts even more solvent public and keeps the demand for real estate on a high level.
As we could see from various sources, real estate prices for the most part rose during the year. However, actual sales prices were often lower than what sellers were asking for.
When buying a home in the Algarve for non-permanent residents, it may make sense to explore its investment potential. Yes, the cost of the property will not be low, but these costs can be gradually recouped by renting it out when the owner is not using it. If you are considering this option, you can contact a professional real estate agent in the Algarve through our website. Our real estate agent will help you at all stages, both when buying a property and when renting it out.
I wish you a pleasant vacation in the Algarve!
