Summer is the hottest season for the all-Portuguese resort, the Algarve region, both in terms of weather and tourist numbers. It is in summer that the region far outstrips Lisbon and Porto in terms of overnight stays. From this article, you can learn how the seasonal popularity of the region is reflected in real estate prices in it. We take a detailed look at the changes that have taken place in the market for buying, long-term rentals, and short-term tourist rentals in the Algarve over the last 3 months.
First, a brief geographical background. The Algarve is located in the south of mainland Portugal, the region is bounded by the Atlantic Ocean to the south and west, and borders Spain to the east. It is a popular vacation destination for both Portuguese and foreign tourists. In addition to this, the region is rich in golf courses, making it particularly interesting to the affluent public. Foreigners love not only to come to the Algarve for a short stay, but also to settle here. According to the latest census, there are municipalities in the Algarve with up to 26% foreign population.
Real estate price dynamics in the Algarve
We will start our price analysis with Idealista.pt, one of the main real estate search websites in Portugal. Since August is not over yet, we will study the data for July, June and May.
As we can see, prices per square meter at sale grew evenly, but not strongly. But rental prices grew at a more noticeable rate. These are the summary data for all municipalities of the region. Further, we will analyze each municipality separately.
Properties for sale in the Algarve municipalities
The table above shows the average price per square meter of properties by municipality within the Algarve that are listed for sale on Idealista.pt (columns 1-3). Column 4 shows how the price has changed over the three months: by how many percent it has increased or decreased. 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 July 2023.
The municipalities whose average cost per square meter in July 2023 was between 3,000 and 3,900 euros are Loulé, Vila do Bispo, Lagos, Lagoa, Aljezur, Albufeira and Castro Marim. The palm of superiority is held by the municipality of Loulé, located in the center of the region, but belonging to the eastern part of the region. In the municipality of Loulé you can find a wide range of cultural and recreational facilities: beaches, tennis schools, golf courses, fitness clubs, shopping centers, churches, castles, casinos and much more. The town of Vilamoura, located in the municipality of Loulé, is well known among golf enthusiasts.
Other municipalities in this most expensive group have this peculiarity:
- 5 municipalities are located in the western part of the Algarve: Lagos, Vila do Bispo, Lagoa, Albufeira and Aljezur;
- There is only 1 municipality in the eastern Algarve (Castro Marim).
Most of the western municipalities in this group have a high concentration of foreign-born residents (20-26% of the population). Since the west of the Algarve has access to the ocean on two sides, this subregion has more beaches and is more attractive for vacations.
Over the last 3 months, the prices per square meter in 6 municipalities changed in different directions. Somewhere they increased slightly, somewhere – slightly decreased. But in terms of the year, there was an increase in all municipalities: from 6.9% in Castro Marim to 23.% in Aljezur.
In the next group of 8 municipalities, the average cost per square meter is between 2,200-3,000 euros:
- Silves, Portimão and Monchique located in the western part;
- Faro, Tavira, Vila Real de Santo António,Olhão and São Brás de Alportel located in the eastern part.
Prices per square meter in all these municipalities have mostly increased by a small percentage in the last three months. The exceptions were Tavira and São Brás de Alportel, where there was a minimal, at the level of statistical error, decrease in prices.
Last on our list is Alcoutim, a municipality in the north-east of the Algarve with no access to the ocean. The average price per square meter in it was 753 euros in July, which was the result of a decline in prices over both the last 3 months (-5.28%) and the year (-13%). Alcoutim was the only municipality where the price per square meter decreased over the year.
The municipalities that showed the fastest annual growth rates were Faro (23.8%), Aljezur (23.4%) and Silves (22.4%).
The general conclusion that can be drawn by looking at the table is that the most expensive municipalities in the Algarve are concentrated in the west of the region.
Are Idealista.pt's statistics to be trusted accurately?
Idealista.pt statistics are based on data taken from housing ads published on the same website. It is clear that this data does not fully describe the situation on the market. Theoretically, it is possible to sell a home without publishing on Idealista, although in the case of the Algarve region, this would be the exception. There is also the possibility that when the transaction takes place, the amount will be different from the price requested by the seller in the advertisement.
To check how much we can rely on the data from Idealista.pt, let's compare its report with the one provided by the Portuguese National Institute of Statistics (INE).
The Institute of Statistics publishes quarterly reports on real estate prices in sales transactions. Currently, the most recent report available is for the first quarter (January - March) of 2023. If we compare prices for Q1 2023 from both sources, we can see how accurately Idealista reflects the realities of the Algarve real estate market.
The table shows the real average price per square meter in sales transactions according to the National Institute of Statistics (column 1), the average price per square meter from ads from Idealista.pt (column 2), and the difference between them in percentage terms (column 3).
In the vast majority of municipalities, the prices were lower in real estate sales transactions than in Idealista.pt ads for the same period. Nevertheless, it is very difficult to identify any pattern. Only in one of the regions, transactions were concluded with lower prices than on Idealista. There are many possible explanations for such differences in the data. Nevertheless, we will still use the statistics from Idealista.pt to approximate the situation, as we do not have more accurate tools available at the moment. When analyzing information from Idealista.pt, it is important to always remember that the price stated by the seller can be changed during the transaction process.
Long and medium term rental properties in the municipalities of the Algarve
To analyze the current situation in the mid- and long-term rental market, we will again turn to the Idealista.pt assets.
The table above shows the average price per square meter of properties whose rental ads are published on Idealista.pt (columns 1-3). Column 4 shows how the price has changed over these three months: by how many percent it has increased or decreased. 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 July 2023.
In the previous 3 months, rental offers were not published for all municipalities in the Algarve. The leader in terms of rental rate per square meter is Loulé with 16 euros per square meter, which is the result of a moderate increase in both the last 3 months (8.84%) and the year (9.1%).
In different municipalities, the price increased in different ways. Somewhere, the growth rate for the year was quite modest, such as 3.7% in Olhão. Other regions, however, showed intense growth, between 21.7% and 25.6%, as in Lagos and Albufeira.
Daily rentals in the municipalities of Algarve
During the summer period, the Algarve becomes the country's most popular tourist destination. According to the National Institute of Statistics, in May and June 2023, more than 1,080,000 people visited the region, spending a total of 4,234,000 nights in hotels, hostels and other tourist rentals. Just by the number of tourist overnight stays, the Algarve leads Portugal in summer. Interestingly, at other times of the year, the region is far behind Lisbon and Porto. Thus, given the seasonal nature of the region's popularity, someone who buys a home there may only be interested in spending part of the year there. The rest of the time, the accommodation can be rented out to tourists as Alojamento local.
The All The Rooms service, for example, can help you assess the potential of different municipalities in the Algarve in terms of tourist rental yields. It allows you to calculate the income from short-term rental properties depending on their location. The service has a free version that provides some interesting data, but 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 a paid version of the service, and I will try to get the most out of what is available in the public domain.
In the free version is available, for example, the number of rental properties rented through AirBnb, as well as the average cost of 1 day of rent in different municipalities of the Algarve in the period from May 13 to August 13 this year. The service gives prices in dollars, and in the table below they are converted to 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. Therefore, the table above shows average values for all properties rented during this period (these can be both large villas and small rooms). Nevertheless, even this data helps to start to get a feel for the situation.
The majority of daily rentals are open in the municipalities of Albufeira (8.247), Lagos (5.039), Portimão (4.095), but in terms of average price per night, São Brás de Alportel leads the way, with far fewer properties on offer. Those who stayed in the Algarve in the summer of 2023 paid on average per night: 197.8 euros in São Brás de Alportel, 192.28 euros in Albufeira, 164.78 euros in Lagoa. The cheapest night in Faro is 122.18 euros.
By the way, if you are interested in buying real estate as an investment, through the portal WithPortugal.com you can contact a manager of tourist property management in the Algarve, which will help you and use the property for your vacation, and receive income from it for the rest of the time.
The most expensive and cheapest properties available in August 2023
In August 2023, Idealista.pt offers 11,109 residences for sale, some under construction, some even in the design phase and some as ruins that need to be rebuilt. In this review, I will include only the completed properties.
The most expensive houses in the Algarve
24.500.000 euros Ocean view villa on a half hectare plot. House of 407 meters, 5 bedrooms, 4 bathrooms. Balcony and terrace. Garden with swimming pool. Energy efficiency class B. Municipality of Albufeira.
19.000.000 euros Villa with 7 bedrooms and 7 bathrooms. The plot of land is 0.7 hectares. The area of the house itself is 740 square meters. The house was built in 2004. The property has a swimming pool, garden, garage. Municipality of Albufeira.
18.500.000 euros The house is 695 square meters. 8 bedrooms, 9 bathrooms. The house was built in 2013. The plot is 1.677 square meters. On the plot there is a garage, a garden and a swimming pool. Energy efficiency class not specified. Municipality of Albufeira.
Minimal prices for ready-made houses, which can be moved into immediately, without making major repairs
71.500 euros Small rustic house of only 45 square meters, without a plot. 1 bedroom and 1 bathroom. The house was built in 1951, so there is no energy efficiency certificate. Located in a village in the municipality of Loulé.
79.000 euros Another village house, this time with an area of 133 square meters. 3 bedrooms, 1 bathroom, terrace. Energy efficiency class F. Municipality of Alcoutim.
79.900 euros A small village house (44 square meters) and a plot of 20 square meters. Built in 2001. No energy efficiency certificate. Municipality of Alcoutim.
85.000 euros One-storey village house of 143 sq. m. Built in 2006. 3 bedrooms, 1 bathroom. The plot is 265 meters. There is a garage. Energy efficiency class E. Municipality of Alcoutim.
If we mention apartments in Algarve, there are 10.616 of them on the portal. For example, let's take studios, which can be used for both your vacation and for daily rent to tourists.
The most expensive studio apartments
349.500 euros Studio of 65 square meters with 1 bathroom. The house was 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. Municipality of Albufeira.
265.000 euros Studio of 30 square meters on the 17th floor in a building with an elevator. The apartment has 1 bathroom and air conditioning. The house was built in 1977. Energy efficiency class D. Municipality of Vila Real de Santo António.
Cheapest studios in the Algarve
71.250 euros Studio of 30 square meters in apart hotel with developed infrastructure: several swimming pools, restaurants, a gym with a sauna, tennis courts, mini golf, 24/7 guardian. It is indicated that the apartment is on the basement floor, but in the photo for some reason, there are windows and sunlight. 1 bathroom. There is air conditioning and central heating. The garage is included in the price. Municipality of Albufeira.
130.900 euros Studio of 80 square meters. 1 bathroom. There is a balcony. The house was built in 2009. Energy efficiency class C. Located in the municipality of Portimão.
133.000 euros Studio of 80 square meters in a residential complex with a swimming pool and a front garden. 1 bathroom. There is a balcony. The house was built in 2009. The monthly payment for the maintenance of the condominium is 500 euros. Energy efficiency class C. Located in the municipality of Portimão.
Summing up about the Algarve real estate market this summer
The Algarve region is insanely popular with Portuguese and foreign tourists in the summer, which creates a seasonal demand for real estate and influences prices. Due to its coastal location and interest from people from wealthier countries, the leisure infrastructure has a target audience of a more affluent public, which in turn keeps property prices high.
According to various sources, real estate prices generally increase throughout the year. However, statistics of real transactions indicate that the actual budget of the transaction may turn out to be lower than the price requested by the seller initially.
Buying an apartment or house in the Algarve can be seen as a source of passive income as well as a purchase of your own home. If the buyer does not plan to live in the Algarve all the time, the high cost of the property can be recouped through daily rentals during the periods when the owner does not use it. If this option sounds interesting to you, you can contact professional real estate agents in the Algarve through our website. Our real estate agent will help you at all stages of the process, both when buying a property and when renting it out.
Wishing you an enjoyable vacation in the Algarve!
Translated from Ukrainian by Rodion Shkurko
