Summer is the period when Madeira is the most popular with Portuguese and foreign tourists. The average daily temperature is around pleasant 25 degrees Celsius, lots of sunshine and few rainy days, cooling sea breezes... In this article, we are going to understand whether this seasonal increase in interest in the island affects the prices of real estate on it. We will analyze the prices of houses and apartments for sale, long-term rentals and tourist rentals, as well as study the offers for sale available today.
Real estate price dynamics in Madeira
We will start our exploration of the archipelago's real estate market by looking at the statistics provided by Idealista.pt, one of the main real estate resources in Portugal. Since August is not over yet, we will look at the data for the last 3 full months: July, June and May.
The charts show that prices per square meter for sale grew evenly, albeit slowly, during the year. On the other hand, the prices per square meter for rent started increasing more noticeably in the last few months. These graphs show the average values for all the municipalities of Madeira. In the following, we will look at each municipality separately.
Real estate for sale in Madeira municipalities
The table above shows the average price per square meter of properties by municipality within the Madeira region advertised for sale on Idealista.pt (columns 1-3). Column 4 shows how the price changed over the three months: by how many percent it 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 most expensive municipalities have an average cost per square meter between 2,100 and 3,000 euros. This list includes the capital, Funchal, Calheta, Ponta do Sol, Ribeira Brava and Câmara de Lobos, all located in the south and southwest of the island. Quarterly changes in them were not at all homogeneous: somewhere the growth was moderate, somewhere high, and in Ribeira Brava there was a decrease in the average price per square meter. Annual growth was also quite heterogeneous: from 15.7% in Câmara de Lobos to 53.5% in Ponta do Sol. By the way, this last neighborhood turned out to be the leader in terms of annual growth rate in Madeira.
The next group of municipalities has prices per square meter between 1,300 and 1,800 euros:
- The municipality of Santa Cruz, located in the southern part of the island of Madeira;
- Machico, Santana and São Vicente, located in the north.
Prices per square meter there varied even more diversely than in the previous group. Speaking about the quarter, São Vicente showed an absolutely amazing growth of 34.73%. Machico, on the contrary, showed a price decrease of 4.86%. Over the year, prices rose strongly (27-47%) everywhere except Machico (only 8.9%)
When it comes to the island as a whole, the southern municipalities of Madeira continue to be more expensive than the northern ones.
Can the statistics of the Idealista.pt website be trusted?
Idealista.pt is the most famous real estate search site in Portugal. It is often the only source of knowledge about the real estate market for foreigners. At the same time, the statistics that this site provides us with are based only on ads from sellers and landlords posted on the same site. Naturally, it cannot claim to be a 100% true reflection of the real situation on the market, as it does not include any information on sales. To check how much we can trust the figures from Idealista.pt, let's compare them with the information on completed transactions available on the website of the Portuguese National Institute of Statistics.
The most up-to-date data concerning Madeira available today is for the first quarter (January - March) of 2023. Therefore, unfortunately, we cannot know right now what the real prices per square meter of real estate in Madeira this summer are. What we can do is compare the available first quarter data from both sources. This will give us an idea of how close to reality the figures we see now on Idealista.pt are.
The table shows the average prices per square meter from both sources, as well as the difference between them in percentage terms. For some reason, the report of the National Institute of Statistics for the 1st quarter of 2023 included only Funchal and no other Madeira municipalities.
As we can see from this comparison, when making sales transactions in the first quarter of 2023, the average price per square meter was lower than the sellers asked for on Idealista.pt. The difference is quite significant, 23.6%. There are many possible explanations for this discrepancy.
What is the bottom line, can we trust the price statistics on Idealista.pt? I would say that in the case of Madeira, this statistic is suitable for a very rough assessment of the situation, simply because we do not have more accurate tools that describe the current situation and are available right now. Nevertheless, it cannot be confidently relied upon. Anyone who is seriously considering buying a home in Madeira, it is best to consult a professional real estate agent who knows the specifics of the Madeira archipelago.
And what can you say about real estate in Madeira as an investment?
Long-term rental property in Madeira
Again, let's turn to the Idealista.pt website to see the price trend for long-term rentals.
Once again, for some reason, the data is only about Funchal. The average cost per square meter of rented housing in July 2023 is 14.2 euros. Since May, this year, this figure has increased by 10.94%, which is a significant change. And since July 2022, the increase in the cost per square meter rented was as much as 28.9%. When it comes to Funchal, the growth in rental prices is clearly outpacing the growth in property purchase prices.
Tourist rental property in Madeira
Madeira has the most tourists in summer. According to the National Institute of Statistics, the most popular period for vacationing there is from June to September. For example, in June 2022, Madeira recorded 816,013 tourist overnight stays.
If you consider buying a home in Madeira as an investment, it is interesting to estimate how much income you can get from short-term tourist rentals. Let's turn to All The Rooms service, which will help you find out the number of properties offered for tourist rentals in Madeira through AirBnB, as well as the average cost of 1 day's rent in different municipalities of Madeira.
The table above shows all the municipalities of Madeira. Column 1 shows the number of tourist rental properties in each of them. And column 2 shows the average cost of 1 night in these properties.
It should be noted that unlike the data from Idealista.pt and the National Institute of Statistics, which we analyzed earlier, All The Rooms is not linked to the average cost per square meter. Therefore, the table above shows the average values for all properties rented during this period, regardless of their size (they can be large villas or small rooms). Nevertheless, even this data helps to begin to orient yourself in the state of affairs.
The majority of daily rental properties are open in the municipality of Funchal (2,726), but this municipality is behind Calheta, Porto Santo and Ribeira Brava in terms of average price per night. The difference can be explained both by the higher competition in the municipality of Funchal and the fact that these municipalities can offer tourists very different accommodation. For example, in Funchal it may be apartments and studios, while in other municipalities it may be villas. Since a villa is more expensive than a studio, statistically other municipalities will be more expensive than Funchal.
In any case, this comparison can be a starting point in exploring the potential of Madeira real estate as an investment destination.
The most expensive and cheapest properties available in August 2023
Idealista.pt currently offers 2,172 houses for sale. In this review, I will only include completed properties.
The most expensive houses in Madeira today
6.000.000 euros Two two-story houses on a 5,000 sq ft lot. Main house with 4 bedrooms and 3 bathrooms. The second house can be used as a maid's house. Laundry and storage are also located there. No energy efficiency certificates. Municipality of Funchal.
4.990.000 euros Three-story house with 4 bedrooms and 7 bathrooms. Private gym and outdoor sports field, small swimming pool, garage. Plot of 2.3 hectares. Energy efficiency class A. Bay view. Municipality of Funchal. This house has already been featured in the spring price review.
4.500.000 euros Restored 17th century manor house on a 1 hectare plot. 6 bedrooms, 8 bathrooms. Garage, swimming pool. Energy efficiency class E. Municipality of Funchal. This house was also featured in our spring review and has not yet been sold.
4.250.000 euros 2 houses on a plot of 2.150 square meters. The main house is two-story with 3 bedrooms. Guest house with one bedroom. All sold as a secondary property, it is written that it was built this year, but there are no real pictures, instead there are plans and renderings. Energy efficiency class A. Municipality of Ponta do Sol.
Minimal prices on finished residences where you can move in without major renovations right away:
90.000 euros Two-story house of 107 square meters, built in 2005. 3 bedrooms, 1 bathroom. There is a garage. The building is a type of "em banda", a kind of townhouse, where several houses adjoin each other with walls. No energy efficiency certificate. Municipality of Santana.
115.000 euros House of 39 square meters, located on a plot of 180 meters. 1 bedroom, 1 bathroom, terrace. The facade requires repair. Municipality of Funchal. This house was also in the spring review.
120.000 euros House of 146 square meters, on a plot of 452 meters. 3 bedrooms, 2 bathrooms. Energy efficiency class D. Municipality of São Vicente.
Now let's study the market of apartments for sale, of which there are 2.178 on the portal. Many offers, especially expensive ones, are either still obviously under construction, or the ad says nothing about it, but there are no real pictures. In this review, I have included only objects where we can say exactly that the object has been commissioned, or where there are real pictures. For example, let's take the T2 typology, i.e., apartments with a living room and 2 bedrooms.
The most expensive apartments:
1.300.000 euros Apartment of 214 square meters in a residential complex built in 2020. 2 bedrooms, 3 bathrooms. 5th floor in a building with an elevator. Sold with furniture and appliances. Energy efficiency class A. In the house there is a swimming pool and a gym. Municipality of Funchal. We saw this option in the spring review too.
1.200.000 euros Apartment of 256 square meters on the 11th floor. 2 bedrooms, 3 bathrooms. Balcony. The house has 3 swimming pools and a gym. Garage included in the price. Energy efficiency class B. Municipality of Funchal.
1.100.000 euros An apartment in a new project. It says it's finished. The area is 148 square meters. 2 bedrooms, 1 bathroom. Balcony. Garage is included in the price. Energy efficiency class is not specified. Municipality of Funchal.
The cheapest apartments:
129.000 euros Apartment of 90 square meters. 1 bathroom, balcony. The house was built in 2009. Energy efficiency class C. Municipality of Santana. We saw this apartment in the spring review. It hasn't been sold yet.
140.000 euros The apartment has an area of 122 meters. 2 bedrooms, 1 bathroom. Located on the 1st floor. The house was built in 2002. Garage is included in the price. Energy efficiency class C. Municipality of Santa Cruz.
145.000 euros The apartment has an area of 87 meters. 2 bedrooms, 1 bathroom. Balcony. Located on the 2nd floor in a house without an elevator. The house was built in 1994. Garage is included in the price. Energy efficiency class C. Municipality of Santa Cruz.
145.000 euros Apartment of 80 meters. 2 bedrooms, 1 bathroom. Located on the 3rd floor in a house without an elevator. It has a license for tourist rentals (alojamento local). Energy efficiency class B. Municipality of Machico.
Summarizing, what can be said about the Madeira real estate market this summer
As we could see from data from different sources, property prices in sellers' listings have been rising throughout the year in all municipalities of this region. Nevertheless, there are reasons to believe that the demand for real estate in Madeira is not as "heated" as in other popular places in Portugal: Algarve, Lisbon and Porto. Firstly, properties for sale that we saw 3 months ago are still unsold. This is true for both the most expensive and cheapest options. Secondly, based on the statistics on actual sales, we can conclude that the actual prices at sale will be significantly lower than what a buyer would expect if they were guided by the Idealista portal.
The largest centers of attraction for tourists are Funchal and Calheta, which is where most tourist rental properties are located.
Whether you are looking for residential real estate in Madeira for your residence or as an investment property, through WithPortugal.com you can get in touch with professional real estate agents who will help you find and purchase the best option.
Translated from Ukrainian by Rodion Shkurko