In this article, we will talk about changes in the real estate market of this warmest Portuguese region during the winter of 2022-2023. In addition, it will show the most expensive and cheapest housing options currently available on the market, and we will also take a look at the investment potential of real estate in the Algarve. I promise it will be interesting!
The Algarve is the southernmost region of Portugal, bordered by Spain to the east, the Alentejo region to the north, and the Atlantic Ocean to the south and west. The warm climate and warm ocean water (but this is not for everyone) have made this region the most attractive place in the country for a beach holiday. The Portuguese love traveling to the Algarve during summer and Easter, and many people even have holiday homes there.
The region is also attractive to foreigners. According to the 2021 census, the proportion of people from other countries living in Portugal is 5.2% of the country's total population. This figure reaches 14.53% in the Algarve, and some of its municipalities have almost 26%! More than half of the immigrants living in the Algarve are from the European Union and the United States. However, we often see such messages on social networks that life in the Algarve stops in winter, and therefore many people do not consider this area for permanent residence. Let's see how this specificity of the region affects the condition of the real estate market.
Dynamics of real estate prices in the Algarve
We will start our price analysis with Idealista.pt, one of Portugal's main property search websites. Since February is ongoing, let's examine the November, December, and January data.
As we can see, the prices per square meter on sale grew more or less evenly throughout the year. But rental prices varied slightly: an increase in the spring of last year, which ended with a slight decline in November. This is a summary of all municipalities in the region. Next, we will analyze each municipality individually.
Sale of real estate in the municipalities of the Algarve
The average price per meter in the entire region in January 2023 was 3.064 euros, resulting from an increase from November 2022 and January 2022.
The most expensive is the municipality of Loulé, where an average price of 3.276 euros would have to be paid per square meter of real estate purchased in January 2023. This value was negligibly higher in November 2022, and compared to January 2022, the price increased by 18.9%. Loulé is located in the heart of the Algarve but belongs to the region's eastern part. You can find everything in Loulé: beaches, tennis schools, golf courses, fitness clubs, shopping centers, churches, castles, casinos, etc. Perhaps the most famous city in Portugal for golfers is Vilamoura. And it is located precisely in the municipality of Loulé.
It is followed by 6 municipalities with prices from 3.000 per square meter:
- municipalities Lagos, Vila do Bispo, Lagoa, Albufeira, and Aljezur, located in the western part of the Algarve;
- the municipality of Castro Marim, located in the eastern part of the Algarve.
If we talk about municipalities from this group located in the west, then most of them are known for a high concentration of immigrants (20-26% of the population). Since November 2022, prices per square meter have been changing upwards, somewhere less noticeable, somewhere more. At the same time, the annual price growth was quite significant, from 10.9 to 33%.
And the municipality of Castro Marim, located to the east and bordering Spain, performed an incredible 49.5% year-over-year price increase.
It`s followed by a group of municipalities with an average price per square meter from 2,000 euros:
- Portimão and Monchique, located in the western part of Silves;
- Vila Real de Santo António, Faro, Olhão, and São Brás de Alportel, located in the eastern part of Tavira.
Prices per square meter in these municipalities have generally increased over the past three months, except for Monchique and Olhão. Nevertheless, in the context of the year, there is an increase from 5.3 to 21.7%.
The latest on our list is the Alcoutim area in the northeast of the Algarve. It does not have access to the ocean, but it borders on Spain, which can be an advantage in some cases. However, the average cost per square meter here is very different from all other municipalities of the Algarve and is 841 euros. This is the result of a slight decline in prices since November 2022. However, since January 2022, the price has increased by 5.8%.
As we can see from these data, except for Loulé and Castro Marim, the most expensive municipalities of the Algarve considering buying housing are concentrated in the west of the region. Proximity to the ocean definitely affects the cost of housing upward.
Can you really trust Idealista.pt's statistics?
The statistics of the portal Idealista.pt are based on data taken from the ads for the sale of housing on this portal. We use it to evaluate the situation quickly, but it cannot be the ultimate truth. After all, you can sell housing without publishing on Idealista, although in the case of Algarve, this situation will be more of an exception. It is also possible that, directly during the dealing, its amount will differ from the price requested by the seller in the ad.
Comparing it with the information on completed deals provided by the National Institute of Statistics of Portugal (INE) is helpful to test how much you can rely on the data from Idealista.pt.
The Institute of Statistics publishes complex reports quarterly. Currently, the most recent report available is for the third quarter (July - September) of 2022. Therefore, we will compare the data for the third quarter of 2022 from Idealista.pt and the Institute of Statistics to understand how prices on Idealista.pt reflect the actual situation with sales now. Let's take several municipalities of the Algarve as an example.
As we can see from this comparison when making sales transactions in the third quarter of 2022, the average cost per square meter was lower than the sellers requested on Idealista.pt. The most significant discrepancy, 50-51%, is observed in the municipalities of the eastern part of the region, Vila Real de Santo António and Castro Marim. Regarding the five most expensive regions, the difference between the cost per square meter declared in the announcement for sale and the actual cost at the time of the deal falls from 10.64% to 33.26%.
What could cause such a difference? Firstly, the Institute of Statistics and Idealista.pt use different formulas for calculating averages. Therefore, a perfect match is impossible. Secondly, the portal Idealista.pt often contains several ads for the sale of the same object. This situation is especially typical for very expensive real estate. Different agencies sell it at the same or very similar prices. Thus, for Idealista.pt, the share of more expensive real estate increases, while the object is actually sold only once, which is exactly reflected in the data of the Institute of Statistics.
It would help if you also considered the possibility of a time gap between the publication of the sale announcement and the actual dealing. And, of course, it is a usual situation when owners boost prices when publishing on the website, anticipating bargaining on the buyer's part.
Ultimately, we will use the Idelista.pt statistics for a general estimate of the situation, just because we do not have more accurate tools that describe the current situation and are available now. It makes no sense for us to wait 3 months to see the report of the Institute of Statistics for the 4th quarter of last year.
Long and medium-term property rentals in the municipalities of the Algarve
To assess the position on the market for medium and long-term rentals, we turn to Idealista.pt again
The average cost per square meter of rented housing for the whole region is 11.6 euros. In the last 3 months, as well as throughout 2022, this value has been growing.
The municipality of Loulé leads regarding the cost of renting a square meter, which was 13.3 euros in January 2023. However, the price growth rate is one of the lowest in the region (0.76% for 3 months and 10% for the year). The next, Lagos, with 12 euros per square meter, breaks away from both Loulé and Albufeira and Portimão, which are in third and fourth place (11.4 euros per meter). These 2 municipalities experienced the most substantial price increases during the last quarter (9.62 - 11.76%) and throughout 2022 (26.2-27.7%).
It is interesting to note that, anyway, the cost of rent increased in all municipalities in 2022, even though prices decreased in two of them (Tavira and Olhão) in the 3rd quarter of 2022.
Daily rent of real estate in the Algarve municipalities
As mentioned earlier, the Algarve is a warm-weather holiday destination, so if you consider buying a home for an investment, long-term rentals may not be as attractive as short-term rentals. For example, the All The Rooms service can help you predict the income from a daily rental property based on its location and size. In this case, data on the average cost of daily rent of such housing, rented in the same area of the city and its occupancy, will be used for the calculation. The service is interesting, but the most detailed valuable information to the investor is available only in the paid version, which is logical.
For example, in the free version, the average cost of 1 day of rent in different municipalities of the Algarve is available from November 13, 2022 to February 13, 2023. The service offers prices in dollars, but in the table below, they are converted into euros at the current exchange rate.
Notably, these data are not linked to the cost per square meter of housing, so the table shows the average values for all properties rented during this period (villas and studios). Nevertheless, even this data helps navigate the situation. By the way, if you are considering purchasing real estate for investment purposes, you can request a tourist property management service in the Algarve on our website, which organizes its rental while the owner does not use it.
The most expensive and the cheapest property available in February 2023
Currently, Idealista.pt offers 10.428 houses for sale. Some of them are under construction, some are even at the design stage, and some are in the condition of ruins that need to be rebuilt. Therefore, in this review, I will include only finished objects.
The most expensive houses in the Algarve today
24.500.000 euro Villa with ocean view on a plot of half a hectare. House of 407 meters, 5 bedrooms, 4 bathrooms. Balcony and terrace. Garden with swimming pool. Energy efficiency class B. Municipality of Albufeira.
20.000.000 euro Estate in Ria Natural Park Formosa. House of 247 square meters on a plot of 20 hectares. House with 1 bedroom and 2 bathrooms. Infrastructure for fish and shellfish farming, as well as for ecotourism. Municipality of Tavira.
14.500.000 euro Three-storey villa with 7 bedrooms and 7 bathrooms. The plot of 1 hectare. Small swimming pool. Municipality of Loulé.
Ruined houses can be bought from:
15.000 euros A decently ruined house with an area of 30 square meters. The village has electricity and other ruins for sale. Municipality of Castro Marim.
Minimum prices for finished houses near the ocean:
149.000 euro A two-storey house with an area of 80 square meters, without a plot. 2 bedrooms, 2 bathrooms. Energy efficiency class E. It is located in a village in the municipality of Loulé. The ocean is 23 kilometers far.
149.000 euro Another house in the same village. The area is 90 square meters, without a plot. 2 bedrooms, 1 bathroom, terrace. It looks like a relatively recent renovation. Located in a village in the municipality of Loulé. The ocean is 23 kilometers far.
158.500 euros A one-bedroom house with a relatively fresh renovation. The area is 69 square meters, without a plot. It is located in the city center of Portimão. 3 kilometers to the beach.
168.500 euros A two-storey house with one bedroom and a fresh renovation. The area is only 46 square meters, a typical accommodation for tourist rentals. It is located in the city center of Portimão. 3 kilometers to the beach.
185.000 euro A three-storey house with 2 bedrooms and 2 bathrooms. A small area of only 65 square meters. Energy efficiency class D. It is located in the city of Silves. The ocean is about 15 kilometers far.
Now let's take a look at the apartments, 8.821 of them are offered on the portal. For example, let's take studios that can be used for your vacation and daily rent to tourists.
The most expensive apartments:
650.000 euros A penthouse of 97 square meters with 1 bathroom. Energy efficiency class B. It is located in the city center of Albufeira.
420.000 euros A studio of 63 square meters with 2 bathrooms and 2 bedrooms (it is not clear why this apartment is classified as T0, apparently because it is so tiny). Energy efficiency class D. It is located in the center of Vilamoura, 2 minutes from the beach.
The cheapest studios near the ocean:
75.000 euros An apartment of 29 square meters is located in the basement. Sunlight does not reach it. 1 bathroom. Energy efficiency class C. It is located on the territory of the Hotel Paraíso in the city of Albufeira. The tenant will have access to the infrastructure of the hotel. 10 minutes walk to the beach.
87.600 euro An apartment in a residential complex with a swimming pool and gym. Area 28 meters. 1 bathroom, 1 parking lot. Energy efficiency class C. Located in the municipality of Lagoa. The exact location is unknown, so it may be far from the beach.
94.500 euro An apartment in a club complex with reception, swimming pools, jacuzzi, garden, and tennis court. Area of 42 meters. 1 bathroom, balcony. Energy efficiency class B. It is located in the municipality of Albufeira, almost on the beach.
Concluding the Algarve property market this winte
The Algarve region is a point of attraction for Portuguese and foreigners during the warm season. It's a kind of all-Portuguese resort, and proximity to the ocean is essential in determining the region's real estate price. As we can see from various sources, real estate prices have been rising throughout the year in all municipalities of this region. However, the actual selling prices were lower than the average prices requested by the sellers.
Consider its investment potential if you are thinking of buying a holiday home in the Algarve. That is, if you plan to use housing only some year-round, you can rent it out daily. Yet, oddly enough, there is demand even in winter.
A professional real estate agent in the Algarve will help you at all stages: both when purchasing a property and renting it out. And if you doubt that the Algarve is for you, maybe you will like Lisbon or Porto.