We are now one month into 2010, and we are all wondering what this year has in store for the Algarve Property Market. Whilst it is not much to go by, the first month of the year has shown many positive signs, with enquiry levels increasing, and many new potential purchasers expressing an interest in property here.
Of course, we are still seeing some of the problems left over from the recent market fluctuations. the main one being a lack of research leading to both vendors and purchasers having unrealistic expectations. As we have reinforced throughout last year, there are some "bargains" around, but these are either in the over-supplied part of the market (primarily apartments and townhouses) or, in isolated cases, where individual owners have a need or desire to sell quickly. A new factor that we have seen this year is vendors wishing to dispose of a property in the Algarve at a reduced price, as the funds they receive can be invested in weaker housing markets where there are some very attractive deals on offer. Even though they are receiving less than they would have expected, it will buy them more in another market.
So, what do we think will happen throughout this year, and what do we hope will happen?
Developers who have surplus stock of new build properties have already been reacting to the changing market, in a number of different ways, and there is no doubt this will continue. Many added extras such as furniture packages, air conditioning etc. are being included to tempt buyers. What has been interesting is the way that many of the developers who either have a short term view, or who are relying on volume of sales in a busy market, have simply stopped construction. It does make potential clients wonder if the properties they are selling have good residual value or not. Contrast this with those developers who clearly have confidence on their product, and who are carrying on construction and marketing at a similar pace to the last few years.
We do not believe we will see many more stopped developments, but until this sector of the market picks up, we are sure many developers will slow down their construction schedule. For those that are able to continue their investments in marketing, this should make them all the more visible as fewer of their competitors are advertising.
With regard to this sector of the market, our prediction is that the pace of construction will continue, albeit slowly, and that the smarter developers will continue to innovate and offer incentives. At the bottom end of this market, it will remain price driven and those offering attractive discounts will be able to make sales.
As we move into the middle and upper segments of the market, the story changes somewhat (for a full explanation, please refer to our Property Market Report 2009 http://www.azul-properties.com/azul-properties/news.asp). As the balance of supply and demand tips, the market is more stable. When you combine this with the more reasonable attitudes being displayed by both vendors and purchasers, these sectors of the market should behave in a predictable manner.
Our prediction is that whilst we do not expect to see much growth in these sectors, we expect to see prices holding steady, with the odd "bargain" where the owner has personal reasons for wishing to sell quickly.
Other factors
Despite the doom and gloom that has been lingering recently, there are still some major infrastructure projects, and developments that we hope to see progress during this year. Carefully controlled and planned development is essential if the Algarve is to continue to develop it´s reputation as a quality destination.
Quinta da Ombria, whilst it has been the subject of great national (and international) debate is one of those. We hope to see this project advancing this year, as it will open up the interior ofLoulé council, an area which really needs a headline project to attract people.
The major road works around Loulé are continuing, and once the circular is complete it will allow more civilised access around the city.
The current proposals for a new Ikea commercial centre have caused great local and political debate, with two different locations being discussed. We hope that the various entities involved can come to an agreement in a short space of time, whilst considering all the social, geographical and practical issues involved, and secure this important project for the council ofLoulé.
Bank lending is a key driver for the property market, and we are now seeing the banks keen to lend again, albeit with conservative lending controls. Whilst this conservatism makes the short term market more difficult, it gives good long term stability, something which is extremely important, as we have seen in the last two years.
Conclusions
We have compared the property market in the Algarve before to a tortoise, making slow, steady progress, but always going forward and getting there in the end. 2010 will be another year of slow progress, and some sectors of the market will see little, if any, substantial increases in the volume of properties sold. The continual search for that dream Algarve property goes on for many people, and as the Algarve has proved itself to be one of the most stable European property markets, many people will return to what they feel comfortable with, rather than risking purchasing in one of the new, more risky markets.
