This is the market commentary regarding the credit crunch and how it has affected the Algarve market. This report was written in October 2008.
Algarve property market remains sound
It is important to remember that living in the Algarve can be akin to living in a bubble. Many momentous events seem to pass us by and we carry on without a care in the world. However, even here all normal topics of conversation have been swamped in recent months by the on-going developments in the global credit crunch. The financial crisis has filtered down and we too are feeling the effects.
There has been much confusion about exactly what the credit crunch is. In very simple terms, it is a reluctance of the banks to lend money. The reasons behind the reluctance or inability of the banks to continue lending is a long and complicated one, but financial institutions have had to adjust their attitudes to risk and reduce their lending accordingly. What seems like a fairly basic issue has had the effect of a financial tidal wave.
The mortgage market in the Algarve has always been very conservative, with risky products such as self-certification mortgages very hard to come by. Mortgages for anything close to 90% of the value of a property are never easy to organise. Mortgages have been mainly granted here on the basis of ability to pay, rather than complicated (and frankly nonsensical) calculations involving multiples of gross salaries and such like. Although it is fair to say that the banks here are now more cautious than they were this time last year, they are certainly more flexible than when I applied for my first mortgage six years ago.
The current problem is more a lack of confidence on the part of potential purchasers, coupled with the natural human tendency to wait and see what everyone else is doing and then follow suit. Whilst there is some logic in this, it never worked very well as a life-plan for lemmings.
In the Algarve marketplace we are generally dealing with the luxury purchase of a second home rather than an essential home. There is a market for primary habitation here but it is simply not a large part of our business.
Ultimately, when someone desires something but has the ability to wait in the belief that the benefits of waiting outweigh the disadvantages, that person will hold on unless something tips the balance in favour of taking action immediately. This limbo period is a simplified explanation of how the property market is currently behaving in the Algarve.
It is no secret that the Algarve is, generally, not a cheap destination. We have excellent and improving infrastructures, a wonderful cultural entertainment programme, countless local events and, of course, the weather, the beaches and the golf venues.
All of this, coupled with high demand, has resulted in property here appreciating steadily, with an average increase of 7% a year over the last 25 years or so.
With the credit crunch, there were fears in some quarters that the market would crash, property prices would come tumbling down and many people would be facing negative equity. But that's not quite what has happened.
Yes, many properties have been reduced in price, but only because the vendors are being more realistic and less speculative, or as a result of the owners desire/need to sell within a given time frame, or because there is over supply of certain types of property.
Properties that are in plentiful supply, especially holiday apartments, are suffering much more in the current market than those that are hard to find. Unique, well located, well constructed quality properties are still in demand.
There are undoubtedly fewer buyers out there now than before, but the vendors remain optimistic and there are historical and logical reasons for this. The Algarve property market has always been slow, with properties sometimes taking months or years to sell. The fact that the present international problems will slow the whole process down further is not a great shock to many people, as they never expected to sell their house quickly anyway.
Many vendors here either live permanent in the house they are selling or occupy it as a second home. Either way it is available to them whilst it is on the market. We are also seeing many owners now deciding to rent their properties to mitigate ongoing expenses. Long-term rentals are always in demand and rentals during the peak periods, which are not just restricted to the summer months, have always produced a good income.
Should I buy in the Algarve now or wait? is a question on many clients’ lips. This depends very much on your personal situation. If you are looking for a particular property and you have funds in place or the capacity to take a mortgage, then keep looking and buy whilst the market is not booming.
If you need a very high level of finance, before you even start looking at property talk to a mortgage broker or a local bank to see if you can obtain a mortgage at this troubled time.
If you want a holiday property or rental investment and you are flexible about the type and location, then look around and find yourself a good deal.
Another frequent question: Does the Algarve remain a good option for investment and as a holiday destination? Unlike many of the emerging regions, particularly those in Eastern Europe, the Algarve has had lots of experience as a holiday destination. We have established international and national transport links and a high flow of visitors. Many of the ‘new’ destinations have seen phenomenal increases in the value of property, but this has been quickly followed by enormous drops in property value as the market has weakened.
As less people want to travel to these destinations, many airlines are reducing the number of flights or cancelling routes entirely, making affordable travel difficult. These are problems that the Algarve does not have. With the Portuguese Government and the regional tourist board aiming to promote the Algarve as a year-round destination, its appeal is widening.
The region has benefited over the last decades from a massive influx of investment, and the income this has created for local authorities is being used not just for physical improvements but also for funding for cultural events and entertainment.
We have a region which has an existing reputation and market, a constant drive for quality and a controlled development plan. Add all this to the natural environment we are blessed with, and there cannot be many better destinations such a short, direct flight away from the United Kingdom and Ireland.
When you look at the growth in the Algarve property market, the average increase is about 7% per year. This is not a headline making increase, particularly when new, cheaper destinations have claimed 40% in a year, but it has proved to be a steady and sustainable increase. And in these turbulent times, it is surely better to be the tortoise than the hare.
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Loulé Ring Road opened
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The ring road around Loulé was finally opened last week. more
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30-June-2010
We are often asked how to find a bargain property in the Algarve. more
Algarve Property Update
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Our property market update for April has now been published, with reduced price and new properties and market commentary. more
Algarve Property
22-Mar-2010
Our February update has now been published, with reduced price and new properties and market commentary. more
Azul Properties Office Move
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We have moved and updated our Loule office. more
Algarve Property Update
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Our January update has now been published, with reduced price and new properties and market commentary. more
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We have published our commentary regarding the outlook for the Algarve property market during 2010. more
Property Market Report 2009
15-Jan-2010
Our comments and report regarding the Algarve Property Market for 2009 have now been issued. more
Azul Properties on Twitter
25-Jan-2010
We have launched a twitter feed, giving up to date Algarve property information. more
New properties for sale
8-Jan-2010
We have a number of new properties which have been added to our portfolio recently. more
New properties for sale
13-Nov-2009
We have a number of new properties which have been added to our portfolio recently. more
Christmas Holidays
19-Dec-2009
Our office will be closed for Christmas at the following times. more
Reduced price properties
4-Nov-2009
During October 2009 we have some properties available at reduced prices. more
Halloween in Loule
03-Nov-2009
Algarve news: Halloween was celebrated in style in Loule this weekend. more
Properties with reduced prices
14-Oct-2009
We have some properties with prices that have been reduced during September. Our latest property market summary has also been published. more
Get Real Radio
23-Sep-2009
We will be participating in the Algarve FM talk show at 8pm on the 24th September. more
Price reductions-August
09-Sep-09
We have a number of properties with reduced and flexible prices, altered during August. more
Property Exhibition-Utrecht
9-Sep-09
We will be attending the SecondHome exhibition in Utrecht, Holland. more
Price Reductions-July
17-Aug-2009
During the month of July, we have had some property price reductions, and other properties where the owners will consider offers. more
Price Reductions-June
9-July-09
We have some properties with reduced prices, and others with flexible prices. more
Price Reductions-May
15-Jun-2009
During May 2009, the following properties have had their prices reduced. more
Palmeiras Resort
5-Jun-2009
Azul Properties is pleased to announce that a major advance has been made in respect of the prestigious Palmeiras Resort in Tavira. more
Querenca-New land zoning
27-May-2009
The Plano de Pormenor (detailed plan) for Querenca is in public discussion. more
Price Reductions-April
5-May-2009
During April 2009, the following properties have had their prices reduced. more
Price Reductions-March
10-Apr-2009
During March 2009, the following properties have had their prices reduced. more
Price Reductions-January
28-Jan-2009
During January 2009, the following properties have had their prices reduced. more
Land Registry Online
19-Jan-09
The Registo Predial (Land Registry) now has many online services available. more
Energy Certificates
7-Jan-09
As of the 1st January 2009, energy certification (Certificação Energética) must be provided by anyone who is selling or renting a property in Portugal. more
Price Reductions-December
07-Jan-2009
During December 2008, the following properties have had their prices reduced. more
Christmas Holidays
18-Dec-2008
Our office will close for Christmas holidays on the following days. more
Price reductions-September
21-Oct-2008
During the months of August and September, the following properties have had their prices reduced. more
Capital Gains Tax Update
18-Aug-2008
Algarve news: A new ruling allows for more expenses to be deducted from capital gains. more
Price reductions-May
04-Jun-2008
The following properties have had their prices reduced in the last month. more
Price reductions-June
30-Jun-2008
During the month of June, we have a number of properties whose price has been reduced. more
Price reductions
19-May-2008
We have a number of properties in our portfolio whose prices have been recently reduced. more
Online IMT calculation
27-July-2007
IMT (formerly known as SISA) can now be calculated on our web site. more
Loulé PDM updated
15-Jan-2008
Algarve news: In line with Protal, the PDM for the council of Loulé has now bee revised. more
Prestige Property Website
24-May-07
Our new website, to promote prestige and luxury properties in the Algarve, has been completed. more
Missing girl
22-May-07
A young girl, Madeleine McCann, has been missing since the 3rd May. Please visit www.findmadeleine.com to see if you can help. more
Prestige Property Website
9-Apr-07
We are currently designing a new website, dedicated to the promotion of prestige properties. more
Trespasse Update
26-Jan-2007
We have had a number of queries from clients regarding the recent changes in legislation that affect the trespasse system of ownership. more
18-12-2006
Our office will be closed for Christmas at the following times. more
Property Price Reductions
19-Sep-2006
As we are now entering the time of year when the property market is quieter, we are able to offer a number of properties whose prices have been reduced to increase the chances of a sale in the latter part of this year. more
Business Factsheet
2-Aug-2006
We have released a new factsheet dealing with the intricacies of buying commercial property and starting a business in Portugal. more
Price reductions
25-July-2006
We are able to offer some very good value properties, now reduced in price. more
Mortgage Update
7-July-2006
Many changes have been made to the types of mortgages now available for non-residents. more
Bargain Properties
16-May-2006
We are able to offer two substantial properties whose prices have been reduced for a rapid sale. more
Currency Exchange
16-Apr-2006
We have formed an alliance with Travelex, the world's largest foreign exchange specialist to provide our clients with fast, efficient and cost effective currency exchange solutions. more
New Mortgage Offers
11-Jan-2006
New mortgage products have been launched/revised here in Portugal in January 2006. These loans are available to non-residents, and are designed to appeal to those wanting to invest in property in Portugal. more
A Place in the Sun
6-Jan-2006
Once again, the Channel 4 television programme “A Place in the Sun” has highlighted Portugal as one of the best places in Europe for property investment. more
Website Update
09-Nov-2005
We have updated many areas of our website, adding a number of new items and updated information. more
Mortgages for non-residents
26-Oct-2005
We have expanded the range of mortgages we can offer to non residents, with rates below 3%. more
Christmas Holidays
21-Dec-2005
Our office will be closed for Christmas at the following times. more
All Change!
23-Aug-2005
Azul Properties now operating as an independent Real Estate Agent. more
Market Report Released
29-Apr-2005
Our market report, considering the current status of the property market in the Algarve is now available. more
New furnishing partner
14-Dec-2004
We have negotiated a deal to provide high quality interior solutions for our customers. more
New golf course opens
14-Sep-2004
The Arnold Palmer designed Victoria Golf course has opened in Vilamoura. more
Online IMT calculation
25-Nov-2004
We now have a facility to calculate IMT (SISA) on our website. more
New Regulations
16-Aug-2004
As of the 16th August, a new law is in force requiring all new houses to have a BI (passport). more
New Properties for sale
31-May-2010
We have a number of new properties which have been added to our portfolio recently. more
