Benefits to investing in the Algarve property market are twofold. Firstly, the market is inherently robust and has surprisingly weathered the pandemic well. Much growth is forecast for the area. And secondly, the lifestyle that comes with living in the south of Portugal is made for a peaceful retirement. The sun, surf and vibrant local culture are all a part of what makes life here so enticing.
And yes, the Golden Visa days may be ending now, but that doesn’t make this area any less attractive. You will now have to pay 10% tax on your pension (before, this was all free of tax), but you still get a good competitive deal. Especially as the cost of living here is so much lower than that in the UK.
To help better understand the market, new visa requirements and the Algarve lifestyle, we have spoken to the team at One Select Properties. These guys are the experts on everything related to the Algarve property market. They have stacks of advice both for foreign investors and those looking for a tranquil place to retire.
Market Update
The Algarve luxury real estate market has shown guarantees of a steady and resilient market for many years and, for the time being, the pandemic has shown very little impact on lowering prices. Even though the national data may show some vulnerabilities, the European average (7.8% compared to 5%) housing prices have been on the rise in recent months, according to Eurostat. This analysis also places Portugal as the fifth highest growing country in Europe.
Banking & Finance CEOs have shared their opinions in how the housing market could be the great winner in the difficulties to come, backed up by interest rates that remain extremely low. This works alongside European & International agreements that, despite changes, are still attractive to foreign investors.
Experts are of the opinion that house prices are to drop, jointly followed by house sales. Nonetheless, they are confident that the residential market will show the most resilience, in comparison to commercial and touristic, with high interest from both investors and developers. Local businesses are confident that the Algarve’s sunshine and safety will be the two big attractors for tourists, helping resurge the market.
Moody’s report has also come to highlight a trend particular to the housing market, which should result in a growing demand for larger homes in suburban areas, rather than in metropolitan cities: “With people working more at home, (…) consumers will want bigger houses where they can work more comfortably, further away from these urban centres” – Moody’s report 2021.
New Visa Programme
The Golden Visa was launched in 2012 to actively promote foreign investment in Portugal. However, the amendment to the future legislation of July 2021, aims to increase foreign investment across the interior of Portugal. With this change, individuals or investors who wish to have national residency can only do so when investing outside of metropolitan areas like Lisbon and Porto.
The Portuguese Government has confirmed that there will be a roll-out period until 2022, which will allow for all individuals with ongoing processes to complete these still following regulations prior to alterations. What could this mean for the Algarve? Indeed, we could see more investors flock away from the big city centres claiming more interest in property along the Southern Coast. Overall, the approval of this legislation could result in a positive impact for the Algarve.
Since 2009 many people moving to Portugal from other countries have been able to enjoy a 10 year long, highly advantageous tax arrangement, under the Non-Habitual Residency (NHR) Scheme. Nonetheless, changes have also been introduced to this program.
Until 1 April 2020, the scheme allowed for income from foreign pensions to be received tax-free in Portugal. But the 2020 Portuguese Governmental Budget introduced a new flat 10% tax rate on foreign pension income. All individuals that applied for the scheme prior to 1 April 2020, are still eligible for tax exemption on pension income.
Exceptions are applied to all foreign pension income on individuals who performed service professions, including local authority, army, police, teaching, fire service and national health service.
A Romantic Retirement
The Algarve was yet again named the best place for retirement living by Forbes magazine, highlighting this Southern Region for its amazing living conditions that attract those that wish to enjoy their golden years in the sunshine. Life in the Algarve could be the pinnacle of anyone’s life. Sunshine filled days with healthy and affordable cuisine, a stable and safe living, history and traditions to discover and a well-connected local airport.
Although many are the individuals who already thoroughly enjoy their retirement years in the Algarve, real estate experts have said that there is potential to further enhance the lifestyle of this market. Senior citizens who search for better living conditions and an increase in average life expectancy, could present a real business opportunity for Portugal, furthermore in the Algarve.
The future in maximising this market lies in taking all the services already offered and personalising these. Creating homes adapted for the senior population, perhaps single storey housing, or adapting the use of lifts and even the detailed and careful design incorporation of emergency features. The unique selling point is to offer differentiating services, that distance themselves from ordinary homes for the elderly.
For this age group, which chooses to live its golden years actively, healthily and peacefully, there could be real opportunity in reverting residential units into senior living concepts, either for individuals with total autonomy or for people who may need services and medical care. Not having to worry about needing help is both reassuring for investing retirees as well as their families.
