To the thousands of Britons who already own a home in Portugal the answer is easy. Top of the list has to be the weather. Portugal enjoys an enviable climate in the summer, and many parts of the country, such as the Algarve, have mild winters, and even in the north the winters are still more agreeable than in many other parts of Europe.
Second on the list is the cost of living. Even though it has risen quite a bit over the past few years, living in or visiting Portugal is still comparatively cheap compared with other European countries. Although the cost of utilities in Portugal have increased substantially over the last decade or so, the same is true for most European countries. The good news is that many items such as beer and wine are considerably cheaper than elsewhere, and Portuguese wines can be extremely good.
The Mediterranean diet also means the Portuguese are amongst the healthiest in the world, and their life expectation is one of the highest in Europe. There is a public and private health system in Portugal, although the public health system doesn’t cover all of the routine tests taken for granted within the NHS. There are some dentists who work within the public health system, but most are private.
However the cost of dental treatment in Portugal can be much more affordable than in the UK. In spite of the recent economic troubles in Portugal, it’s still a great place in which to buy property for use as a holiday home, or in preparation for retirement. The great advantage of buying Portuguese property is that it can be rented out quite easily when not in use, and at the moment it’s possible to get some great bargains.
Portugal has been praised by the International Monetary Fund for the progress it has made towards regaining access to international debt markets. The IMF has also just approved payment of the next part of the rescue loan for Portugal, worth some €838.8 million.
The approval came as Lisbon has successfully completed its latest review. In spite of the praise given out, the IMF has also warned challenges still remain, and the Portuguese central bank recently forecast the economy would shrink by 1.9% this year which is slightly more than had been previously predicted.
Lisbon is due to gain access to the international debt markets this autumn, but is already considering an early return to the medium and long-term bond markets as it’s been buoyed up by the recent success of the Treasury bill auction. Last September the troika agreed to give Portugal an additional year to meet its deficit targets, as the budget deficit target last year was increased to 5% of national output, while the target for this year was increased from 3% to 4.5%.
This resulted in the government making stringent budget cuts as part of the necessary reforms. Although recent progress has been extremely good, the IMF is still warning that the Portuguese government needs to make sure structural reforms are pursued and met, as this is the only way to ensure long-term growth and employment, and an improvement in the country’s competitiveness. The IMF conceded that Portugal will need continued external support from the euro zone in order to achieve success.
A new study on the quality of life which has been compiled by the University of Beira Interior shows Lisbon as being the top city, followed by Oporto and Albufeira.
The top 30 places in the study are dominated by municipalities in the Algarve, while towns and cities in northern Portugal account for most of the bottom 30 out of the 308 municipalities assessed in this report. The study is based on the indexes of social and economic development.
People living in Albufeira are not surprised it is ranked third in this study as considerable investments that have been made in homes for the young and elderly, in basic sanitation and urban cleanliness, and in education and culture. The city has invested a lot in public spaces such as museums and art galleries and the municipal library, and the county has enjoyed good economic development thanks to tourism.
Albufeira is on the south coast of Portugal and covers an area of around 140 km². It has a population of approximately 40,000 residents, including around 4,000 foreigners. Although the area is known for its tourism, it also has a rich history and culture. In addition its renowned for its excellent food, as one of the principal activities in the region is fishing.
There are no less than three golf courses in Albufeira, and the local council has made considerable efforts to promote sports. It’s also known for its lively nightlife, and for its entertainment. There are also numerous activities available for tourists and locals alike, making it easy to see why this municipality rates so highly for its quality of life.
Last autumn the Portuguese government launched an initiative to try to cut €4 billion worth of public spending through the state reforms, and asked the international Monetary Fund for help. The government has now released a report from the IMF, but it’s not likely to be very popular.
It suggests that large-scale layoffs should be made within the public sector, and has also suggested reductions in pensions, unemployment and health benefits and education to try to save money. Although these cuts are likely to be very unpopular, it’s quite clear the welfare state isn’t sustainable. The aim of these spending cuts is to prepare the public sector within Portugal for the expiry of the bailout from the IMF and the European Union.
Although Portugal received a €78 billion bailout, under the terms of the rescue plan it is scheduled to return to financing itself within the bond market in the second half of this year. However opposition to the Portuguese bailout has increased considerably during the past few months, and it’s likely any of these proposed cuts would further inflame the situation. Many Portuguese already feel the welfare state has been negatively impacted by austerity measures.
These cuts weren’t originally part of the country’s bailout plan which was signed in 2011, but are likely to be evaluated by the IMF and the European Union next month. One of the possible measures suggested by the IMF is a reduction in the number of civil servants of between 10% and 20% which could save up to €2.7 billion. Cutting pensions by 10% would save another €2.3 billion.
According to Christine Lagarde, chief of the International Monetary Fund, Portugal is on track for meeting the targets set by international creditors even though the country is still at risk due to high unemployment. The Portuguese people received praise for being able to carry out such painful but necessary reforms.
In May 2011 Portugal received a €78 billion bailout from the International Monetary Fund and the European Union. In exchange the country had to agree to carry out a three-year reform programme that has resulted in unemployment increasing to more than 16%, and which has plunged the country into a deep recession. Although the IMF is concerned about the high unemployment levels, it is confident structural reforms will help increase growth levels, and will create jobs in the longer term.
The reform programme is now two thirds of the way through, and Portugal recently implemented even more tough measures, including tax increases. However the Portuguese president, Anibal Cavaco Silva, recently announced that he has asked the highest court in the country to decide whether or not this year’s austerity budget is constitutional.
He is concerned that the budget will result in a lower level of income for many citizens, as well as lower social payments. He feels that while everyone will be affected by these measures, that some will be far more affected than others, and that this may be unfair. He has pointed out that the tax hikes will lead to lower output and a decline in tax revenue. The average rate of income tax will increase by 3.4% this year as Portugal aims to cut its budget deficit by 4.5% in 2013, something that will mostly be achieved through tax increases.
Data from the latest housing market survey from the Royal Institution of Chartered Surveyors and Confidencial Immobiliario shows rents and property prices in Portugal are still falling due to continued weak demand. This particular survey covers the Algarve, Lisbon and Porto and shows the weakness of residential property sales, although it is the first time it has revealed any signs of weakness in the residential rental sector.
The numbers of transactions and prices have fallen, as at 72% of those surveyed saw price falls rather than gains. The price falls are largely due a decline in demand rather than an increase in supply, as the number of new listings has fallen since December 2010 and there have been no significant building projects in recent years. This declining demand is expected to continue due to the high unemployment rates and a fall in mortgage lending. Unemployment in Portugal is currently at 16.3%.
However the survey did find that the demand for new build homes tended to be better than the demand for existing stock, as residential developers are seeing less severe price declines than residential estate agents. While some estate agents are still pessimistic about the outlook for this year, others feel that 2013 will be better due to an improvement in credit conditions.
Up until now the residential rental sector had benefited from the decline in property sales, but is now beginning to slow slightly. It had previously been boosted by the fact that more households had been forced to turn to rented accommodation due to constraints over mortgage lending. Demand from new tenants dropped slightly, and the number of new instructions from landlords stabilised.