Portugal’s appeal to foreign investors is continuing to grow, after reports in July confirmed that the country’s Golden Visa investment scheme has earned Portugal more in revenue during the first six months of 2014 than it did during the whole of last year.
According to Portugal’s SEF immigration office, by June the amount of funds brought into the country by Golden Visa candidates had reached €417 million, €100 million more than the €307 million generated by the scheme during the whole of 2013. A total of 670 new Golden Visas were issued during the first six months of 2014. This is good news for the mid to high end of the property market in Portugal, which in includes luxury villas in the Algarve.
The Golden Visa scheme gives foreign investors from outside the EU who invest in private property or a company in Portugal the right to live in the country. Successful candidates are also free to travel around the EU, thanks to the Schengen Agreement, and after six years they can apply for Portuguese citizenship.
To qualify for the Golden Visa scheme, candidates have the choice of investing €1 million in a public or private company or fund, setting up a business and creating 10 new jobs or buying property, which can be any type commercial, residential or land for a minimum value of €500,000.
Property can be owned jointly and loans can be obtained to finance properties over and above the €500,000 equity stake. An applicant can apply to bring his or her spouse and his under age children as well as those who are students, who do not have to be in full time education as long as they are attending a recognised course. Dependent parents (ie, those who are over retirement age) may also join the applicant.
Owning a home in Portugal is back in fashion in 2014, according to the latest RICS/Ci Portuguese Housing Market Survey (PHMS), which showed a significant pick up new buyer enquiries during January.
This increased activity in Portugal’s housing market has pushed the sales expectations for the coming three months to its highest level since the PHMS survey was launched in 2010.
The national confidence index – is a composite of the sales and price expectations series – increased to +16 from the previous figure of +6. This, again, is the best reading since the survey’s inception and marks the third successive month in which a positive value has been posted.
The pick-up in buyer interest and confidence has, however, yet to feed through into prices of property in Portugal. Indeed, prices are still falling (albeit at a moderating pace) and are expected to continue to do so in the near future. In the lettings sector, tenant demand rose marginally whilst landlord instructions fell for the fourth straight month. Rents continue to decline, with little respite expected in the short term. Furthermore, future lettings activity is only anticipated to rise modestly.
On a regional level, new buyer enquires increased substantially across all areas covered by PHMS. Likewise, sales are expected to grow materially throughout each region and this growth is expected to be sustained.
RICS Senior Economist, Josh Miller said: “The January results show buyer interest returning to the market while sales are expected to pick up in the months ahead. For the moment however, there is little sign of this filtering through into prices. The recent GDP figures also portray an upbeat message although the recovery still has a way to go until it is firmly entrenched.”
Interest in Portuguese property saw a huge hike last month, according to the leading UK property portal Rightmove Overseas, whose December report for on-line searches was dominated by destinations along Portugal’s Silver Coast.
The destination on Rightmove Overseas that received the highest increase in searches for property in terms of percentage during December was Alvaiázere, near Leiria on the Silver Coast. The second highest increase was in Ansião, also in the Silver Coast area, followed by Caldas da Rainha a little further south, and then Leiria. The term with the fifth highest increase in searches was the Silver Coast itself.
Commenting on the climbers and fallers in this month’s search chart, Shameem Golamy, Head of Rightmove Overseas said: “Interest in Portugal grew significantly in December, with Portuguese destinations featuring in the top five climber positions. National television campaigns and media advertising appear to be raising awareness to the benefits of buying property in Portugal, however what is particularly interesting is the amount of traffic we are receiving from international users. After the UK and Portugal, people from Canada, Hong Kong, the UAE and the US have browsed Rightmove Overseas to look for Portuguese property. So why the interest from non-EU countries? Well, it’s highly possible that these are potential investors looking to purchase property for that all important Golden Visa.”
Portugal’s performance in Rightmove Overseas’s most recent report contrasts with that of Spain, which dominated the list of destinations that saw the highest decrease in searches. Compared to Portugal’s famous Algarve in the south, the Silver Coast is known for its dramatic cliff-lined beaches, cooler climate, greener countryside and minimal development.
Tourism businesses and homeowners who let their property in the Algarve will welcome the news that the Algarve Tourism Association (ATA) has pledged €6million for the sole purpose of rising awareness of the Algarve in other countries.
The new president of the Algarve Tourism Association, Carlos Luís, said at the start of January: “Our budget this year is in the region of six million euros which could possibly be increased through applications. Half of that amount has already been received – for the first time it was received right at the beginning of the year, which helps us a lot because we have a lot of planning to do.”
ATA’s budget is based on the amount of investment committed by private companies – which this year is €1million – which is then matched by the Regional Tourism Board (RTA). The national tourist board Turismo de Portugal then puts in four times whatever the private sector invested, which this year equates to €4million.
Over the whole year, Turismo de Portugal is expected to transfer a total of around €5.9million to the ATA and the RTA, for the sole purpose of promoting the Algarve in Portugal and overseas. The knock-on effects can only be positive for the property market in the Algarve.
Meanwhile, new figures from the Algarve’s largest hospitality association, AHETA, showed that revenue generated from Algarve hotels and resorts during December increased by 2.2 per cent compared to December 2012. The areas of Vilamoura, Quarteira, Quinta do Lago, Carvoeiro, Armação de Pêra and Albufeira registered the biggest growths in occupation, with tourists mainly choosing to stay in three-star holiday villages or tourist apartments, followed by five and four star units.
The forecast is looking good for Portugal’s tourist industry and holiday homeowners, after leading travel association ABTA included it in its list of 12 hot holiday destinations for 2014.
Portugal features alongside exotic places such as Mexico, Malaysia, Brazil, Costa Rica and Mauritius, and is noted by ABTA for its “great food, historic cities, rugged coastline and stunning countryside, all done with great charm”. Neither Spain nor France featured on the list, which was compiled in association with the Foreign and Commonwealth Office.
The ABTA report that accompanied the list highlighted that British holidaymakers have always loved Portugal and in 2013 visitor numbers were up by over eight per cent. It added that with new direct flights in 2014 to the main cities Lisbon and Oporto, savvy holidaymakers will be heading off to these two beautiful and historic towns for a city break with a difference. Meanwhile, the Algarve has a year round good climate and remains the main draw for UK holidaymakers, with surfers and more adventurous holidaymakers heading for the big waves and dramatic coves of Europe’s most south westerly point Sagres.
Mark Tanzer ABTA Chief Executive said: “We know that Brits hate to cut back on their holidays and after several years of tough market conditions, we are seeing early signs of more optimism amongst British consumers. However, with the squeeze on household budgets continuing, we are expecting that tried and tested destinations and package holidays will continue to perform well in the coming year. We are also expecting a range of other overseas destinations to prove popular in 2014, as well as another good year for domestic tourism after the heatwave in the UK in summer 2013.”
Portugal was ranked fifth in ABTA’s top 10 holiday destinations in its report in October 2013, attracting 1.6 million British holidaymakers. Maintaining a high level of foreign tourism is good news for owners of property in the Algarve, who can benefit from holiday lets.
Signs that the Portuguese property market is close to turning the corner come from the October housing market survey from RICS, which supports the idea of stabilising sales market conditions, alongside relatively flat lettings market activity.
In the sales market, the agreed transactions series remained stable in October, while the new buyer enquiries data maintained positive momentum for a third month running.
RICS Senior Economist, Josh Miller said: “The October survey results again convey the message of a stabilising sales market and while recent economic data has also been encouraging, this will have to be sustained through 2014 before we are in a position to talk about a genuine residential property market recovery.”
That said, this month’s confidence reading is still fairly close to the series high level. Although house prices continue to fall, the net balance indicates the pace has moderated significantly since the back end of last year. Alongside this, sales expectations for the coming quarter are still positive. On balance, the current market dynamic appears to be much less negative than at any point in the survey’s three year history.
In the lettings sector, tenant demand appeared flat whilst new landlord instructions fell. Meanwhile, lettings volume expectations point to little change occurring over the next quarter. Results in recent months point to more subdued lettings sector activity on the horizon.
In keeping with recent surveys, rents continue to fall and respondents are still anticipating rents to deteriorate over the coming quarter, albeit to a lesser degree than was the case six months ago. In terms of the regional outlook, Lisbon appears to be leading much of the improvement in the sales market. In contrast, the lettings sector in Porto has seen some firming, with tenant demand and landlord instructions particularly strong relative to the headline results.