Although Portugal may still be recovering from the economic crisis, its tourism industry is very much alive and kicking. While property in Portugal might not be quite as cheap as Spain, it is still pretty desirable, and the Portuguese government is doing its best to boost the market share of homes sold abroad. It’s currently trying to entice more foreign investors, and has introduced a number of new reforms including tax incentives of offering a flat rate of 20% to foreign residents and new residency reforms.
The very best of Portugal’s tourism industry recently travelled to London to try to boost the second home market. At the moment Portugal is 18th in the world for the number of tourists, but the government fully expects its ranking to increase.
In particular it’s looking to boost the year-round attractiveness of the country which in turn would support this business is dependent on tourism such as local restaurants. At the moment Portugal sells approximately 5,000 homes per year with average value of €200,000 each. The aim is to at least double this figure, and a new guide is to be produced in helping people to make the move to Portugal, or to explain the process of buying property there.
This guide includes important information on the residency permits, taxes, schools and health care, as well as pointing out exactly why Portugal is such a great place to live. It’s certainly still a popular country to visit, something that is constantly recognized by UK holiday companies. A leading online holiday planning company recently announced new holiday packages to Portugal, including a flight booking service to cater for the increased demand and interest in the country this year.
Estate agents in Portugal now believe the market is stabilising, having experienced several years of falling prices. Immediately after the financial crisis prices dropped by up to 30%, but last year the market began to correct itself. Property prices for luxury homes dropped considerably less, falling by 15% to 20%. This is probably due to the fact that wealthier buyers are less likely to have mortgages, while others reliant on funding would have found it more difficult to obtain a loan due to tighter lending restrictions.
Luxury apartments in the centre of Lisbon currently cost between €5,000 and €6,000 per square metre, while apartments in less upscale neighborhoods currently go for around €5,000 per square metre. Older apartments in Amoreiras are likely to cost between €3,500 and €4,000 per square metre, while newer apartments could cost as much as €5,500 per square metre. The Estoril Coast, just half an hour’s drive from Lisbon is popular amongst surfers and for its casinos. Apartments here can cost as much as double as those in the city.
Most overseas buyers are looking for property in Lisbon or the Algarve, and around 60% of buyers in the Algarve are international. Most are from Britain, although the area is also popular with buyers from Spain, Italy, Scandinavia and Germany. The market in Lisbon is a little different, as it’s not so heavily dominated by the British, and just 15% of the property is sold to overseas buyers. Purchasers include those from Western Europe and Russia, as well as buyers from Angola and Brazil, as these countries are Portuguese speaking.
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.