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 is still a top choice for many buyers looking for a second home in the sun, in spite of the economic difficulties faced by the country. Buyers from Northern Europe and Britain are particularly fond of the Algarve and the Silver Coast, and estate agents are still receiving pretty high levels of enquiries from buyers looking to purchase correctly priced property. Many are cash buyers, and are able to take advantage of the extensive price falls that have occurred since Portugal entered recession more than two years ago.
This market for second homes hasn’t been affected as much as the primary housing market. In spite of this, buyers are unwilling to even look at properties they feel are overpriced, and sellers do need to be prepared to negotiate. Obviously those buyers who are able to complete a purchase quickly are far more attractive to sellers, and as such may be able to find their dream home at a reasonable price.
It is a bit of a different story elsewhere, as estate agents in Portugal have found that in areas primarily driven by demand from the domestic market, the price falls have been more substantial, especially in the mainly residential cities of Lisbon and Porto. Some sellers in these areas don’t have a choice as to whether or not they sell their home, as they may need to move to seek employment elsewhere or to be nearer their children’s school.
Even though these sellers are faced with a falling market, they are able to pass on these price reductions throughout the chain. An increasing number of people are being forced to sell due to unemployment, the threat of repossession, or simply because they cannot afford the higher interest rates.
Now could be the perfect time to buy property in Portugal as recent data shows prices fell by 8.9% to the year ending May 2012, but in the quarter ending May 2012 prices dropped by just 0.8%. Prices of apartments have fallen more quickly than houses, dropping by 10% over the past year compared to just 7.2%. It is predicted that prices will continue falling for the rest year, and that domestic demand will remain weak due to Portugal’s problems.
Although Portugal had to request a bailout, it has coped relatively well and has stuck to a tough austerity programme that has earned praise from onlookers. Unemployment is still high in the country, as it recently rose to reach a record 15%, which means 830,000 people are now unemployed compared with 440,000 at the end of 2008.
One of the hardest hit sectors is the construction industry as the number of construction firms going out of business has increased by nearly 50% during the past year, and it’s expected thousands will lose their homes due to foreclosure.
The construction industry is estimated to owe banks around €25 billion, and the banks are cutting back on loans, resulting in projects grinding to a halt. In spite of the problems in the country, home ownership is surprisingly high, as the government gave out generous mortgage subsidies that pushed owner occupancy rates up to a high of 75% in 2001. This led to the rental market shrinking to just 21% of total housing stock.
It’s relatively straightforward to buy property in Portugal and there are no restrictions on foreign ownership, while transaction costs are generally reasonable.