Algarve Golden Triangle Real Estate

2011 expectations for the tourism and the real estate market

2011-02-07T19:31:00.000Z

While the tourism in the Algarve showed a positive development during the summer of last year the numbers for the winter tourism were tremendously failing. In December 2010 the Algarvian hotels registered a drop of 19% in sales and 14% in occupation. In the areas of Vilamoura and Quinta do Lago these figures were even worse, and resulted in a decline of 39% in comparison to December 2009.

If we believe the "Entidade Regional de Turismo do Algarve (ERTA)" the 2011 hotel room occupation will be less than in 2010 or with some luck equal to 2010. Due to the planned toll on the Algarve highway "Via do Infante", the cancellation of the winter schedules by Thomas Cook and TUI as well as reduced quantity of flights during the winter, this negative expectation may come true. The raise in VAT and many other taxes seems to have no effect in the opinion of the respondents of this enquiry.

Ironically, the riots in Tunisia and Egypt may have a positive effect on the Algarvian tourism, and many operators in the area are "hoping" that the riots will go on for a while. Just follow the latest advertisements of some of the local tour operators and you will see that the word safety is used more often than in the last years.

Of course, the reduction of overnight stays has also its effect on the real estate market and who would expect anything else than a negative effect. Furthermore, the new law about the national budget for 2011 will reduce the possibility for the Portuguese consumers to buy new homes. The market was already reacting last year buy a reduction in prices for new and second hand homes. The banks reacted by reducing their loans to home owners and also reducing the evaluation values of homes.

But the market reaction was not enough. Less capital, less possible purchasers from Portugal as well from abroad will once more strike many home-owners and constructors. Of course, special locations like Quinta do Lago or Vale do Lobo will not suffer massive price reductions as the property owners rather will not sell, if they don't achieve the price than put their price down. But the prices will also not raise as they did since 1999. The time of annual price increases of 8% or more stopped already last year in the Golden Triangle, and we can be sure we will not see any sales price increases this year.

But many other areas in the Algarve do not have this luxury and if owners have to sell, they must evidently cut the asking price, because the only properties which will sell in 2011 will be the ones who are in a perfect location or the ones who are very cheap in comparison to the average price achieved in the last years in the area.

The person, who is interested in purchasing property in the Algarve, can only be congratulated. It is the period in his favour, the time of choosing in between many offered products, of stock picking and tough price negotiations. The cherries will hang a lot lower in 2011 than in the years before and be assured, most of them are sweet and not sour.

Hundreds of thousands of homes for sale in Lisbon area

2010-11-26T16:15:00.002Z

Almost 140.000 properties are currently on Lisbon's "for sale market", 34 percent of which are new-builds.

During the second quarter of 2010 12.000 properties were bought. In terms of dynamics, the secondhand residential market registered an absorption rate of 16%, the equivalent to the sale of 15.000 units, proving to be more in demand than brand-new properties, which experienced an absorption rate of only 14%, or 7.000 residences.

The absorption rate includes next to sales also units, which were taken of the market by the owners.

(source: The Portugal News, 23.10.2010)

No Rental Cars Available At The Algarve

2009-08-05T18:48:00.005+01:00

Since July it is close to impossible to rent a car in the Algarve. Press, media and others are celebrating this fact as the end of the crisis because it seems to be a signal of increasing tourism. I, personally, did not really want to comment this situation, but it seems to be necessary.

Let's go into the real figures. As reported on my twitter the hotel occupation in 2009 is down by more than 10%. Furthermore, bars and restaurants in the Albufeira area are suffering big losses in turn over, some reach 40%. Shops and stores, formerly very expensive, are standing empty. Just on the road between Faro and Almancil I count more than 20% of the shops with for rent/ for sale signs. This arrives at the conclusion that we have less tourists in the Algarve and these tourists are also spending less.

Why do we still have a lack in rental cars? The upshot can only be missing replacement of the sorted out older rental cars. I don't want to imply that the banks have once more the finger in the pie, but I cannot rule it out. Stricter credit conditions for the local rental car companies and cutting reinvestment by the fleet managers may have reduced the availability of rental cars.

Is the real estate market influenced by this? Real estate agents report that they have more to do now than in the beginning of the year. What a surprise! In the beginning of the year most of the agents were sitting in their offices, contacting prospects or simply playing on their computers. The summer in the Golden Triangle was always the time of sightseeing. Many tourists took, take and will take the chance to view villas and mansions they cannot afford now, comparable with sightseeing tours in Beverly Hills ("This is the house of Madonna and here lived Ayrton Senna"). Don't understand me wrong, the summer tourists are necessary for Quinta do Lago and Vale do Lobo, because they also create the desire to invest in this area and some of them bought years after their dream villa.

So, this argument is not valid. Less tourists, less turn over, less rental income for property owners and stricter credit conditions will keep the pressure on the prices. This is the GOOD news for all who are planning to purchase property in the area within the next 12 months. E.g. a few developers are prepared to offer up to 50% discount, of course only under the counter.

My advice for all who are planning to buy in the Algarve: Act like stock pickers; find the property you like, try to find out how long it is on the market and how often it already suffered price reductions. Ask your bank or independent brokers or surveyors for an evaluation and be prepared to offer not more than this.

Price Situation of Off-Plan Property in the Golden Triangle

2009-04-28T10:17:00.000+01:00

The year 2008 brought an end to all property price bubbles. Dublin, London, the Spanish coastline or Florida, all property owners in these areas suffered severe loss in value of their properties and even worse, some had to realise this loss by selling the property to pay off mortgages.

The Algarve is no exception as long as we talk about the “second hand” market. Resale prices were and are dropping by 30% in comparison to January 2008. On the other hand we don’t see any decreasing prices when it comes to new built property. Developers for luxury real estate as E3 Properties, Vale do Lobo or Imocom as well as smaller developers offer their off-plan products at the same price as they were a year ago.

Actually, you will receive this price information:

Key Lago – Quinta do Lago AAAAAAAA Villa 606 m2

Key Lago – Quinta do Lago AAAAAAAA € 5.490.000,00

Key Lago – Quinta do Lago AAAAA Apartment 386 m2

Key Lago – Quinta do Lago AAAAAAAA € 2.710.000,00

Palácio da Quinta –Quinta do Lago AA Apartment 97m2

Palácio da Quinta –Quinta do Lago AAAA € 1.170.000,00

Vale do Lobo – Beach Club AAAAAAAA Villa 300m2

Vale do Lobo – Beach Club AAAAAAAA € 2.800.000,00

Vale do Lobo – Vale Sto. António AAAA Apartment 99 m2

Vale do Lobo – Vale Sto. António AAAA € 850.000,00

But why are these prices not following this trend? Why don’t we see any discounts like we see in Spain?

Yes, it is still a good and wise decision to invest in luxury property, but it must be to the right price. Are the above-mentioned prices of more than € 7.000,00 per square metre of construction right prices when it is possible to purchase resale property in the same area for less than € 6.000 per m²?

Of course, you have to check, what will be included in the purchase price. Rental guarantees, luxury furniture, up-to-date house electronics and highest standard building features as well as branding can increase the asking price. But are all these facts enough to explain the high difference in pricing?

The answer is: Be prepared to negotiate. Instruct your agent to achieve at least a 20% discount. The official asking prices cannot be lowered because all developers sold already units for these prices. These prices are part of calculations presented to shareholders and banks to secure the investment. These prices guarantee that you will achieve a nice profit, if you decide to sell the property in a few years.

The old broker’s saying “Buy on bad news, sell on good news” is not only valid for stock exchange trading. It is a general rule, which works on most of the investments. Counter cyclical behaviour is the key to financial success.