With Portugal on the UK’s green list and slowly reopening to British (and other) holidaymakers, the country is likely to be the most popular destination for tourists this year.
It has long been a magnet for British holidaymakers and second home owners, thanks to the enticing combination of excellent weather, great beaches, good food and wine, and historic, characterful towns, villages and cities mixed in with tailor-made resorts.
Here, the experts at Ideal Homes Portugal outline the enduring appeal of Portugal and why investors should be considering it.
A tourist hotspot
Even before it was placed on the green list, reopening Portugal to British tourists properly for the first time since the pandemic began (there was a brief window last summer when Portugal was a quarantine-free destination, but this air corridor was dramatically slammed shut only a few weeks later), it was a country that had significant appeal to tourists.
The UK and Portugal, in particular, have long, deep-rooted connections. The nations have the longest continuous alliance of any two nations in the world, dating back to the Treaty of Windsor in 1383, while in more recent centuries the Brits have had a big say in the country’s port industry and in helping to establish the resorts that are now so popular among holidaymakers.
Portugal is one of the UK’s favourite holiday destinations, with Lisbon, Porto and Coimbra becoming as popular as the Algarve in recent years for those looking to experience Portuguese’s unique culture, love of coffee and wine, and bustling nightlife.
In city, country and coastal locations, demand for hotels, Airbnbs, apartments and holiday villas are typically very high – and investors certainly shouldn’t have any issues with occupancy (in normal years) from May to September. October to April are likely to be slower months, with fewer tourists travelling during this time due to less good weather and the misguided notion that everything is closed up.
This isn’t actually the case – and some of the country’s most high-profile events take place during these months – but you might have a harder time filling your holiday home. That said, the increase in digital nomads – the work from anywhere demographic which has soared since the pandemic and the huge rise in remote working – is likely to keep demand high even through the winter, late autumn and early spring months.
Favourable interest rates
Our sister company, Ideal Homes Mortgages, recently reported significant interest in people looking for more than just a fortnight in the sun – eager, instead, to invest for the long-term in Portugal.
It pointed to the impressive deals available to non-residents looking to purchase homes in Portugal, with loans of up to 80% available at just 0.5% interest for up to 40 years.
For buyers who find the standard 20% deposit a stumbling block, bank repossessions can provide the potential for 90% mortgages, albeit at a slightly higher interest rate of 1%. Even in this case, the rates are more favourable than those in the UK – at the time of writing, the lowest rate available for any UK mortgage deal on Money Saving Expert stands at 1.19%.
We previously explored how overseas investors can successfully get a mortgage in Portugal.
Property prices on the rise
For those with one eye on strong capital gains over time, Portugal’s house price growth since the financial crisis has been very strong – and the pandemic doesn’t appear to have affected this upwards growth.
The country has seen house prices rising steadily over the past few years, with the Instituto Nacional de Estatistica reporting a rise of 6.32% in the 12 months to November 2020. What’s more, despite the Portuguese economy contracting by 8.1% in 2020 thanks to the pandemic, Banco de Portugal projects that it will grow by 3.9% in 2021 and by a further 4.5% in 2022 as the country bounces back from Covid.
Although prices have been growing for some years, initial buy-in costs in Portugal are generally more affordable than the UK or its near neighbours.
This varies quite considerably, of course, but generally speaking the Algarve and Lisbon will have the most expensive homes, with plenty of affordable gems in less heralded areas. On the other hand, demand will be at its highest in the Algarve and the areas in and around Lisbon and Porto, Portugal’s two biggest and most iconic cities, so an investment here may prove to be a safer bet.
Numerous incentives
Portugal is one of the most attractive places for non-residents to invest their money thanks to a number of favourable tax and residency programmes. It’s also one of the best places for non-EU residents, which is now the status of most Brits, largely thanks to the popular Golden Visa scheme.
You can find out more about what the Golden Visa is – and what’s changing from January 2022 – by clicking here. UK citizens are now eligible for the scheme, founded in 2012 and heavily backed by the Portuguese government ever since, but the window to invest in Lisbon, Porto and much of the Algarve is diminishing by the day.
Even once the changes come into play, though, there will still be plenty of investment opportunities in lower-density areas, while Portugal also has various visa schemes and the NHR tax programme for those looking to invest and be tax-resident in the country.
Virtual viewings
Like everywhere else in the world, agents, brokers and real estate companies in Portugal have adapted to the new normal with virtual viewings to allow people to see a potential home without actually visiting in person.
While things are opening up, and the chances of people visiting in person are much higher, virtual viewings are likely to be a long-term legacy of the pandemic for the extra convenience and flexibility they provide.
There has been an increase in the number of investors investing sight unseen since the start of the pandemic, with in-person viewings off the table for much of the last year for overseas buyers, and the purchasing off the strength of a video tour alone could continue even once lockdown has fully eased.
Even for those who still desire to see a property in-person before starting the buying process – which is the case for most people – an initial virtual tour has appeal to ensure that the home, area and other factors align with a buyer’s desires and wants.
Ideal Homes Portugal is one of the leading estate agents in the Algarve, Porto and Lisbon and can help investors find property for sale and secure a mortgage. Find out more here.