Property market in the Algarve after COVID-19

Since the start of 2020, the world as we know it has changed. We now live in a new reality that is still full of uncertainties. We are constantly having to find new strategies that will allow us to continue with as normal a life as possible, in the face of this pandemic.

As with most countries, Portugal has suffered economically, particularly as we rely so much on tourism. The Algarve in particular has seen a huge decline in tourism due to the various periods of confinement and restrictions being enforced around the globe.

The summer of 2020 was not the usual hive of activity in resorts and on beaches across the region. Instead, we had a significantly low number of visitors who tentatively ventured to this sunny corner of Europe, trying their best to make the most of their summer holiday.

Hotels have been badly hit by this, as have other sectors of the hospitality and tourism industries. Because this problem is not due to a lack of money but is instead due to a lack of demand, a factor that has been imposed as a result of these extraordinary circumstances, our approach has had to be very different to the ones adopted in previous economic downturns.

What have we done?

As a country, we’ve had to adapt the way we work so that the country didn’t come to a complete standstill. With real estate in particular, remote working presented certain challenges that needed careful consideration – so that the all-important personal touch wasn’t lost.

Dialogues have been maintained using the various communication applications that are available to us; digital meetings have been held so that all the parties are able to have their own input and receive instant feedback; virtual viewings have been made available so that clients can ‘walk through’ properties and get as close a feeling to the real thing as possible; recommendations and precautionary measures have been adopted, in order to keep everyone as safe as possible.

At Your Luxury Property, we are not only working online to provide you with the best possible service, we are also keeping our clients informed, through the various digital channels we have at our disposal, and reassuring our clients that everything will be alright. These are not just words; we truly mean what we say.

Through all of the negativity we are exposed to as a result of Covid-19, we mustn’t forget that, compared to many other countries, the Algarve still continues to be a safe area. There are not many clusters of people and we have an array of fantastic opportunities to be in contact with nature – away from the hustle and bustle.

It is also important to mention, from a financial perspective, that worldwide, Portugal holds one of the strongest passports and has the 22nd best healthcare system. Another important factor to consider is that the tax regime for non-habitual residents in Portugal is also very attractive. So, Portugal still remains a great place to be and a definite contender for investment!

Now that remote working has become the norm, why not do it from a stunning location that is not only gloriously sunny, but also comes with so many of these other benefits?

How have the various real estate sectors been affected?

Although the real estate market in the Algarve has seen a decline in demand, thus experiencing some financial setbacks, it has not been as bad as many had initially thought.

When Portugal went into confinement back in March 2020, the various real estate sectors all had a very similar approach. Realtors in the Office sector proceeded with caution under the uncertainty of the outbreak.

There was a prudent ‘wait and see’ approach from tenants and owners. Tenants requested rent free periods and owners requested other incentives. The Retail sector adopted a similar attitude, in order to minimise losses and maintain the sector sustainable in the long term. Rents were waived in some shopping centres with others negotiating moratoriums as an alternative.

Residential real estate also followed these patterns and the results have been encouraging. Unlike with previous economic crises, this one has not resulted in a large number of repossessions, a property crash, or anything on this level. Things are looking positive for the future and it is believed that in the case of residential property, international clients will set the trend when it comes to demand.

If we are fortunate enough to experience a rapid recovery in the Algarve, a meaningful price variation is not expected as there is still an imbalance between supply and demand. Also, although new developments were paused and there was a decline in this area, there is still a strong desire to invest in the Algarve. Prices have not fallen, and the results of our efforts are encouraging.

Predictions for the future

In the last few months, business in Portugal has been quite positive. Although the hospitality sector has been hit hard, the fundamental foundations of tourism in itself remain the same. Despite there being less visitors coming in from abroad, we’ve still benefited from domestic tourism as well as a little flurry of international visitors during the months of July and August. In addition to this, our Spanish neighbours have also contributed to this sector, when restrictions have allowed them to visit. 

Although quite a lot of sectors have seen a decline in revenue, others have actually flourished during this pandemic, with a noticeable increase in sales. Logistics companies and online stores are prime examples of businesses that have thrived as a result of confinement and the reduced access to goods in physical stores. 

Naturally, there are some investors who are still waiting to see what happens next before they decide on how to proceed. However, there are also quite a lot of international investors who continue to show an interest in Portugal and in particular, in the Algarvian real estate market. There are many opportunities to be explored and many are demonstrating a readiness to embrace these. 

It is believed that activity will gradually get back to some sort of normality over the coming months, as we circumnavigate the evolution of the virus.

Businesses have accepted that this year’s performance will be low and so, they are focusing on their 2021 business plans. It is possible that house prices will drop and that new developments may decline but, if this does happen, demand and recovery will most likely follow quite swiftly.

There may be some cases of ‘fire sales’, in situations where investors consider that this is the best option for their business plan, and this is when others will take advantage of these opportunities. Any impact that is experienced in the Algarve property market, as a result of this current situation, will not be anywhere near the levels of the last financial crisis and the outlook in general is quite positive.

So, taking everything into account, and considering all the options available in other European destinations, the pros far outweigh the cons when it comes to the real estate market in the Algarve. With so many reasons to choose the Algarve to live, or for investment, now is a probably good time to put your feelers out and grab an opportunity!

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