How did the pandemic affect Real Estate in 2021?
Of all the markets, one of the sectors that has responded most positively to the Covid-19 pandemic is Real Estate. With the pandemic in full force in 2021, the housing segment remained dynamic for the first half of the year, with house prices continuing to rise, albeit at a reduced pace. In the Algarve, for example, there was a surge in the number of housing transactions, registering a year-on-year increase of 26.8% in the first three quarters of 2021. In Portugal, as a whole, there was a clear recovery seen in all real estate segments, with prices rising in the run-up to 2022.
The INE – Instituto Nacional de Estatistica (National Institute of Statistics) reported that in the third quarter of 2021, Real Estate prices escalated by 5.46% Year-on-Year and by 2.85% Quarter-on-Quarter. In October 2021, residential properties in Lisbon were listed online for an average selling price of €583,636 – up 5.9% on the previous year and €70,000 more than the second most expensive region in Portugal, Faro.
The INE also reported that in the first three quarters of last year, 21,230 permits were issued to construct individual residential properties in Portugal. This represented a 15.3% increase for the year in comparison to the 2.6% in the previous year.
A good time for investors
Interest rates in 2021 hit an all-time low, providing favourable conditions for borrowers. According to leading Real Estate professionals, of all the transactions recorded during the year, the Portuguese accounted for 60% of these. The remaining 40% were predominantly from England, North America, France, Spain and Brazil.
At the end of 2021, house prices in both Algarve and the North were more than 40% up above the previous peak. However, this hasn’t put off foreign buyers, who consider Portuguese real estate to be astonishingly good value, when weighed up against the obvious lifestyle benefits such as the Mediterranean beaches, glorious sunshine and golf resorts, to name a few. The fact that there are no restrictions on foreign property ownership in Portugal, and that purchase related costs are very reasonable, are two further contributing factors towards the growing enthusiasm of the foreign buyer.
Another contributing factor to the increase in foreign investors looking to buy in Portugal is the new trend for working from home – brought on by the pandemic. If we are able to do this from any remote location, why not do it in a place where you have the weather and lifestyle to help make your working day more enjoyable?
It is also worth remembering that non-EU citizens who buy a minimum of €500,000 worth of Real Estate in Portugal are granted a 5-year residency permit which allows them to work or study in Portugal, and travel to Schengen countries. After five years, they can then apply for permanent residency and take full advantage of these benefits on a permanent basis. Taking all these amazing benefits into account, it is no wonder that Portugal is still a very attractive option for foreign investors – in particular, the Algarve.
Whether you’re buying a property for rental income, to use as a holiday home or to live in, our sunny southern climate seems to have an equally sunny financial outlook. Therefore, it’s not surprising that the Your Luxury Property portfolio continues to feature its usual plethora of very attractive and breath-taking properties to suit all manner of investment requirements – with our expert team on hand to tell you all about them.
Changes to the Golden Visa Programme – How has this affected the market?
The changes to the golden visa programme that came into force in January 2022 have put pressure on international sales and diversified the range of active nationalities within Portugal. These new rules are a little less attractive in comparison to the previous ones and do put some limitations on what can and cannot be done. For example, popular cities such as Lisbon, Porto and Setubal, to name a few, will no longer be an option for international investors seeking to buy new residential property or to invest in renovation projects. Another change to note is that although the required minimum investment amount remains at €500,000 for new constructions or €350,000 for old building refurbishments, the minimum required investment amounts in Portugal have increased for the following investment options:
– Investment funds: 2021 = €350,000; 2022 = €500,000
– Research projects: 2021 = €350,000; 2022 = €500,000
– Businesses registered in Portugal: 2021 = €350,000; 2022 = €500,000
– Fixed-term bank deposits: 2021 = €1 million; 2022 = €1.5 million
Due to these changes, a significant spike in investment was noted last year in the residential real estate sector throughout Portugal. Many investors wanted to take advantage of the better conditions that were in place, before the new rules came into effect in January 2022. As a result, Portugal received this very welcome cash injection, which helped move things along in the right direction.
Outlook for the Property Market in 2022
Projections for 2022 are very positive with a maintenance of growth predicted by many experts. In this first quarter of 2022, we can already see a greater level of activity than in the same pre-Covid period at the end of 2019 – when the market was historically at its most buoyant.
The European Commission’s forecast expects the national economy to show a 5.3% growth in 2022, as a result of the rollout of goods and service exports (including tourism) as well as the easing of the Covid-19 related restrictions.
Of course, there are pros and cons in any given situation that should be considered when making an overall evaluation of things to come. In this case, we can say that there is still a solid demand for property in Portugal. Rents continue to rise, which offer a good investment return for potential investors. There is also, as previously mentioned, a rise in new projects – another positive aspect to look forward to. In contrast to these positive aspects, we must also consider that there is still a high level of liquidity to invest in the real estate market – both in project development and in acquisition of investment property. That said, there is still great potential in the property market with many areas already being explored (e.g. senior residences and affordable housing) and others coming to the fore – such as student residences and logistics.
So, in summary, it is safe to say that the real estate market has not suffered any significant detrimental effects as a result of the pandemic. On the contrary, it has in many ways thrived and is buoyant at the moment. The foreseeable future seems quite positive for the real estate market in the Algarve, with many great opportunities to be explored. Come and take a look – once you do, you’ll never look back!