SIMON PERKS | Property Comment
A confidence to purchase
By Simon Perks
Traditionally the majority of purchasers of second homes in Portugal, and particularly the Algarve, emanate from the UK. To undertake such a purchase an individual must have confidence in both their home market, from where their income originates, and the country where the property to be purchased is located. These conditions have obviously not existed over the last few years, indeed it is fair to say that the world, Eurozone and UK economies have been somewhat volatile, hence the second home property market in Portugal, and particularly the Algarve, has been very quiet.
Historically, economic cycles rotate approximately every 7 years. We are now, arguably, 4 / 5 years into an economic recession and there would appear to be signs that we are moving, albeit very slowly, out of the economic recession. At the time of writing Greece had agreed to stay in the Euro, a bailout had been agreed for the Spanish banks and both Ireland and Portugal were adhering to the terms of their respective bailouts. In the UK, the Bank of England had started to encourage banks to start lending to both companies and individuals to stimulate economic growth.
Portugal has a well regulated property market with regard to planning and development and as such there is not a vast oversupply of speculative properties, as there is Spain. As a consequence Portugal, and particularly the Algarve, has a well-deserved reputation for quality and exclusivity with purchases being made for reasons of life style rather than purely investment purposes.
The Portuguese authorities, the major resorts, developers and the banks have all recognised the prevailing circumstances and are aware they are in a good position to start taking initiatives that will allow them to promote the Portuguese second home market, particularly to the UK, to give individuals the confidence to purchase.
Encouraged by these initiatives, Boavista Golf & Spa Resort has recently commenced the construction of four properties and is about to start work on another further four. Philip Pope, managing director comments“ in spite of austerity measures and the bad economic climate, Boavista is seeing a slow return to the touristic property market. Clients are cautious, take their time in making a decision and are looking for value for money. Without question clients expect a discount and / or a giveaway but are showing genuine interest in properties on secure, well maintained developments that offer facilities and services, such as Boavista”.
Monte Rei
Another important factor that determines whether individuals buy is the exchange rate. Over the last year GBP has appreciated by some 12 % against the EUR and a number of foreign currency experts are predicting a GBP / EUR exchange rate of 1.30 by the end of this year with the rate being maintained as it is felt that this is its natural level. This would obviously be of benefit to any purchaser from the UK. In addition it is predicted that interest rate for both GBP and EUR will continue at, or near, their current levels for the foreseeable future.
In conclusion the property market in Portugal, and particularly the Algarve, is very quiet, with prices in some areas having fallen by as much as 30 / 40 % from their peak of 2008. In other areas prices have held up but this is partly the result of a lack of transactions. However it would seem that Portugal due to various initiatives and forward thinking will be in a good position to take advantage of any upturn in the market, occasioned by any economic improvement”.
Simon Perks- Perks Property Finance Solutions Limited + 44( 0) 7389 0567 + 44( 0) 7780 501548 email: simon @ perks-pfs. com
58 | Summer 2012 | www. portugal-life. net |