INSIDE VIEW

FINE HOMES
ISSUE #4
INSIDE
VIEW
PORTUGAL
2016
RESIDENTIAL
Overview
Portuguese Market Overview
The Algarve inspires a
special affection for secondhome buyers. It is a place
where many spent childhood
holidays, where their
parents’ owned a holiday
home and they now want to
invest for themselves and
future generations.
It has a traditional, multigenerational appeal and not only
will nowhere in Spain or elsewhere
in Portugal do, nor will alternative
Algarve locations suffice. They
tend to set their sights on one
location only.
Mention the Western Algarve
to someone who is considering
the luxurious Quinta do Lago
resort and they will think you are
talking about a different planet.
Conversely, a buyer who wants
the escapism of the Algarve’s
West coast – the huge, untouched
surfing beaches, farmhouses on
large plots in the hills – may find
the central Algarve’s resorts too
busy and blingy for their tastes.
As Portugal recovers from the
financial crisis, however – one
that saw the country among the
hardest hit in Europe and the
Algarve’s property prices fall by
up to 50% – the traditional, prime
locations rule once more.
In recent years, buyers have been
nervous about investing in the
Southern Eurozone. Portugal is
rarely a place that buyers move
to for work. It’s primarily a second
home destination and a luxury
purchase. A good-quality property
is one thing, but there needs to be
a reason to buy in some locations
– a badge of endorsement such
as a Kempinski or Four Seasons
hotel, sought-after restaurants,
proximity to a beautiful beach or an
excellent golf course, such as the
project at Monte Rei in the largely
undeveloped Eastern Algarve.
Many of Portugal’s new schemes
that have been designed
specifically with Golden Visa
buyers in mind – non-EU investors
who are seeking residency in
return for a property investment
of at least €500,000 – are proving
popular with the Asian market
and tend to be near Lisbon. But
these developments are often
set in locations that lack the
infrastructure that typical holiday
home buyers want and need.
Along the Algarve coast, where we
focus all of our Portuguese activity,
resorts such as Quinta do Lago and
Vale do Lobo command a premium
over nearby off-resort properties –
there is a cachet to buying there,
and rental demand is higher,
because of their excellent locations,
sports and lifestyle offerings.
Such resorts also offer a sense of
security, which is a key issue for
buyers now. The Algarve has
never been associated with high
levels of crime, but the issues
related with the world’s trouble
spots are pushing buyers to
prioritise the security that comes
with a gated resort.
After a period in which the cranes
stopped and barely anything over
€1m sold, buyers are investing in
the Algarve again. They are buying,
extending and improving. Increased
liquidity is returning with the good
quality stock selling quickly and
sensible pricing after years on the
market, proving vendors are more
motivated to sell.
Prices vary widely across the
coast. A good-quality three/
four-bed villa with a pool on
Quinta do Lago will cost around
€2.5m, whereas in the Western
Algarve – including Lagos and
Luz – €500,000-€1m will stretch to
something similar with a sea view.
Whilst unsurprisingly the
€500,000-€1m bracket is the
most active due to numerous
buyers drawn to the Non-Habitual
Residency regime, which offers
tax benefits if buyers become a
Portuguese tax resident (see page
7). For many non-dom status
clients and some retired buyers
who want easy access to the UK,
it’s an appealing option.
Buyers are also drawn to the
Algarve for the long rental season
it offers. Golf is a huge attraction
all-year round in the Algarve.
People who want their holiday
home to make money when they
are not using it, can reasonably
expect to rent out their properties
from Easter to late October.
Rental income is important. But
so is the ease of the Algarve for
owners – a place that is easily
accessible and offers everything
on tap once there.
Alex Koch de Gooreynd
Head of Portugal
For Sale - Benagil, Algarve
02
Knight Frank Inside View
Knight Frank Inside View
03
Lifestyle
The resort
for all ages
It’s nearly half a century since the property developer
André Jordan spotted the potential of a peaceful
550-hectare slice of the Algarve coast overlooking
the Ria Formosa nature reserve and began to build a
low-density golf resort.
By Zoe Dare Hall
That was in 1971 and, since then,
Quinta do Lago has become
Europe’s premier sports and
residential resort, attracting
property owners at the top of their
fields from Formula 1 to finance.
But when John Dwyer, an
accountant and talented golfer,
took over as CEO in 2008, the
recession was kicking in and a
rethink was required. The resort
had matured nicely, but its owners
and visitors were ageing with it.
“Our shareholders said we hadn’t
Quinta do Lago, 15th hole
been proactive enough and that we
needed to start the ‘new Quinta’.
The average age of our golf club
members was 71. We had to
change the demographic and
make the resort young again,”
says Dwyer.
That push has led to a €50m
investment in the resort over the last
seven years, including rebuilding the
North Course, which is surrounded
by some of Quinta’s last remaining
plots. Dwyer has also beefed up
the dining options with the trendy
new Bovino steakhouse and The
Shack, the perfect lake-front spot
for a sundown drink.
to Quinta for the whole summer
and the husband or wife commute
back to London for work.”
“We’ve renovated and rebuilt
everything so we now have a
good asset base with our golf and
restaurants. We are constantly
thinking of new events too. There
are now 500 a year, including an
Easter egg hunt on the driving
range which attracted 1,200
people and our Friday drive-in
movie nights in summer which
see crowds of up to 2,000,” says
Dwyer. “You don’t need to be a
Quinta resident or owner to join
in and everything we’ve done has
been free to access, which has
worked well.”
Adding to the child-friendly offering
– particularly for teenagers – is a
new sports centre that should be
fully complete by next summer,
with football pitches, tennis courts
and 45 other activities from a BMX
track to climbing walls. “Happy
kids mean happy families,” says
44-year-old Dwyer, a father of
two youngsters. Naturally this has
a direct impact on the average
daily spend.
It’s all going down well, too, with
existing and prospective owners –
and the average age of buyers at
Quinta has dropped significantly.
“There used to be little for kids to
do. Now we’re hearing the second
generation saying ‘Dad, can we
keep the house at Quinta. We love
it’. Parents send their kids here for
a fortnight with the grandparents
and we see a lot of families move
Quinta undoubtedly appeals to a
wealthy audience who want an
upmarket resort, as seen in some
of the most recent villas that are
being built, some of up to 1,000
sq m, not including their vast
basement levels. “We’re seeing
more ‘estate buyers’ who want
double plots where they can build
a larger house. They often holiday
with other families with about 20
kids,” says Dwyer. But he points out
that Quinta is available to a wider
audience, with properties costing
from €250,000 to €40m. Many
buyers start small, then trade up
as their finances improve.
The strength of Sterling in the
past year or so has prompted
many prospective British buyers
who were sitting on the fence
to invest. “We saw double the
number of transactions in 2015
compared with 2014,” says
Dwyer. A possible Brexit, too, is
encouraging risk-loving investors.
“We’re seeing opportunism rather
than apprehension. Some buyers
are waiting to close in September
or October in the hope of making
10% on the currency exchange.”
Airlift, too, to nearby Faro airport,
“is the key to our success,” says
Dwyer. “Seasonality is the big evil
for any resort, but we just see two
quiet months in December and
January before the golfers drift
out, fed up with the weather back
home. May to October sees
100% occupancy.”
It’s not just year-round sunshine
but the global political climate that
is playing in Quinta’s favour. “The
second conversation we have with
“We’ve renovated and
rebuilt everything so
we now have a good
asset base with our
golf and restaurants.
We are constantly
thinking of new events
too but you don’t have
to be a Quinta resident
or owner to join in. ”
John Dwyer,
CEO, Quinta do Lago
every buyer, after capital values, is
about security,” says Dwyer. “We
have 98 full-time security guards,
we have emergency medical
response. We can give people the
safety and security they want.”
He can also guarantee
entertainment for all generations.
John Dwyer may have joined
Quinta at its most challenging time,
but for this 45-year-old resort, he
may also have discovered its key to
eternal youth.
Quinta do Lago, North Course, 8th hole
04
Knight Frank Inside View
Knight Frank Inside View
05
Research
Lagos
Carvoeiro
€
€
€2,500-€5,000
€
€2,500-€5,000
93 km
‘Beach of Light’, a well established sea
front second home location. The town is
quiet, low rise and maintains its traditional character. Properties range from
apartments & townhouses in the centre
and larger private villas with swimming
pools and sea views on the outskirts.
Brighter
horizons
€
€3,000-€4,500
91 km
Historic walled townMonchique
with a modern
462 berth marina and boasts the
Algarve’s longest beach (4 km) popular
for water sports. Properties range from
modern apartments, townhouses and
villas amongst some new 5 star hotels
in the area.
Praia da Luz
Tavira/Eastern Algarve
Vilamoura
The original village is nestled between two
low hills behind the beach. Popular with
UK and Irish buyers the resort was the
focus of development pre-2008. Large
villas in citrus orchards predominate.
A22
Carvoeiro
Lagos
Albufeira
Burgau
Vilamoura
Loulé
Almancil
Vale do Lobo
By Kate Everett-Allen
Quinta do Lago
€
€8,000-€10,000
A22
Praia da Luz
Sagres
25 km
Home to five championship golf courses,
an equestrian centre and 875-berth
marina, Vilamoura is set to see
investment of €1bn as it enters a new
phase of development adding 5,000
new residential properties.
56 km
The Eastern Algarve is comprised of smaller
resorts, popular with Portuguese second home
owners. New developments such as Monte
Rei, are reshaping this market with the added
services allowing for those prices to compare
with Vale do Lobo.
€
€4,000-€6,000
E1
Portimao
After several testing years the Algarve
is back on the radar of second home
buyers. Realistic pricing, the availability
of cheap finance, strong investment in
infrastructure and tax initiatives have led
to renewed confidence.
€3,000-€4,500
58 km
17 km
Founded in 1972, the world-renowned
estate has four golf courses, boasts 2 km
of beaches and an enviable number of
sporting and recreational facilities.
Tavira
Golden Triangle
Quinto do Lago
€
FARO
Prime price Drive time/distance
€ per sq m
from airport
Marina
Championship
golf course
Vale do Lobo
The Portuguese property market’s
troubled past is well documented.
Not even the Algarve’s ancient cork
forests and pristine golf courses
managed to entice buyers post
2008, prompting prices in some
resorts to fall by as much as 50%
in peak-to-trough terms.
Residential construction plummeted
across Portugal. According to
the Bank of Portugal completions
Price recovery underway
Algarve upper quartile price index,
100 = Jan 2011
110
105
100
95
90
85
80
MAR 13
Austerity
measures
at peak
75
70
MAR 15
Global
economic
uncertainty
65
60
2011
2012
2013
Knight Frank Research, INE
2014
2015
fell from 67,000 in 2007 to 7,000
units in 2015. However, with the
supply tap turned off excess stock
has been absorbed back into the
market narrowing the gap between
demand and supply.
Sale volumes and prices have
responded in two phases. In 2013
we saw vendors start to adjust
their prices, keen to progress sales
leading to an upturn in transactions,
and by 2015 the Algarve recorded
its first annual increase in prime
prices since 2008.
What set the Algarve apart during
the downturn was the continual
investment in infrastructure.
The upgrade of the coastal A22
motorway (stretching to Lagos
and opening up the western
Algarve), the improvement to the
E1 (to Lisbon and Porto) and the
€32m expansion of Faro Airport
have helped boost economic
confidence. Further development
is planned at Vilamoura and Quinta
do Lago.
Faro Airport is now served by over
47 airlines with a notable increase
in flights from secondary cities in
northern Europe. Total passenger
numbers arriving at Faro Airport
increased by 35% in the decade
prior to 2015 and journey times
from the airport to the western
Widening pool of buyers
No. of nationalities searching for a property
on the Algarve
145
139
147
137
134
128
2010 2011 2012 2013 2014 2015
Knight Frank Website
resorts of Lagos and Luz have
been cut to c.55 minutes.
Who’s buying?
UK, Irish and German buyers are
still evident along the Algarve but
French, Scandinavian and nonEuropeans, including South Africans
and Chinese, are increasing in
number. The surge in French interest
has been notable in the last 2-3
years with many citing Portugal’s
Non-Habitual Tax Residency regime
(NHR) as a key incentive.
Introduced in 2009, the NHR
exempts non-residents spending
183 days a year in Portugal (or
those with a primary residence
in the country) from income tax
on non-Portuguese incomes,
including pensions, salaries and
capital gains for a period of
10 years*.
Another initiative, Portugal’s
Golden Visa – by far the most
successful of the European
schemes in existence – has seen
inward investment focus on the
Lisbon area rather than on the
Algarve. To date Chinese buyers
account for 79% of the 2,853 visas
granted since 2012.
Today there is greater focus on
the Algarve’s investment potential
compared with pre-2008. The
Algarve’s 37 championship golf
courses are responsible for over
50,000 rounds of golf a year and
their season extends beyond that
of the traditional summer rental
period, running from February to
May and again from September
to November.
New development is evident
once more particularly at the
eastern end of the Algarve,
but prime projects need to be
anchored by a 5-star hotel brand
or a championship golf course to
pull buyers away from the more
established locations such as
the Golden Triangle area which
stretches from Quinta do Lago to
Vilamoura and Vale do Lobo.
€
€6,000-€8,000
18 km
The Algarve’s first development, Vale do
Lobo extends across 1,100 hectares, the
resort comprises two golf courses and
1,550 properties with planning permission
for 500 more, plus a luxury hotel.
Sales volumes recovering*
Net balance %
RISING
80
60
40
20
0
-20
-40
-60
FALLING
Mar
2011
Mar
2012
Mar
2013
Mar
2014
Mar
2015
Mar
2016
RICS/Confidencial Imobiliario
*Net balance = Proportion of surveyors reporting a rise in prices minus
those reporting a fall
* if subject to tax in the country of source.
06
Knight Frank Inside View
Knight Frank Inside View
07
Buying Guide
The purchase of real
estate in Portugal
Portuguese Taxes
Buying property in Portugal should be relatively straightforward,
but we would always recommend that you engage the services of
a reputable agent, lawyer and notary.
When a purchase has been
chosen, typically the buyer is asked
to sign a promissory contract (the
first legal commitment in Portugal
on a property purchase) and pay a
10% deposit.
If the buyer withdraws after the
promissory contract is signed,
they may forfeit the deposit; if the
vendor withdraws, they may have
to compensate the buyer. A lawyer
can explain the specific rules in
more detail.
If the buyer is purchasing off-plan
and the new development is under
construction, the buyer is typically
required to pay the purchase price
in stages.
The buyer’s lawyer will:
•Confirm that the property’s legal
documents are in order
•Verify that the property is
registered in the name of the
vendor
•Establish that no mortgages,
seizures or charges are
registered on the property
•Check that the property has all
the necessary licences in place
08
Knight Frank Inside View
Permanent residence
Once the necessary searches
have been carried out, the deed
or ‘escritura’ in Portuguese, is
then booked with a local notary.
The deed is the official document
identifying the vendor, which is
signed before the notary by both
the buyer and vendor. After this
document is signed the property is
then registered in the name of the
buyer at the local Land Registry
Department and Tax Office.
The escritura includes a detailed
description of the property, the
name of the vendor, the name
of the buyer, the price paid and
the verification that all of the
documents have been checked by
the notary. It also declares that the
full price has been paid. If the buyer
is not able to sign the escritura,
they may give the power of attorney
to their lawyer. This document can
be signed either in Portugal or in
their country of residence.
Notaries are now private in Portugal
and their task is to certify that the
escritura has been signed and that
all legal documents have again been
checked. The notary fees will vary
according to the purchase price and
the time spent on the transaction.
FROM (€)
TO (€)
% TO APPLY
AMOUNT TO DEDUCT (€)
0
92,407
0
0
92,407
126,403
2
1,848.14
126,403
172,348
5
5,640.23
172,348
287,213
7
9,087.19
287,213
574,323
8
11,959.32
Above
574,323
6
-
Non-permanent residence
Additional fees include:
•VAT (IVA in Portugal) will be
charged at the legal rate of 23%
•A registration fee of €250 is
typically charged by the Land
Registry Department for a
straight forward purchase
FROM (€)
TO (€)
% TO APPLY
AMOUNT TO DEDUCT (€)
0
92,407
1
0
92,407
126,403
2
924.07
126,403
172,348
5
4,716.16
172,348
287,213
7
8,163.12
287,213
550,836
8
11,035.25
Above
550,836
6
-
For more information on the above,
property taxes and offshore
companies please consult our
Guide to buying property in
Portugal, prepared for us by
Dr Patricia Dias. This has been
compiled as a guide for potential
buyers of property in Portugal,
it does not seek to provide or
replace legal advice which you
should obtain, nor is it intended
to have any contractual effect.
Knight Frank Inside View
09
Our Team
The Portugal
Network
The London team works closely with two local
experts in the central and western Algarve, who
have been carefully selected for their integrity,
experience and professionalism.
E1
A22
A22
Praia de Luz
Almancil
Faro
Important Notice
Residential
Research
SOFIA SONG
Executive Vice President,
Elliman Insights
Direct: 212.303.5285
[email protected]
KAMILA AKSHALOVA
Research Analyst, Elliman Insights
Direct: 212.303.5303
[email protected]
10
Knight Frank Inside View
Knight Frank
in Portugal
Press Office
MICHELLE PERFANOV
Senior Director of
Corporate Communications
Direct: 212.891.7189
Mobile: 917.412.3645
[email protected]
© Knight Frank LLP 2016 – This report is published for general
information only and not to be relied upon in any way. Although high
standards have been used in the preparation of the information,
analysis, views and projections presented in this report, no responsibility
or liability whatsoever can be accepted by Knight Frank LLP for any
loss or damage resultant from any use of, reliance on or reference to
the contents of this document. As a general report, this material does
not necessarily represent the view of Knight Frank LLP in relation to
particular properties or projects. Reproduction of this report in whole
or in part is not allowed without prior written approval of Knight Frank
LLP to the form and content within which it appears. Knight Frank LLP
is a limited liability partnership registered in England with registered
number OC305934. Our registered office is 55 Baker Street, London,
W1U 8AN, where you may look at a list of members’ names.
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