Market Report Portugal (1): High Demand from Germans and Other Interested Parties

Portugal is more in the spotlight than ever. This country on the edge of the Atlantic not only attracts as a desired tourist destination but also stands out as a safe haven in turbulent times. In the years 2022 and 2023, the real estate market experienced a true boom, inserted into a constantly evolving price spiral. Here, we present an overview. 

Portugal as a Dynamic Market for Vacation Properties 

Portugal is currently among the most dynamic markets for vacation properties in Europe, with rising prices, declining stocks, and demand surpassing supply. Especially after the pandemic year of 2020, the situation exploded. New construction prices have risen by over 60% since 2015, and adjusted for inflation, Portugal currently has the highest real estate prices in 30 years. In the third quarter of 2023, properties became about 11% more expensive compared to the previous year, which itself had seen an increase of 13% compared to the year before. 

Causes of the Real Estate Boom in Portugal 

Tourism has long been a solid foundation for the real estate market in Portugal. The capital, Lisbon, and the "Island of Flowers" Madeira have attracted the rich and aristocrats since the 19th century. Since the 1960s, the enchanting coast of the Algarve has been discovered for both mass tourism and the construction of exclusive golf resorts. Portugal, on the edge of the Atlantic, offers a variety of attractions: a pleasant climate, picturesque landscapes, excellent gastronomy, historical architecture, and the friendliness of the locals. Portugal has been in high demand for about eight years. Not only tourists are attracted but also artists, investors, and digital nomads planning a long-term stay, looking for suitable properties. 

Until October of this year, there was the "Golden Visa Program" for non-EU citizens, allowing residence in Portugal (and the EU) through investments in real estate (at least 280,000 to 500,000 euros, depending on the area and property). Especially Americans and Chinese took advantage of this. Today, there is the D2, D3, and D7 visas, which are equally attractive and guarantee permanent residence in Portugal. The British traditionally constitute the largest group of foreign buyers, but now buyers come from all corners of Europe, with Germans representing about 10%, which has significantly increased in 2023, currently at about 13%. 

The purchase of properties for holiday rentals (in Portuguese: AL - Alojamento Local) has become more expensive but can be significant given the current demand. However, it should be noted that the political will of the current government in Portugal is against it due to housing shortages. However, early elections are scheduled for March 11, so this may change. The Corona pandemic and the war in Ukraine have further fuelled the real estate market, as Portugal is seen as a safe and peaceful destination. An advantage for buyers is also that Portugal has very diverse markets with a huge variety of prices to choose from. More market reports will come... 

Author: Paulo Lopes