In 2024, the market recovered from a series of impactful decisions taken in 2023 by the outgoing government. The changes in NHR, Golden Visa and Alojemento Local went viral in the news and came as a cold shower for many investors. Fortunately, after the demission of Antonio Costa’s government, the new government took action to stabilize and reassure investors. While the year started slowly in terms of sales, it quickly recovered and surpassed 2023, while prices rose by up to 10% in certain municipalities.
House sales in Portugal since 2009
Source: Confidencial immobiliario
The real estate market in Lagos and the Western Algarve is looking bright for 2025. We expect a continued surge in activity, with strong demand from both domestic and international buyers. Here’s a breakdown of what we anticipate:
Factors Driving the Market:
- Economic Growth: Portugal’s economy is expected to grow, boosting confidence in the real estate market.
- Lower Interest Rates: Interest rate cuts will make mortgages more affordable, encouraging more buyers to enter the market.
- High Demand: Demand for properties in Lagos and the Algarve remains high, particularly for holiday homes and investment properties.
- Limited Supply: The supply of new homes is not keeping pace with demand, especially for affordable housing.
- IMT Exemption: The exemption of IMT for buyers under 35yo is encouraging domestic demand
- AL Clarification: The clarification of the AL ” Short-term license distribution for apartment” expected before November this year is expected to finally bring back investors on that important segment
Price evolution of housing for sale in the Faro District
Source: Idealista
Key Trends Shaping the 2025 Market
- Strong Demand:
- Domestic Buyers: Portuguese buyers, particularly from Lisbon and Porto, are increasingly investing in second homes and retirement properties in the Algarve.
- International Buyers: The Algarve remains a popular choice for international buyers, especially from the US, UK, Germany, and France.
- Rising Property Prices:
- Prime Locations: Properties in prime locations, such as Lagos, Vilamoura, and Quinta do Lago, are experiencing significant price growth.
- Affordability: While high-end properties command premium prices, more affordable options are still available in less sought-after areas.
- Increased Investment:
- Tourism Infrastructure: Significant investments are being made in tourism infrastructure, including new hotels, golf courses, and marinas.
- Residential Development: Developers are launching new residential projects to meet the growing demand for luxury villas and apartments.
- Focus on Sustainability:
- Eco-Friendly Developments: There is a growing trend towards sustainable and eco-friendly developments, with a focus on energy efficiency and green building practices.
Market Outlook for Key Segments
Residential:
- Strong Demand for Luxury Villas: High-end villas with private pools, sea views, and modern amenities are in high demand.
- Growing Interest in Apartments: Modern apartments, particularly in urban areas like Lagos, are becoming increasingly popular.
- Rental Market: The rental market is thriving, with strong demand from both short-term and long-term tenants.
Commercial:
- Tourism-Related Businesses: Hotels, restaurants, and bars continue to be popular investments.
- Retail: Retail properties in prime locations are in high demand, especially those catering to tourists.
- Office Space: The demand for office space is increasing, particularly in the Algarve’s business centers.
What about the Ajamento Local (Short-term rental) licenses for apartments?
While the transferability of AL licenses is now official, meaning if an apartment already has an AL, it can be automatically transferred to the new owner, it has yet to be decided how Lagos will implement its regulation on the distribution of new licenses for apartments that don’t already have an AL. Rumour has it that the tourist areas of Lagos and Praia da Luz will not have any restrictions. In contrast, less touristic areas like Portelas and Bensafrim could be subject to restrictions to limit price increases and protect the right to housing of the local population. At the latest, this will have to be officialised by the municipality of Lagos by November of this year. This will significantly impact the sales of apartments that have been suffering since the restrictions of AL were implemented in October 2023.
Investing in the Algarve: A Wise Choice
Investing in the Algarve real estate market offers several advantages:
- Strong Rental Yields: The region’s popularity as a tourist destination ensures high rental yields.
- Capital Appreciation: Property values in the Algarve have historically shown strong appreciation.
- Lifestyle Benefits: Enjoy the region’s stunning beaches, world-class golf courses, and Mediterranean climate.
- Tax Advantages: Portugal offers various tax incentives for non-resident property owners.
My Advice:
Whether buying or selling, working with an experienced real estate agent who can guide you through the process and help you navigate the market is essential.
Want to learn more about the Lagos and Western Algarve real estate market?
Contact me today for a personalized consultation.
