Capital gain – There are few “free lunches” still available. The days of the desperate seller are now gone. The desperate ones jumped ship 2 to 3 years ago. The bankrupt ones had their properties repossessed at the same time. Yes at the top end, you can still find 3.3 million€ villas for 1.5 million€, but at the sensible end, anyone with a property under 350,000 € does not have to sell as rental incomes will cover Bank interest payments and keep them at bay until times get better, so silly offers are rarely accepted.
Distressed sales usually are now linked to new developments where builders are suddenly dumping properties to avoid paying council tax (they have exemption from this tax for a fixed period after build). These are usually apartments or townhouses in sizable condominiums. These make great rental and capital gain purchases…..less than 250,000€ in a good location with proven equity gains and you are on to a winner.
Bank repossessions are not always good news! Many developments were vastly overpriced 5 years ago. The Banks may have lent the builder up to 80% of that value and as prices have dropped 30 or more, so the Bank are asking 10% more than the current market value!!!
Usage – Is it a big family…..are the older teenagers really going to come to Portugal with Mum and Dad or go to Ibiza with all their mates instead? It’s important because many buyers specify 3 bedrooms when 2 would be better. 2 beds rent more often, are much cheaper and the buyer has much more choice. Most owners have sofa-bed in the lounge anyway, so a 1 bed sleep 4, a 2 beds sleep 6 and so on! 2 bed rent and sell better as they appeal to the largest audience,… so consider the usage carefully.
Finally expectations – If you want a 5 Star resort, expect to pay a 5 Star price, not only in the purchase but also running costs. Many people want a distress sale in an exclusive resort then are appalled that the condominium fees are 5,000€ per year! The reality is that if people were paying up to a Million for their property they could probably afford the upkeep for the stunning gardens, spa, 24 hour security, tennis courts etc. If someone spies a bargain in one of these resorts for 300,000€, they have to be able to cover its running costs!!
The Algarve is 150km wide, has 7 million visitors each year, and has strict planning laws As a result the demand for holiday homes out-strips supply. Yes of course, in these difficult times, there is a lot of property for sale, but most of it is average or poor. The nice, or well-priced properties in good locations sell quickly….. and the over-priced, average and badly situated properties don’t sell at all. The Algarve is like Brighton with sun and prices reflect that. Compare this to Spain with its 1,500 miles of coast and massive uncontrolled over build, poor and uncontrolled planning and increasing lack of demand and you see why prices plummeted there.