An end to 2013 and the final figures are in for the Algarve’s top-class range of properties for sale. We have got used to this being a buyer’s market but what has astounded experts is that property prices across the Algarve are now lower than bank valuations.
Bank Valuations vs. Current Market Values
Last December, Portugal’s National Institute of Statistics (INE) published price per square metre valuations by banks for properties in the Algarve region, and for three of the Algarve’s important municipalities - Faro, Olhão and Portimão.
For the same period Meravista is able to compare these bank valuations with market prices using the information from our database of over 24,000 properties,* the largest collection of Algarve properties on the market on one website.
From 2008 the INE’s price per square metre for Algarve property has continued to fall to the current affordable levels. Surprisingly, the current market value of Algarve property in Olhão and Portimão is either at or actually below bank valuations. Albufeira and Lagos, two of the Algarve’s most popular property areas, both show property market values below the average bank valuations for the region.
Banks these days are more cautious than ever when valuing property for loan purposes. They assign values below the market values, remembering the reasons for widespread banking failures in the past. Depending on the criteria used by the individual bank, valuations vary from between 1% and 20% below market value. In depressed economies such as in Portugal, banks are valuing property at much lower levels to reduce their risk and to ensure they can get their money back in the event of default and repossession.
The fact that homeowners and estate agencies are agreeing selling prices that are on, or below bank valuation figures represents a huge buying opportunity. This rare situation also means that buyers looking for a loan to fund their property purchase have a good chance of a loan with a high ‘loan to value’ percentage.
The average list price for property across the Algarve region is 1,371 €/m² which is only 5% above average bank valuations of 1,298 €/m².
This implies that close to half of all Algarve real estate currently on the market is undervalued to the point that it is positioned below the banks’ own valuations.
One of the surprises from the Meravista research is the below average cost of property in Lagos, the sleek western Algarve enclave with big cliffs, wide beaches and fun surfing.
David Westmoreland, owner of B&P Property in Lagos commented,
“Lagos has developed hugely over the past 10 years and was going through a major growth period just as the recession hit.”
“During the peak we saw property values rising exponentially, in some cases at a higher growth rate than the rest of the Algarve. We were catching up on the central areas of the region, so some of the growth was inflated and did not have the maturity enjoyed by those central locations. As a consequence, when the recession hit, Lagos experienced sharper decreases than other parts of the Algarve. Now, as the market has started to improve, we have seen properties selling at prices at more than 30% below their peak.”
David concludes: “This is now levelling out, as these things always do. However, it doesn’t surprise me that Lagos and the western Algarve have lower €/m2 values than some of our neighbours.”
Algarve vs Other European Retirement Destinations
Compared with other popular retirement locations in Western Europe, the Algarve is now way ahead in value for money. With France now sporting an unpopular 75% top tax rate Portugal has gone the other way with generous tax breaks to new foreign buyers, who can live in the sun and have spending money left over to enjoy life to the full - this now is possible in southern Portugal.
*Based on actual data held by Meravista Property Ltd.
W: http://pt.meravista.com/en/home
E: info@meravista.com
