The Algarve is one of the most popular destinations in Portugal for real estate development, and the region still has plenty of great plots to invest in.
Developing property in Portugal is a bit more complex than buying property in Portugal, however. If your knowledge of real estate investment in the country is limited to pre-built units, you have to know about the specific rules surrounding buying land and developing it first. This will allow you to know the obstacles you may have to face, prepare for them, and make sure that the whole process goes as smoothly as possible. Here’s what you need to know before developing land in the Algarve.
Your Budget
You should know that land in the Algarve can vary greatly in price depending on how far from the coast it is and many other factors, so make sure that you look at varying plots at first and start listing a few plots that fit your criteria and budget.
Another thing you will have to plan for is financing. Banks won't give you financing for buying a plot in the country but will give you a loan for building on a plot, so you may have to buy the plot in cash. If you get a building loan, money will be paid in instalments after you meet specific building stages.
Your budget should factor in things such as land purchase plus any related fees. These include builder fees, which will be paid in instalments, and lawyer fees, which should account for about 1% of the total purchase. There are also architect fees, taxes, mortgage, and transfer fees.
Will You Buy the Land or Plan the Property First?
There are two approaches you can take when looking for land for development. You can either start with a floor plan then find a plot of land to match or find a plot of land and build the floorplan after.
The best option here is usually to get the land first. Finding a piece of land in the rapidly shrinking Algarve market that will fit your floor plan will be much more difficult than the other way around.
Picking the Right Piece of Land
When looking for land, you’ll have to look at things like elevation and pitch, how easy it will be to connect the property to water, gas, telephone services, and electricity, and have a soil survey performed as well. We would also suggest that you look at future developments in the area and see how yours will be affected.
For instance, there are a lot of new road developments coming in the Algarve region, and not everyone would like to have a major road running right in front of their property. This is information you can get from the Plano Director Municipal. They are obligated by law to show you any infrastructure plans they have for the next 10 years. This will help you find the most suitable piece of land for you and avoid nasty surprises in the future.
Sustainability
Sustainability should be at the top of your list when developing property anywhere, but especially in a place like the Algarve. Preserving the ecosystem is what will allow the area to keep flourishing and will eventually benefit you as an investor if you decide to develop more properties in the area.
Coming from the UK is an advantage here since the country is at the forefront of sustainable building. Having your development built according to UK rules will ensure that your development is not only sustainable but actually adds to the local ecosystem.
If this is important to you, you should consider having a biodiversity net gain plan drafted by a team like Arbtech. Their ecological consultancy team will look at the land you want to acquire and conduct a biodiversity net gain assessment to help you build in the most responsible way possible. They will walk with you every step of the way and will come up with various solutions, whether it’s making changes to your original plan, moving natural assets, or adding some to your property.
Designing the Property
Know that you don’t necessarily have to hire a local architect to build the property for you. You can have your plan made back home and bring the CAD with you. But it’s usually better to go with local talent.
Working with a local architect will make the hiring process easier as it will be much easier to verify their reputation and expertise. Working with a local architect could give you something that will be more in line with the region’s style too. They might be aware of some specificities about the region that you may not be aware of as well. Another benefit of going with a local architect is that they can be much more involved in the project and even become sort of a project manager for you.
Also, know that there are plenty of great prefabricated home manufacturers in Portugal, and going for a prefab house could be a great way to cut your costs while accelerating the building process. So, look at all the options that are open to you and see which ones would be a better choice based on your budget, needs, and expectations.
Dealing with Local Bureaucracy
Various inspections will have to be performed before you start your project, so it’s better that you start learning about them right now. Tax, sewer, electricity, and other amenity plans will have to be sent for approval to the municipal authority. Your documents will then be examined, and inspectors sent to look over the parcel of land. Once they’ve surveyed the plot, you’ll be issued a Construction Licence, or Licença de Obras by the municipal authority.
You'll then have to apply for a connection with each service and then get an inspection for each connection after. This could take weeks and will take longer during the summer and holidays, so prepare for that. Also, know that some architects will take care of that part for you, so choose the one you're going to pick wisely and see what's included in their service.
The Algarve is one of the most attractive regions in Portugal for real estate developments, and now is a great time to invest in it. Just make sure that you’re ready for what will be required of you and start planning early so you can get the most out of your investment.
