Where to invest in the Algarve?

The Algarve is famous for its golden beaches, steep cliffs, secluded coves and year-round sunny climate. Investing in property in the Algarve meets the constant demand for seasonal rentals and also increases the stock of secondary residences, which can reasonably be expected to become primary residences one day. This creates a virtuous cycle that maintains a certain level of economic dynamism throughout the year.

Portugal is much more resilient than its neighbors, with economic growth of 1.5% of its GDP in the first quarter of 2024 compared to the same quarter of the previous year.

Let’s take a look at the cities that combine strategic location, cultural offer and strong development potential (including in rural areas).

Albufeira is one of the Algarve’s most emblematic tourist destinations. It requires a wide range of accommodation – mainly residential – because that’s what tourists are looking for: more modern, more flexible infrastructures, and the capacity to support a large peak in summer visitor numbers. It is also home to the Algarve’s largest resident foreign community.

Investors are sure to find what they’re looking for, thanks to the wide range of properties on offer, from seafront flats to luxury villas.

Expect to pay around £3,413/m² for a property in Albufeira city centre.

Faro, the capital of the Algarve, is the administrative and economic heart of the region. This is where the airport is located, with regular services to major European cities. Faro is typical of Portugal’s picturesque historic charm, with its famous cobbled streets lined with restaurants and nightclubs, its lively markets and its Moorish and Roman ruins. The region is home to the magnificent Ria Formosa Natural Park. The beauty of the beach on the island of Beretta is a must-see for those in search of an escape.

Faro is the perfect place to invest, as it is an extremely well-connected city on a human scale, with a population of 63,000 in 2023.

The price per square metre is around £2,474/m².

Lagos, in the west of the Algarve, is the place to discover Portuguese-style nightlife. The city attracts more tourists than its neighbours, and this is reflected in property prices (expect to pay around £3,413 per square metre in the city centre).

But profitability is normally assured thanks to the demand for seasonal rentals.

The Vilamoura casino, the Vilamoura golf courses, the Vilamoura beaches: everything here works together to develop luxury tourism. In fact, the image people have in mind when they think of the Algarve is Falesia beach, with its ochre cliffs and immense white sandbank. As an internationally renowned seaside resort, you won’t be surprised to learn that the property on offer includes luxury flats and ultra-modern villas.

The price per square metre in this charming resort? £4,607 per square metre on average for a house.

Tavira is also highly rated. Situated in the east of the Algarve, it is appreciated for its authenticity and well-preserved cultural heritage: no fewer than 30 churches and a superb bridge dating from Roman times spanning the River Gilão. It’s the perfect choice if you want to live peacefully in a charming setting that’s unique in Portugal, while being close to beaches and amenities.

The price per m² reflects the city’s appeal: around £3,157 for the city centre.

The Algarve offers great investment potential. Sometimes, you need to focus on towns in the making, because all it takes is for a few builders to decide to develop the area, and you’ll immediately have a much larger catchment area. In these cases, you need to focus on value for money and the long term. High-potential municipalities include:

Loulé is a small shopping town with a strong Arab influence. On Saturdays, it comes alive with the arrival of the region’s biggest markets. What makes it special is that its historic centre has remained virtually unchanged since medieval times, and is much visited for this very reason. But it has managed to modernise all its infrastructures. A necessary choice, given that it is only ten or so kilometres from the Algarve’s golden triangle and the luxury resorts of Vale do Lobo.

So it’s a good reason to invest here, at an average cost of £3,839 per square metre.

Portimão, in the west of the Algarve, is booming with property development. The town is home to the largest resident community in the region and, very recently, a retail park was built on a 22,000 m² site, which is a major asset for its attractiveness thanks to the creation of jobs and the arrival of the working population. This is the Nova Vila Retail Park. Portimão is undoubtedly an opportunity for investors wishing to participate in the region’s growth.

Prices are very reasonable, with an average of £2,815 per square metre for a city-centre flat.

Quarteira, next door to Vilamoura, which can be reached on foot in 15 minutes along Falesia beach, is a booming property sector. Its strategic location by the sea is attracting investors looking for properties with great potential.

Prices have risen and it costs around £4,266/m² to become a homeowner in Quarteira.

Olhão is a town that looks more like a fishing village. The houses are very authentic, Moorish in style, and have been renovated by the expatriate community made up of French, Belgians and English. As a result, the town is enjoying a renaissance. And the rental offer has expanded. As the town is only 8 km from Faro, it benefits from its aura. Investment opportunities are multiplying.

Price per square meter? Between £2,559 and £2,986.

Sagres, at the westernmost tip of the Algarve, is renowned for its natural beauty. There are some of the most beautiful beaches on the coast. Praia de Mareta, for example, is sheltered from fairly strong winds, while Praia Do Tonel is renowned for its waves and is frequented by surfers. The fact that this area is particularly green and rustic does not mean that nothing happens here. It’s a peaceful place to live, but that’s what people who come here are looking for. It’s not for nothing that there are luxury hotel resorts. Investors know that Sagres attracts people for its unique, even mystical charm.

To invest in Sagres, expect to pay £4,266/m².

The latest property figures show that prices have risen in Portugal as a whole, and inevitably also in the country’s most popular tourist region.

Today, renting out your property on a long-term basis yields a gross return of around 5%, and can be higher for seasonal rentals (over 10%).

Seasonal lettings also allow you to take advantage of your property when it is not let, whereas with long-term lettings you would have to wait for your tenant to leave.

For an agency to take care of setting up your tenants, checking them in and out, and any repairs to your property, the average charge in Portugal is 20% of the rent.

This is a good deal, especially in terms of saving time and energy, if you have a lot of turnover during the season. If you are receiving long-term holidaymakers, you might consider doing this yourself, if you are on site.

Prices are rising in Portugal as the country attracts more and more foreign investors and residents. The economic climate is better than in other parts of Europe, which makes it a very attractive place to invest in property and seasonal rentals.

Don’t hesitate to contact an iad Overseas property consultants in Portugal to help you in your search!