Iberian property market projected to grow in 2011
Despite media headlines suggesting that the economy in Portugal is in a precarious state, the country’s real estate and tourism industry has done better than expected, according to officials.
Even with the effects of the global economic crisis, the Bank of Portugal has revealed that the tourism industry was responsible for generating revenue of almost €6 billion in the first nine months of the year, well above numbers registered in 2009 or even 2008, which was considered the best year ever for tourism in Portugal.
The past twelve months has not been as bad as the media suggests, according to Stephen Anderson, managing director of the Portugal based property group of property investors, Infinito Real.
‘Going into 2010, the market was filled with uncertainty which was evident from the numbers of would be buyers who either postponed their viewing trips or who just came over to get a feel for what was happening without any firm decision to commit to a purchase. Many of those that did venture over were looking to capitalise on distressed sellers wishing to dispose of their overseas property and willing to make a loss in the process,’ he said.
‘With the Spanish property market going into freefall, many assumed that the reductions experienced in Spain would apply in Portugal. Expectations were completely unrealistic, with clients looking for a 50% discount on sea front villas. For us as a group, the first part of the year was unproductive,’ he explained.
Over the year his company found that while bargains existed, this was actually a small part of the property market and anything with a unique location still held its value. ‘The latter half of the year saw an upturn in clients looking seriously but they had to contend with an increase in mortgage rates and a tightening of the lending criteria, which are huge factors to take into account when buying abroad,’ he added.
Anderson believes that things will not change dramatically in 2011. ‘It’s likely we will see more of the same, albeit with less drastic price reductions, as those most hit by the economic crisis have either sold up or walked away. Although prices will still be negotiable, there will be a more restrictive mortgage process hindering some of the previously available high loan to value deals. Borrowers will also find that mortgage rates will have almost doubled in twelve months,’ he explained.
He is expecting an upturn in the number of clients making inspection visits. ‘The first few months will perhaps be the best time to look as the talk of a Portuguese bail out, although nowhere near the levels of the Irish or Greek one, will be enough to delay some people’s decision making, offering some leverage when it comes to making a deal,’ he said.
This is unlikely though to drastically affect property prices, according to Anderson. ‘Although it will make financing a little more expensive as the rate will increase again, as well as some nominal increases in the stamp duty and IVA taxes,’ he added.
For those buying to let the robust tourism figures and a boost in cheap flights to The Algarve along with Ryanair taking up a permanent presence in Faro airport mean that 2011 could have a positive outlook. ‘Portugal is on Europe’s and the world’s route of quality destinations. This will help those letting out their properties.
Although rental levels have been lower this year, the occupancy has been relatively unaffected, meaning property owners have been able to cover costs. This will likely remain the same next year with perhaps an extra few weeks rental due to the extra flights now available,’ said Anderson.