Algarve Property Market Snapshot – October ‘09

One thing is clear: the desire to own an overseas property is as strong as ever. Statistics of people browsing overseas property websites are on the up, and, with the demise of “emerging markets”, interest in the Algarve, as a safe, well-established market with a strong tourism infrastructure and planning controls, is greater than ever. However, over the past year, with the financial crisis and sterling languishing against the euro, actual buyers have been thin on the ground.

Several factors are now at work to change this picture. People generally believe that we have now hit a market bottom. In fact, with the recent unwinding of pent-up demand, property prices in the UK are already back to their 2008 levels. Mervyn King has also made it clear that the cheap pound is not a problem for the Bank of England, so there may be no point in waiting for the pound to strengthen.

In fact, with quantitative easing inevitably leading to inflation, now might be a good time to convert cash into hard assets, which means snapping up those overseas property bargains while they are still available.

In the Algarve, enterprising agents have been tracking down stocks of unsold apartments and townhouses, and offering them fully furnished at attractive discounts, with pre-arranged financing and rental management packages. These are now selling out.

Although banks here have tightened their lending criteria and increased spreads, there is no shortage of mortgage financing available, with LTV offers of up to 80%, and interest-only for a portion of the loan or repayment period.

Here at AlmaVerde, we have – in the past couple of weeks – sold one off-plan villa, as well as our show villa, which was the only remaining unsold new property. Both buyers are running successful UK businesses, have cash in the bank and were looking for a great deal, which meant significant discounts off published prices.

Our experience is that more discerning buyers do recognize and appreciate the real, tangible benefits to owning an AlmaVerde property, in terms of year-round thermal comfort as well as low energy and maintenance costs, and, once they realize that villas of this quality are available, they become unwilling to compromise.

It is no accident of fate that our buyer profile includes architects, chartered surveyors, property lawyers, builders and even other property developers.

And one thing that we have not compromised is our energy-efficient specification. This makes our construction costs relatively high, in comparison with other developments, and puts a firm floor under off-plan prices.

For an off-plan purchase, the timescale from initial reservation to final delivery is typically fifteen months. We are also able to transfer the plot prior to construction, reducing property transfer tax and giving the buyer total security over the work in progress. This also means that payment is made in stages as construction proceeds, and so is spread over the life of the project.

There are also a few re-sales on offer, with prices starting at under 400,000 sterling, including furniture.