Buying overseas: Laughing all the way to the banks

It's as beautiful as Tuscany, and the wine is world-class, but prices in Portugal's Douro Valley are more palatable. By Laura Latham

To the northeast of Portugal lies a stunning and tranquil landscape of mountains and vineyards pouring dramatically down to the Douro River. This region is far from the most popular hunting ground in Portugal for second homes. Despite its beauty, the Douro Valley attracts a fraction of the number of visitors of the Algarve. Most are wine tourists, as the region provides ideal conditions for producing Portugal's best-known tipple, port. However, with the government keen to encourage tourism, the area is tipped for bigger things.

The river winds from the Spanish border to the historic harbour of Porto, 120 kilometres away, and the fertile valley through which it flows is considered so important that the region is a Unesco world heritage site. Road improvements and more flights into Porto have opened up the region, without adversely impacting on its rural charm. Price rises in the housing market in other areas of the country have also had less effect here, though there are signs that small-scale development is starting to move in.

Homes tend to be small country houses and elderly quintas (estates) dotted among the hills and villages. Buyers migrating to this area are often "tired of the Algarve and looking for the real Portugal", according to Jim Edmeads of Homes for Sale in Portugal.

He says that the cost of property can be competitive compared to other locations with average prices of four-bedroom homes with a couple of acres for £170,000 to £200,000. "It depends what you're looking for," Edmeads says. "It's possible to spend over a million pounds on very exclusive properties but equally you can find restored houses with two or three bedrooms finished to a really high standard for around £120,000."

Edmeads admits that much available property in the region is not immediately attractive. "The Portuguese love their breeze blocks," he laughs, "in the country it's more about being practical than having good aesthetics." However, he says that it is possible to update the exterior architecture to make them prettier.

For those who'd rather not take on a renovation but still want the feel of an authentic village, projects such as Povoa Dao, near the town of Viseu, may be an option. The Catarino Group has turned the rustic ruins of this lovely medieval village into a series of pretty homes. In addition to the 45 one- to three-bedroom cottages, which are selling from £133,000, an aparthotel and restaurant are also planned.

The good thing about this development is that the few remaining residents in the village have had their properties restored as part of the project. Electricity and piped water have been brought in for the first time and the locals will be involved in the upkeep of the village and in cultivating the adjacent farm.

The Catarino Group's Ana Rebelo says the company loved the idea of restoring Povoa Dao because it was a piece of Portuguese history in an area that offered different attractions to the Algarve. "It's not often the chance comes to rebuild something dating back to medieval times. We had the opportunity not just to rebuild a village but to restore what was once a thriving community."

A similar project has also been launched by Cushman & Wakefield in a peaceful area near the Douro's main city of Peso da Regua. Aquapura Villas is part of a wider estate of which the focal point is a historic quinta now run as a boutique hotel. The estate has extensive vineyards and there are spectacular views over the Douro River.

The properties fall into two styles: traditional houses and contemporary, hi-tech homes. Properties start at £436,000 for a one-bedroom vineyard cottage with two-bedroom riverside villas costing from £789,000. Eleanora Laczova of Cushman & Wakefield says there is a lot of interest in the resort. "This area isn't well known but it can be compared to Tuscany in terms of beauty."

Laczova believes the Douro Valley has been saved from mass development by its protected status, which makes it difficult to get planning permission. She also feels it is a niche area, appealing to those who want to escape the wider world. "The region has a rich character and people who want to own here love it. When you visit the Douro Valley you can understand its appeal."

Homes for Sale in Portugal: 01480 412 082, www.homesforsaleinportugal.com; Catarino Group: 0870 112 5472, www.povoadao.co.uk; Aquapura: 870 042 9773, www.aquapuravillas.com; Quadrant Overseas Property: 01276 507 513, www.quadrant-property.com

Buyers' guide

*Before you can buy a property in Portugal you need a fiscal card, known as a cartao de contribuinte, with an identity number.

*Surveys are not required in Portugal but you should have one done, especially if buying a rural or older property. It should detail not just the structural aspects of the property but the boundaries as well.

*In rural areas property is commonly sold privately. Make sure you're aware of how much similar properties in the area are selling for, so that you have a benchmark for negotiation and use a good independent lawyer fluent in Portuguese and English.

*Vendors in Portugal often ask for part of the purchase price to be paid in cash to avoid declaring tax on it. The practice is illegal and best avoided.

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