Starved of sun? Algarve offers Brits attractive property escape route

There's plenty to attract property buyers and investors, writes Monica Woodley – not least a resilient market

Memories of the fierce winter may have you planning your escape to a second home in a milder climate. If far-flung, exotic destinations like the Caribbean are too far removed from life and work in the UK, the Algarve might offer a tempting compromise.

The Portuguese property market was one of the worst hit by the financial crisis and resorts like Quinta do Lago have not emerged unscathed. But due to the limited number of properties in the area, prices have held up far better than in the rest of the country.

Quinta do Lago was founded in the early 1970s as a golf resort, and now has over 800 homes and four golf courses. No new building land had been available in the resort since 2001, but last year 26 plots ranging in price from €2.3m (£2m) to €3.5m were released. Three have sold so far and, once the rest are gone, the resort will be at capacity, leaving the market reliant on resales.

Prices start around €250,000 for a basic one-bedroom apartment, while substantial homes with pools, spas and gyms sell for more than €15m. And there is plenty in between: a three-bedroom, three-bathroom villa is currently for sale at €460,000.

Algarve attractions

Temperatures rarely fall below 12°C in winter, and reach as high as 30°C in summer, and the Algarve has plenty of attractions beyond the climate. The resorts tend to be smaller and more discreet, with unspoilt beaches, while Quinta do Lago has a wealth of excellent restaurants. And it is easily reached. Quinta do Lago is just 15 minutes from Faro airport, and flights from London to Faro take less than two-and-a-half hours, with six airlines running 70 flights on the route every week.

Buyer profiles

Brits have always been, and look set to remain, the main foreign buyers of residential property in the Algarve. While many purchase second homes to come out for weekends or the occasional holiday, many also choose to make resorts like Quinta do Lago their permanent home – not just retirees but couples with children as well.

Local estate agents say there is a trend for working people to take advantage of high-speed internet, and good connections from Faro, to work from the Algarve. They also report another shift in the buyer profile – from people seeking holiday homes to people who see Algarve property as a long-term investment.

Changing taxation

Brits have been the most receptive as successive Portuguese governments have lured foreigners to the country with a favourable tax regime. However, a new "mansion tax" of €75,000 per year on homes owned offshore with a valuation of €1m or more will hit resorts like Vale do Lobo and Quinta do Lago as a large proportion of the Algarve's luxury real estate is in these areas and may still be owned by offshore firms. It has already caused many owners of luxury homes to seek buyers.

Other taxes Portuguese property owners need to be aware of are:

* On purchase, Imposto do selo (stamp duty) of 0.4 to 0.8 per cent of the purchase cost, depending on the type of transaction and the property value, and imposto municipal sobre as transmissoes (property purchase taxes, IMT) of 0 to 8 per cent of the higher of either the value of the deeds or the rateable value, and depending on the type of property.

* Annually, there is an immovable property tax (IMI) of 0.2 to 0.8 per cent of the property value, depending on the area in which it is located.

Income from rental profits is taxed at 25 per cent for non-residents, with deductions for repairs and maintenance (but not mortgage interest). For residents, rental income is added to any other income and the total is calculated on a sliding scale of 12 to 40 per cent.

On the death of the owner, inheritance tax of 10 per cent of the property value must be paid, unless the property is left to a spouse or other family members.

On the sale of a property, capital gains tax is due at a flat rate of 25 per cent for people who are not resident in Portugal for tax.

Luring foreign buyers

While tightening the rules on owning property in offshore companies, the government is keen to promote foreign homeownership to support Portugal's fragile economy.

Álvaro Santos Pereira, the minister of economy, said that residential tourism generates 9 per cent of the country's GDP and 8 per cent of employment.

The government is keen to build on these figures, and believes that the sale of just 4,000 properties would bring in additional revenue of €1bn. "We need to increase these numbers. Investing in residential tourism is investing in our economy," he said, contributing to job creation and providing a boost to the construction and real estate industries.

Rather than relying on British buyers, however, it has launched a campaign to attract high-end property buyers around the world. Non-EU buyers who invest over €500,000 in Portuguese property could ultimately gain a "golden visa" or residence permit.

Some agents have even begun selling investment packages that include a visa and property with a guaranteed rental income, and see this as one solution for the many unsold holiday homes that were developed before the onset of the financial crisis and recession.

Outlook

The golden visa scheme could provide some underpinning for the Algarve property market, giving it an advantage over other resorts in southern Europe. Resorts such as Quinta do Lago, which has reached its capacity for growth and appeals to high-end buyers, look particularly well placed to benefit from this boost.

Discover more property articles at Homes and Property
Arts and Entertainment
EurovisionGoogle marks the 2015 show
News
The coffin containing the remains of King Richard III is carried on a procession for interrment at Leicester Cathedral on 22 March 2015 in Leicester, England.
news
Sport
The Queen and the letter sent to Charlie
football
Arts and Entertainment
Eurovision Song Contest 2015
EurovisionGoogle marks the 2015 show
News
Two lesbians hold hands at a gay pride parade.
peopleIrish journalist shares moving story on day of referendum
Arts and Entertainment
<p>
<b>Kathryn Williams</b>
</p>
<p>
When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
<p>
He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
<p>
I really believe that Louis recognised the music from the tour, and when I gave birth to him at home I played Ray's record as something that he would recognise to come into the world with. </p>
booksKathryn Williams explores the works and influences of Sylvia Plath
News
Liz Kendall played a key role in the introduction of the smoking ban
newsLiz Kendall: profile
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
Property search
Property search
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?