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Property Investment in Portugal 2008

Booming real estate showing climbing prices in all sectors of the market; Portugal is presenting foreign buyers with very attractive values.

Portugal is a massively popular year-round tourism destination, boasting a mild climate with an average 300 days of sunshine per year and cheap flights daily from all over Europe. Forecasts for 2007, from the World Travel and Tourism Council (WTTC), stipulate that Portugal’s Travel and Tourism Industry will contribute €30.6 billion to the economy rising to €53.5 billion by 2016.

"Booming real estate showing climbing prices in all sectors of the market; Portugal is presenting foreign buyers with very attractive values."

Portugal has benefited greatly as a member of the EU, receiving funds of €25 billion between the period 2000 and 2006, and can look forward to further funding of €22.5 billion over the next 6 years. The funds contribute to infrastructure projects, to upgrade road and transportation links, such as the construction of a high speed rail line, reducing journey times between Madrid and Lisbon from 10 hours to less than 3. €550 million has also been set aside for the expansion of Lisbon’s International Airport, in anticipation of increasing passenger numbers, which are forecast to rise from the current annual figure of 10.7 million to 33 million by 2039. As the quality and availability of infrastructure increases, so will property prices.

In 2007, the travel and tourism industry accounted for approximately 6.5% of Portugal's GDP (equivalent to €10.4 billion and 15.4% of the economy) and this is predicted to increase to 7.2% of GDP by 2017.

Portugal’s economic growth remains stable with gross domestic product (GDP) growth forecast at 1.8% for 2007 and 2.1% in 2008, according to the Bank of Portugal. A gradual increase in economic activity for the 2007/2008 period is expected.

Portugal is in the process of carrying out a number of structural reforms in its product and labour markets with the aim of developing a more dynamic business climate. This will have a knock-on effect on both the local and holiday property markets, with increased business activity set to stimulate investment into the regeneration and construction of property.

Based upon information provided by PricewaterhouseCoopers, A Place In The Sun rated Portugal third out of the twenty best property investment locations, quoting an incredible 360% potential return on investment over the next 10 years. Portugal’s capital growth has remained at a consistent 10% to 15% year-on-year since 2000. Low purchasing costs and deposits of 20% means the average investor may enjoy a 37% annual return from a combination of both rental income and capital gains.

Average property prices increased by 17% during the period 2001 to 2006, with 5.7% yields for properties in Lisbon’s rental market; rents have experienced an average annual growth rate of 10.3% since 1984. A healthy 12% growth is expected in Portugal’s property market in 2007.

The Portuguese property market is a safe bet for investors and is a favourite for British buyers who have favoured the shores of the Algarve; some 50,000 properties are owned by British. A stable economy, a solid tourism industry, strong price growth and high yields all present an excellent investment climate for property investment in Portugal.