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- 2. Overview 02 Knight FrankInside View For Sale - Benagil, Algarve PortugalInsideView_FINAL_WEB.indd 2 19/05/2016 17:00
- 3. Knight Frank InsideView 03 Alex Koch de Gooreynd Head of Portugal Portuguese Market Overview The Algarve inspires a special affection for second- home buyers. It is a place where many spent childhood holidays, where their parents’ owned a holiday home and they now want to invest for themselves and future generations. It has a traditional, multi- generational appeal and not only will nowhere in Spain or elsewhere in Portugal do, nor will alternative Algarve locations suffice. They tend to set their sights on one location only. Mention the Western Algarve to someone who is considering the luxurious Quinta do Lago resort and they will think you are talking about a different planet. Conversely, a buyer who wants the escapism of the Algarve’s West coast – the huge, untouched surfing beaches, farmhouses on large plots in the hills – may find the central Algarve’s resorts too busy and blingy for their tastes. As Portugal recovers from the financial crisis, however – one that saw the country among the hardest hit in Europe and the Algarve’s property prices fall by up to 50% – the traditional, prime locations rule once more. In recent years, buyers have been nervous about investing in the Southern Eurozone. Portugal is rarely a place that buyers move to for work. It’s primarily a second home destination and a luxury purchase. A good-quality property is one thing, but there needs to be a reason to buy in some locations – a badge of endorsement such as a Kempinski or Four Seasons hotel, sought-after restaurants, proximity to a beautiful beach or an excellent golf course, such as the project at Monte Rei in the largely undeveloped Eastern Algarve. Many of Portugal’s new schemes that have been designed specifically with Golden Visa buyers in mind – non-EU investors who are seeking residency in return for a property investment of at least €500,000 – are proving popular with the Asian market and tend to be near Lisbon. But these developments are often set in locations that lack the infrastructure that typical holiday home buyers want and need. Along the Algarve coast, where we focus all of our Portuguese activity, resorts such as Quinta do Lago and Vale do Lobo command a premium over nearby off-resort properties – there is a cachet to buying there, and rental demand is higher, because of their excellent locations, sports and lifestyle offerings. Such resorts also offer a sense of security, which is a key issue for buyers now. The Algarve has never been associated with high levels of crime, but the issues related with the world’s trouble spots are pushing buyers to prioritise the security that comes with a gated resort. After a period in which the cranes stopped and barely anything over €1m sold, buyers are investing in the Algarve again. They are buying, extending and improving. Increased liquidity is returning with the good quality stock selling quickly and sensible pricing after years on the market, proving vendors are more motivated to sell. Prices vary widely across the coast. A good-quality three/ four-bed villa with a pool on Quinta do Lago will cost around €2.5m, whereas in the Western Algarve – including Lagos and Luz – €500,000-€1m will stretch to something similar with a sea view. Whilst unsurprisingly the €500,000-€1m bracket is the most active due to numerous buyers drawn to the Non-Habitual Residency regime, which offers tax benefits if buyers become a Portuguese tax resident (see page 7). For many non-dom status clients and some retired buyers who want easy access to the UK, it’s an appealing option. Buyers are also drawn to the Algarve for the long rental season it offers. Golf is a huge attraction all-year round in the Algarve. People who want their holiday home to make money when they are not using it, can reasonably expect to rent out their properties from Easter to late October. Rental income is important. But so is the ease of the Algarve for owners – a place that is easily accessible and offers everything on tap once there. PortugalInsideView_FINAL_WEB.indd 3 19/05/2016 17:00
- 4. Lifestyle That was in1971 and, since then, Quinta do Lago has become Europe’s premier sports and residential resort, attracting property owners at the top of their fields from Formula 1 to finance. But when John Dwyer, an accountant and talented golfer, took over as CEO in 2008, the recession was kicking in and a rethink was required. The resort had matured nicely, but its owners and visitors were ageing with it. “Our shareholders said we hadn’t new Bovino steakhouse and The Shack, the perfect lake-front spot for a sundown drink. “We’ve renovated and rebuilt everything so we now have a good asset base with our golf and restaurants. We are constantly thinking of new events too. There are now 500 a year, including an Easter egg hunt on the driving range which attracted 1,200 people and our Friday drive-in movie nights in summer which see crowds of up to 2,000,” says Dwyer. “You don’t need to be a Quinta resident or owner to join in and everything we’ve done has been free to access, which has worked well.” It’s all going down well, too, with existing and prospective owners – and the average age of buyers at Quinta has dropped significantly. “There used to be little for kids to do. Now we’re hearing the second generation saying ‘Dad, can we keep the house at Quinta. We love it’. Parents send their kids here for a fortnight with the grandparents and we see a lot of families move been proactive enough and that we needed to start the ‘new Quinta’. The average age of our golf club members was 71. We had to change the demographic and make the resort young again,” says Dwyer. That push has led to a €50m investment in the resort over the last seven years, including rebuilding the North Course, which is surrounded by some of Quinta’s last remaining plots. Dwyer has also beefed up the dining options with the trendy 04 Knight Frank Inside View The resort for all ages It’s nearly half a century since the property developer André Jordan spotted the potential of a peaceful 550-hectare slice of the Algarve coast overlooking the Ria Formosa nature reserve and began to build a low-density golf resort. By Zoe Dare Hall Quinta do Lago, 15th hole Quinta do Lago, North Course, 8th hole PortugalInsideView_FINAL_WEB.indd 4 19/05/2016 17:01
- 5. Knight Frank InsideView 05 to Quinta for the whole summer and the husband or wife commute back to London for work.” Adding to the child-friendly offering – particularly for teenagers – is a new sports centre that should be fully complete by next summer, with football pitches, tennis courts and 45 other activities from a BMX track to climbing walls. “Happy kids mean happy families,” says 44-year-old Dwyer, a father of two youngsters. Naturally this has a direct impact on the average daily spend. Quinta undoubtedly appeals to a wealthy audience who want an upmarket resort, as seen in some of the most recent villas that are being built, some of up to 1,000 sq m, not including their vast basement levels. “We’re seeing more ‘estate buyers’ who want double plots where they can build a larger house. They often holiday with other families with about 20 kids,” says Dwyer. But he points out that Quinta is available to a wider audience, with properties costing from €250,000 to €40m. Many buyers start small, then trade up as their finances improve. The strength of Sterling in the past year or so has prompted many prospective British buyers who were sitting on the fence to invest. “We saw double the number of transactions in 2015 compared with 2014,” says Dwyer. A possible Brexit, too, is encouraging risk-loving investors. “We’re seeing opportunism rather than apprehension. Some buyers are waiting to close in September or October in the hope of making 10% on the currency exchange.” Airlift, too, to nearby Faro airport, “is the key to our success,” says Dwyer. “Seasonality is the big evil for any resort, but we just see two quiet months in December and January before the golfers drift out, fed up with the weather back home. May to October sees 100% occupancy.” It’s not just year-round sunshine but the global political climate that is playing in Quinta’s favour. “The second conversation we have with every buyer, after capital values, is about security,” says Dwyer. “We have 98 full-time security guards, we have emergency medical response. We can give people the safety and security they want.” He can also guarantee entertainment for all generations. John Dwyer may have joined Quinta at its most challenging time, but for this 45-year-old resort, he may also have discovered its key to eternal youth. “We’ve renovated and rebuilt everything so we now have a good asset base with our golf and restaurants. We are constantly thinking of new events too but you don’t have to be a Quinta resident or owner to join in. ” John Dwyer, CEO, Quinta do Lago PortugalInsideView_FINAL_WEB.indd 5 19/05/2016 17:01
- 6. Research The Portuguese propertymarket’s troubled past is well documented. Not even the Algarve’s ancient cork forests and pristine golf courses managed to entice buyers post 2008, prompting prices in some resorts to fall by as much as 50% in peak-to-trough terms. Residential construction plummeted across Portugal. According to the Bank of Portugal completions fell from 67,000 in 2007 to 7,000 units in 2015. However, with the supply tap turned off excess stock has been absorbed back into the market narrowing the gap between demand and supply. Sale volumes and prices have responded in two phases. In 2013 we saw vendors start to adjust their prices, keen to progress sales leading to an upturn in transactions, and by 2015 the Algarve recorded its first annual increase in prime prices since 2008. What set the Algarve apart during the downturn was the continual investment in infrastructure. The upgrade of the coastal A22 motorway (stretching to Lagos and opening up the western Algarve), the improvement to the E1 (to Lisbon and Porto) and the €32m expansion of Faro Airport have helped boost economic confidence. Further development is planned at Vilamoura and Quinta do Lago. 06 Knight Frank Inside View Lagos Carvoeiro Portimao Praia da Luz Burgau Sagres Monchique A22 Faro Airport is now served by over 47 airlines with a notable increase in flights from secondary cities in northern Europe. Total passenger numbers arriving at Faro Airport increased by 35% in the decade prior to 2015 and journey times from the airport to the western Knight Frank Website 201520142013201220112010 139 134 128 137 145 147 Widening pool of buyers No. of nationalities searching for a property on the Algarve After several testing years the Algarve is back on the radar of second home buyers. Realistic pricing, the availability of cheap finance, strong investment in infrastructure and tax initiatives have led to renewed confidence. By Kate Everett-Allen Brighter horizons Knight Frank Research, INE 60 65 70 75 80 85 90 95 100 105 110 20152014201320122011 MAR 13 Austerity measures at peak MAR 15 Global economic uncertainty Price recovery underway Algarve upper quartile price index, 100 = Jan 2011 € Prime price € per sq m Drive time/distance from airport Marina Championship golf course € Praia da Luz €2,500-€5,000 93 km ‘Beach of Light’, a well established sea front second home location. The town is quiet, low rise and maintains its tradi- tional character. Properties range from apartments townhouses in the centre and larger private villas with swimming pools and sea views on the outskirts. € Lagos €2,500-€5,000 91 km Historic walled town with a modern 462 berth marina and boasts the Algarve’s longest beach (4 km) popular for water sports. Properties range from modern apartments, townhouses and villas amongst some new 5 star hotels in the area. PortugalInsideView_FINAL_WEB.indd 6 19/05/2016 17:01
- 7. Knight Frank InsideView 07 Golden Triangle Carvoeiro Loulé Almancil Albufeira Quinto do Lago Vilamoura Vale do Lobo Tavira FARO E1 E1 A22 resorts of Lagos and Luz have been cut to c.55 minutes. Who’s buying? UK, Irish and German buyers are still evident along the Algarve but French, Scandinavian and non- Europeans, including South Africans and Chinese, are increasing in number. The surge in French interest has been notable in the last 2-3 years with many citing Portugal’s Non-Habitual Tax Residency regime (NHR) as a key incentive. Introduced in 2009, the NHR exempts non-residents spending 183 days a year in Portugal (or those with a primary residence in the country) from income tax on non-Portuguese incomes, including pensions, salaries and capital gains for a period of 10 years*. Another initiative, Portugal’s Golden Visa – by far the most successful of the European schemes in existence – has seen RICS/Confidencial Imobiliario *Net balance = Proportion of surveyors reporting a rise in prices minus those reporting a fall Sales volumes recovering* Net balance % * if subject to tax in the country of source. RISING FALLING-60 -40 -20 0 20 40 60 80 Mar 2016 Mar 2015 Mar 2014 Mar 2013 Mar 2012 Mar 2011 € Carvoeiro €3,000-€4,500 58 km The original village is nestled between two low hills behind the beach. Popular with UK and Irish buyers the resort was the focus of development pre-2008. Large villas in citrus orchards predominate. € Quinta do Lago €8,000-€10,000 17 km Founded in 1972, the world-renowned estate has four golf courses, boasts 2 km of beaches and an enviable number of sporting and recreational facilities. € Vilamoura €4,000-€6,000 25 km Home to five championship golf courses, an equestrian centre and 875-berth marina, Vilamoura is set to see investment of €1bn as it enters a new phase of development adding 5,000 new residential properties. € Vale do Lobo €6,000-€8,000 18 km The Algarve’s first development,Vale do Lobo extends across 1,100 hectares, the resort comprises two golf courses and 1,550 properties with planning permission for 500 more, plus a luxury hotel. inward investment focus on the Lisbon area rather than on the Algarve. To date Chinese buyers account for 79% of the 2,853 visas granted since 2012. Today there is greater focus on the Algarve’s investment potential compared with pre-2008. The Algarve’s 37 championship golf courses are responsible for over 50,000 rounds of golf a year and their season extends beyond that of the traditional summer rental period, running from February to May and again from September to November. New development is evident once more particularly at the eastern end of the Algarve, but prime projects need to be anchored by a 5-star hotel brand or a championship golf course to pull buyers away from the more established locations such as the Golden Triangle area which stretches from Quinta do Lago to Vilamoura and Vale do Lobo. € Tavira/Eastern Algarve €3,000-€4,500 56 km The Eastern Algarve is comprised of smaller resorts, popular with Portuguese second home owners. New developments such as Monte Rei, are reshaping this market with the added services allowing for those prices to compare with Vale do Lobo. PortugalInsideView_FINAL_WEB.indd 7 19/05/2016 17:01
- 8. Buying Guide When apurchase has been chosen, typically the buyer is asked to sign a promissory contract (the first legal commitment in Portugal on a property purchase) and pay a 10% deposit. If the buyer withdraws after the promissory contract is signed, they may forfeit the deposit; if the vendor withdraws, they may have to compensate the buyer. A lawyer can explain the specific rules in more detail. If the buyer is purchasing off-plan and the new development is under construction, the buyer is typically required to pay the purchase price in stages. The buyer’s lawyer will: • Confirm that the property’s legal documents are in order • Verify that the property is registered in the name of the vendor • Establish that no mortgages, seizures or charges are registered on the property • Check that the property has all the necessary licences in place Once the necessary searches have been carried out, the deed or ‘escritura’ in Portuguese, is then booked with a local notary. The deed is the official document identifying the vendor, which is signed before the notary by both the buyer and vendor. After this document is signed the property is then registered in the name of the buyer at the local Land Registry Department and Tax Office. The escritura includes a detailed description of the property, the name of the vendor, the name of the buyer, the price paid and the verification that all of the documents have been checked by the notary. It also declares that the full price has been paid. If the buyer is not able to sign the escritura, they may give the power of attorney to their lawyer. This document can be signed either in Portugal or in their country of residence. Notaries are now private in Portugal and their task is to certify that the escritura has been signed and that all legal documents have again been checked. The notary fees will vary according to the purchase price and the time spent on the transaction. Additional fees include: • VAT (IVA in Portugal) will be charged at the legal rate of 23% • A registration fee of €250 is typically charged by the Land Registry Department for a straight forward purchase 08 Knight Frank Inside View Buying property in Portugal should be relatively straightforward, but we would always recommend that you engage the services of a reputable agent, lawyer and notary. The purchase of real estate in Portugal PortugalInsideView_FINAL_WEB.indd 8 19/05/2016 17:01
- 9. Knight Frank InsideView 09 FROM (€) TO (€) % TO APPLY AMOUNT TO DEDUCT (€) 0 92,407 0 0 92,407 126,403 2 1,848.14 126,403 172,348 5 5,640.23 172,348 287,213 7 9,087.19 287,213 574,323 8 11,959.32 Above 574,323 6 - FROM (€) TO (€) % TO APPLY AMOUNT TO DEDUCT (€) 0 92,407 1 0 92,407 126,403 2 924.07 126,403 172,348 5 4,716.16 172,348 287,213 7 8,163.12 287,213 550,836 8 11,035.25 Above 550,836 6 - Portuguese Taxes Permanent residence Non-permanent residence For more information on the above, property taxes and offshore companies please consult our Guide to buying property in Portugal, prepared for us by Dr Patricia Dias. This has been compiled as a guide for potential buyers of property in Portugal, it does not seek to provide or replace legal advice which you should obtain, nor is it intended to have any contractual effect. PortugalInsideView_FINAL_WEB.indd 9 19/05/2016 17:01
- 10. Our Team ALEX KOCHDE GOOREYND Head of Portugal +44 20 7861 1109 alex.kdeg@knightfrank.com CAROLINE LAKE Personal Assistant +44 20 7861 1109 caroline.lake@knightfrank.com London KATE EVERETT-ALLEN International Research +44 20 7167 2497 kate.everett-allen@knightfrank.com ASTRID ETCHELLS International PR +44 20 7861 1182 astrid.etchells@knightfrank.com 10 Knight Frank Inside View The Portugal Network The London team works closely with two local experts in the central and western Algarve, who have been carefully selected for their integrity, experience and professionalism. Knight Frank in Portugal A22 A22 E1 Faro Praia de Luz Almancil PortugalInsideView_FINAL_WEB.indd 10 19/05/2016 17:01
- 11. © Knight FrankLLP 2016 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis,viewsandprojectionspresentedinthisreport,noresponsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. Important Notice Knight Frank Inside View 11 Guide to buying property in Portugal 2016 10th Edition THE WEALTH REPORTThe global perspective on prime property and investment SARDINIAPRIVATE ESTATES OLIVE GROVES NEW YORK TO DUBAI VIEWS FROM THE TOP ZAMBIA EXCLUSIVE GAME RESERVES BALI MUSTIQUE HIDDEN GEMS MODERNIST VILLAS LONDON LIVING BESIDE HERITAGE LANDMARKS INTERNATIONALVIEW2016 KnightFrank.com THE FINEST PROPERTIES FROM AROUND THE WORLD Guide to Buying Property in Portugal International View 2016 Recent Global Publications KnightFrank.com/Publications The Wealth Report 2016 PortugalInsideView_FINAL_WEB.indd 11 19/05/2016 17:01
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