INTERNATIONAL
Spain is in crisis, with prices down 30 per cent or
more from the peak – and still down 15 per cent from the start of 2008 – while Portugal has seen prices rise 1.5 per cent since then, according to
Findaproperty.com
portugal
Below: Tavira, Inset: Praia da Rocha beach.
or more, and are not selling because they are overpriced. However, correctly priced properties in central Portugal are selling quickly, particularly character properties.
Nervous brits aNd active dutchmeN It’s not the British buyers who are driving the market. Doug Styles says they are displaying “a lot of interest, but they’re all a bit nervous”. Other nationalities are being much more adventurous; “We’ve seen quite a few Dutch buyers – they’ve become quite active, and they’re the second biggest resident community on the Algarve,” he says; “also Scandinavians and Germans, though not many French.” Stephen Anderson says the Germans are certainly very active – but he’s also intrigued by a very noticeable Spanish presence on the Algarve this year. But, he says, it’s not just the nationality of buyers that has changed, it’s also their motivation. “It’s all lifestyle investors now – the pure investors have dropped out. Even if people are buying for investment, they’re making sure it is somewhere they personally would like to use as a holiday home if they can’t rent it out.” The leading buyers seem to vary by region
though. Nicky Carter says that in central Portugal, “most surprising of all is the recent increase in interest from American buyers coming to this region.” But this is also a region where Portuguese buyers provide important support to the market, with many Lisboetas buying second homes in the area.
In 2009 a number of buyers postponed their plans, partly in
response to the weakness of sterling against the euro. Now that the pound has rebounded by 20 per cent, they are ready to move and this has created a backlog. But conversion rates remain low compared to the peak years, “We’ve had quite a lot of enquiries from British buyers; but not buying. That said, our conversion rate now is a lot better than last year. Last year they were serious about looking – this year they’re serious about buying.”
…Nobody’s selliNg either Another problem facing the Portuguese market is a lack of inventory, which has stymied the resale market. Doug Styles says “The biggest problem is that we have vendors who are not selling, or aren’t desperate to sell, and buyers who think it’s a distressed market. The gap between the buyer and the seller has never been greater.” He regularly sees offers of 20 per cent below the asking price - Which are refused by vendors. While the rebound of sterling has helped create interest, it has made vendors even less likely to accept lower offers, Styles says. Last year, the strength of the euro allowed vendors to accept lower prices - even if they accepted, in euros, what they paid for the property, they would book a profit once the proceeds were converted back into sterling. That certainly swung a few uncertain vendors - but it won’t work this year. Nicky Carter of agency Chavetejo says one of the problems is a number of properties which have been on the market for two years
cheaper homes hardest hit Doug Styles says the luxury market over €2-3m, particularly over the €4m mark, has been strong. “The market that’s suffered most is the under €400,000 property.” That’s borne out by Property Frontiers, which points out that Portugal has seen the reverse of many hotspots where luxury markets have been the worst affected. Stephen Anderson, whose agency deals mainly in the €200- 300,000 price range, says “you can get fantastic deals right now.” But rather than attracting bargain hunters, he says, this is bringing back buyers who were priced out at the top of the boom. “People are looking at the cheaper properties, looking to spend €100,000 to 200,000, and now you can get quite nice properties for that sort of money.” Lower income buyers are slowly returning to the market. Another big difference from Spain is the fact that most agents
have managed to keep going. “Most agencies are financially quite stable,” says Doug Styles; while there have been layoffs, there have been few closures. Stephen Anderson, however, worries that agents have been
living on their savings and business needs to pick up soon for them to remain viable. “The costs and the taxes here are high, with your tax based on last year’s income,” he says, “and if you’re not generating any income it’s really difficult. We need to get 10-15 enquiries a day just to get going.”
No boom for a while yet And while the market is ticking along, there are no signs of a new boom. Finance is constrained, Doug Styles says; “The banks are not lending – and they’re certainly not lending to speculators or developers.” Some developments have been mothballed, and release dates put back, while mortgage finance is also constrained, with LTVs above 60 or 65 per cent difficult to find (compared to 80 or even 90 per cent at the top of the market).
PROPERTYdrum NOVEMBER 2010 35
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