Authored by the expert who managed and guided the team behind the Portugal Property Pack
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What will happen in the Algarve’s real estate market? Will prices go up or down? Is the Algarve still a hotspot for foreign investors? How is Portugal’s government impacting real estate policies and taxes in 2025?
We’re constantly asked these questions because we’re deeply involved in this market. Through our work with notaries, real estate agents, and clients who buy properties in the Algarve, we’ve gained firsthand insights.
That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market predictions and forecasts.
Our goal is simple: to ensure you feel informed and confident about the market without needing to look elsewhere. If you think we missed the mark or could do better, we’d love to hear your thoughts. Feel free to message us with your feedback or comments, and we’ll work hard to improve this content for you.
Fact-checked and reviewed by our local expert
João Morais 🇵🇹
Founder | Real Estate Advisor, at Wilderness Investments
1) Luxury property prices in the Algarve will rise as international buyers continue to invest in premium areas
The Algarve's luxury real estate market is a hot spot for international buyers, and this trend is set to continue.
In 2023, the value of luxury homes in the Algarve saw a 12.3% increase, making it one of the top-performing regions worldwide. Areas like Lagos, Silves, and Ferragudo are particularly in demand, with prices reflecting this growing interest in premium properties. The Algarve's appeal isn't just about the sun and sea; it's about the lifestyle and exclusivity that these locations offer.
International buyers are a driving force behind this market boom. More than 50% of property investments in the Algarve come from abroad, with German, British, and Belgian investors leading the charge. In Tavira, for instance, foreign investment makes up a whopping 92% of property purchases, underscoring the region's global allure. This international interest is not just about owning a piece of paradise; it's about investing in a lifestyle that combines luxury with a laid-back vibe.
The scarcity of new developments is another factor pushing property values higher. Last year, only 20,000 new properties were built, a stark contrast to the 200,000 constructed a decade ago. This limited supply, coupled with the influx of high-net-worth individuals, is driving up prices. The Algarve's cultural richness and quality of life are major draws for these buyers, who are looking for more than just a home; they want a piece of the Algarve's unique charm.
With its stunning landscapes and vibrant culture, the Algarve continues to attract those seeking luxury and exclusivity. The region's real estate market is not just about buying property; it's about investing in a lifestyle that offers both relaxation and sophistication. As long as the demand from international buyers remains strong, the Algarve's luxury market will keep thriving.
Sources: The Portugal News, Idealista, Live Algarve
2) Rental yields in the Algarve will drop as short-term rental platforms increase competition
The Algarve's coastal rental market is feeling the heat from short-term rental platforms like Airbnb and Vrbo.
Since January 2021, the number of active listings has jumped from 83,892 to 107,253 by January 2024. This boom in short-term rentals means more competition, making it tough for traditional long-term rentals to keep their occupancy rates up. While short-term rentals hit about 81% occupancy during summer, long-term rentals often find it hard to stay full.
The market is getting crowded, and this saturation is pushing down average daily rates (ADRs). Even though the hospitality sector is growing, the oversupply is slowing down rental price growth in coastal spots like the Algarve. This is putting a squeeze on yields for long-term rentals.
For those eyeing property in the Algarve, it's crucial to know that the rental landscape is shifting. The rise of short-term rentals is not just a trend; it's reshaping the market dynamics. Investors banking on long-term rental income might need to rethink their strategies as short-term platforms continue to expand.
Local property owners are feeling the pinch as they compete with a growing number of short-term rental options. The increased supply is making it harder to command higher prices, affecting the overall profitability of long-term rental investments.
As the Algarve's rental market evolves, understanding these changes can help potential buyers make informed decisions. The competition from short-term rentals is a game-changer, and adapting to this new reality is key for anyone looking to invest in the region.
Sources: PriceLabs, Enso Connect, Benoit Properties
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Portugal versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
3) Property prices in rural Algarve will rise gradually as more people look for peace and space after the pandemic
In the Algarve's countryside, property prices have been climbing steadily as more people seek peace and space post-pandemic.
In 2023, areas like Loulé and Lagos saw price growth of around 6-10%, while even more affordable spots like Silves and São Brás de Alportel experienced increases of over 10%. This shows a growing interest across the region.
After the pandemic, many buyers are now looking for year-round homes rather than just holiday spots. The Algarve has become a hotspot for younger families, drawn by its quality of life, international schools, and outdoor lifestyle.
The rise of remote work has also fueled this trend. Portugal is a favorite among digital nomads who want both connectivity and tranquility. They are particularly interested in quieter areas that still offer easy access to amenities and airports.
There's also a noticeable shift from city to countryside living. The Algarve is seen as a safe and stable place, attracting international buyers, especially in uncertain times. This ongoing demand is expected to keep property prices buoyant.
Sources: Sardo Real Estate, Live Algarve
4) Rents in the Algarve's coastal rental market will drop as more short-term rental properties become available
The Algarve's coastal rental market is expected to see a decline in rents as more properties become available for short-term stays.
In recent years, property owners have increasingly converted their homes to short-term rentals, especially in the Algarve. This shift is evident from data showing a 36% annual increase in temporary rental supply across Portugal. With more properties available for short-term stays, the market is experiencing an oversupply.
Government policies have played a role in this trend. The end of the Non-Habitual Residents regime and reductions in income taxes have made short-term rentals more appealing for property owners. These changes have encouraged more owners to choose short-term rentals to boost their earnings.
Real estate market analyses suggest that the Algarve is facing an oversupply of rental properties. This is due to the rapid increase in new constructions and conversions to short-term rentals. As a result, property owners are competing for tenants, which can drive rents down.
For potential buyers, this means that investing in the Algarve's rental market could offer opportunities to capitalize on lower property prices. However, it's essential to consider the potential for fluctuating rental income due to the oversupply.
Understanding these dynamics can help you make informed decisions about property investments in the Algarve. Staying updated on market trends and government policies will be crucial for navigating this evolving landscape.
Sources: Idealista, The Portugal News, Benoit Properties
5) More non-EU buyers will invest in Algarve real estate due to new visa programs
The Algarve is becoming a hotspot for foreign buyers from non-EU countries, thanks to new visa programs that simplify investing in Portuguese real estate.
In 2023, nearly 30% of property purchases in the Algarve were made by buyers from outside Portugal. This highlights the region's appeal to international investors. The Algarve is not just a beautiful coastal area; it's a strategic investment location with a strong track record of attracting foreign interest.
Foreign buyers are making a significant impact, with 27.2% of property sales and 38.5% of the total transaction value in the Algarve coming from international investors. This trend underscores the region's growing reputation as a prime real estate market.
The Portuguese real estate market is on the rise, showing a 2.5% increase in quarterly sales since mid-2023. This growth is fueled by the market's resilience and the allure of new visa programs, making it easier for non-EU investors to enter the market.
The introduction of the Digital Nomad Visa in 2022 has been a game-changer, boosting entrepreneurship and demand for long-term rentals. This visa has opened doors for non-EU investors, making the Algarve an attractive destination for those looking to combine work and leisure.
With these new visa programs, the Algarve is poised to see even more interest from non-EU investors, solidifying its status as a top choice for international property buyers.
Sources: Idealista, Portugal Buyers Agent, The Portugal News
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6) British buyers will keep leading the Algarve’s foreign property market due to its familiar culture and climate despite Brexit
British buyers are still a major force in the Algarve's real estate market, even after Brexit.
In the Algarve, over 50% of property investments come from foreign sources, with British buyers leading the charge. Areas like Lagos and Albufeira-Carvoeiro see a large percentage of these transactions, showing the region's ongoing allure. The Algarve's charm lies in its familiar culture and climate, which have long attracted British expats and property seekers. With its relaxed lifestyle, excellent healthcare, and favorable tax conditions for retirees, it's no wonder the Algarve remains a top choice.
The region's year-round sunshine and stunning coastlines make it a paradise for outdoor enthusiasts and beach lovers. This natural beauty, combined with a laid-back atmosphere, enhances its appeal. The Algarve is home to well-established British expatriate communities, offering a sense of belonging and support for newcomers. This makes the transition to life in Portugal smoother and more enjoyable for British buyers.
British-focused services and amenities, like pubs and community groups, further cement the Algarve as a popular destination. These familiar touches provide comfort and ease for those settling in. The Algarve's enduring popularity among British buyers is a testament to its unique blend of lifestyle benefits and cultural familiarity.
Sources: Idealista, Idealista, Fresh Portugal
7) Rental yields in the Algarve will rise steadily as more retirees move there for the mild climate
The Algarve is becoming a hotspot for retirees, thanks to its mild climate.
In August 2023, the Algarve recorded 3.2 million overnight stays, showing its strong appeal to visitors, especially retirees. This trend is likely to continue as more people discover the region's charm.
By October 2024, property prices in the Algarve had risen by 10.1% year-over-year, reaching €2,321 per square meter. This surge indicates a growing demand for housing, which can boost rental yields.
The tourism sector is thriving, with hotel revenues surpassing €1,500 million from January to November 2023, marking a 9.5% increase from the previous year. This boom in tourism means more demand for short-term rentals, pushing rental yields higher.
In the first half of 2024, property transactions in the Algarve increased by 5% compared to the same period in 2023. This rise is fueled by foreign investors drawn by residency rights and tax incentives, further driving the demand for rental properties.
The Algarve's pleasant climate is a major attraction for retirees, making it a top choice for those seeking a warm and inviting environment.
Sources: Portugal Resident, ETIAS, Global Property Guide
8) Property prices in the Algarve's central region will rise steadily due to its prime location between major cities and the coast
The Algarve's central region is set for a steady rise in property prices thanks to its prime spot between bustling cities and the scenic coast.
In recent years, the Algarve has seen a noticeable uptick in property transactions, with a 5% increase in 2023 and 2024. This signals a market recovery and growing interest in the area. The limited number of new properties, with only about 3,000 units entering the market annually, creates a supply-demand imbalance that naturally pushes prices up.
Adding to the allure, the region benefits from ongoing infrastructure projects that enhance connectivity. These developments make the Algarve even more accessible, further boosting its appeal. Buyers are drawn to the central Algarve for its easy access to both major cities and the coast, making it ideal for holiday homes and permanent residences alike.
International buyers, including digital nomads, are increasingly interested in the area. They are looking for properties that offer a blend of connectivity and tranquility, which the Algarve provides in spades. This influx of international interest is a key factor in the rising demand.
With its strategic location and improved infrastructure, the Algarve's central region is becoming a hotspot for property investment. The combination of limited supply and growing demand suggests that property prices will continue to climb steadily.
For those considering a purchase, the central Algarve offers a unique mix of urban convenience and coastal charm, making it a wise investment choice. The region's ongoing development and international appeal ensure that it remains a desirable location for years to come.
Sources: Portugal Buyers Agent, Sardo Real Estate
We have made this infographic to give you a quick and clear snapshot of the property market in Portugal. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Property prices in the Algarve will drop moderately in tourist-dependent areas as travel patterns change
The Algarve is seeing a shift in travel patterns, impacting its seasonal tourism.
While there was an 8.9% boost in hotel occupancy in November 2024, the overall trend is a dip in tourist numbers during off-peak times. For instance, December 2024 saw an occupancy rate of just 34.9%, a slight rise from the previous year but still not back to pre-pandemic levels. This suggests that travelers are now favoring destinations that offer attractions all year round, rather than just seasonal beach spots.
New tourist hotspots are drawing visitors away from traditional places like the Algarve. This shift could mean property prices might drop as demand decreases. The Algarve's real estate market is feeling the pinch, especially in tourist-heavy areas. Even with a 2.5% rise in quarterly sales since mid-2023, the market is tough due to a shortage of new properties.
Local real estate agents are noticing a dip in buyer interest, likely because of these changing travel habits and the lure of new destinations. The Algarve, once a go-to for beach lovers, is now facing stiff competition. This could lead to a moderate decline in property prices in areas that depend heavily on seasonal visitors.
As travel patterns evolve, the Algarve's reliance on seasonal tourism is being tested. The region's real estate market is adapting, but the lack of new properties and reduced buyer interest are challenges. The shift towards year-round destinations is reshaping the landscape, potentially affecting property values.
Sources: The Portugal News, The Portugal News, Portugal Buyers Agent
10) Demand for homes with office spaces in the Algarve will grow as remote work becomes permanent
Remote work is booming in Portugal, with over a million people now working from home.
This shift has sparked a surge in demand for homes with office spaces. In places like Lagos, buyers are keen on properties that offer dedicated work areas, a trend that's catching the eye of both locals and international investors.
The Algarve, known for its stunning coastline and sunny weather, is seeing a rise in property transactions, especially in the luxury market. This is largely due to the growing number of remote workers seeking homes that cater to their new lifestyle.
Architectural designs are evolving to meet this demand, with a focus on functional home office spaces. This makes properties in the Algarve even more appealing to those who work from home.
As remote work becomes a permanent fixture, the Algarve is poised to become a hotspot for those looking to combine work and leisure. The region's appeal is further enhanced by its limited supply of high-demand properties, driving up interest and prices.
For anyone considering a move, the Algarve offers a unique blend of work-friendly homes and a vibrant lifestyle, making it an ideal choice for remote workers. Properties with home offices are becoming a must-have in this picturesque region.
Sources: Portugal Resident, Alina Reis, The Portugal News, Live Algarve, Portugal Decoded
11) Rental yields for rural properties in the Algarve will rise as digital nomads look for peaceful long-term stays
Digital nomads are on the rise, and they're changing the way we think about work and living spaces.
More people are choosing to work remotely, and they're looking for long-term rentals in peaceful, rural areas. The idea of working from anywhere has become a reality, and many find that they are more productive in serene, nature-filled environments.
The Algarve, famous for its tourism, is now a top choice for digital nomads. With its millions of overnight stays in 2024, it's clear why this region is so appealing. Rural properties here are more affordable than in urban areas, making them perfect for those seeking long-term stays.
Thanks to improved internet connectivity, the Algarve is even more attractive to remote workers. Social media and media coverage have painted it as an ideal spot for remote work, boosting its popularity among digital nomads.
Digital nomads who have moved to the Algarve rave about its peaceful environment, great weather, and high quality of life. These testimonials, along with stable rental yields, suggest that rural properties here are set to see a boost in rental yields as demand grows.
Sources: Portugal Buyers Agent, Apollo Technical, The Portugal News, Kumospace
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12) Rental yields in Faro will rise as demand for long-term rentals increases
Rental yields in Faro and other urban centers in the Algarve are on the rise as more people look for long-term rental options.
The Algarve is not just a tourist hotspot; it's becoming a popular place to live. With 3.2 million overnight stays expected in 2024, the demand for both short-term and long-term rentals is evident. This popularity is pushing more people to consider renting in the area.
People are moving to the Algarve, thanks to positive net migration. This influx is boosting the demand for housing, and with tourism booming, short-term rental prices are climbing. Property owners are keen to capitalize on this trend, which can also affect long-term rental prices.
In cities like Faro, there's a noticeable shortage of rental properties. This scarcity, paired with growing demand, is a recipe for increased rental yields. The region's economic growth is drawing more workers to urban areas, further fueling the need for housing.
As property prices rise, buying a home becomes less feasible for many, pushing them towards renting. This shift is contributing to higher rental yields as more people opt for renting over buying.
With the Algarve's appeal and economic opportunities, urban centers like Faro are seeing a surge in rental demand. This trend is likely to continue, making it a promising time for property investors looking at long-term rentals.
Sources: Portugal Buyers Agent, Portugal Residency Advisors
13) Rents in Algarve's cities will increase as young professionals move there for remote work opportunities
The Algarve is now a prime spot for remote work, drawing in many young professionals.
Platforms like Indeed show a surge in remote job listings, making the Algarve a top choice for those wanting a flexible work setup. This influx of young professionals is reshaping the region, with many choosing to relocate for its appealing work-life balance.
Portugal's net migration is on the rise, with over 155,701 people moving in, which is pushing up housing demand. This demand is driving up rents in the Algarve's urban areas, especially as more young professionals settle there.
Remote workers love coastal living, and the Algarve's stunning beaches fit the bill perfectly. The growth of co-working spaces and remote-friendly cafes adds to the allure, making it a magnet for young talent.
Portugal's Digital Nomad Visa (D8) is a game-changer, making it easier for remote workers to live in the Algarve legally. This visa is boosting the region's attractiveness, drawing in even more digital nomads.
With these trends, rents in the Algarve's urban areas are set to rise as more young professionals flock to the region for remote work opportunities.
Sources: Portugal Buyers Agent, Global Citizen Solutions, Alina Reis Blog
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility. Finally, please note that we are not affiliated to any of the sources provided. Our analysis remains then 100% impartial.