Is buying a property in the historic center of Faro a good investment?

Last updated on December 29, 2023

Yes, the analysis of Faro's property market is included in our pack

If you've experienced the historical richness and coastal beauty of the Historic Center of Faro, you may have thought about buying a home in this picturesque part of Portugal.

Is it a good idea though? What's the current state of the real estate market in that area? Are property values appreciating or depreciating? Are investors seeing returns on their real estate investments? How's the demand for rentals?

We'll answer all these questions for you! When building and updating our property pack for Portugal, our team has been researching and surveying this area. In fact, there is significant customer interest in investing there. Therefore, we believe it would be beneficial to include some information about it in our property pack.

Why do property buyers like investing in the historic center of Faro?

The historic center of Faro, known as the Old Town or Cidade Velha, has garnered significant attention from property buyers for several reasons.

One of the key attributes that set it apart from other real estate markets is its unique blend of historical charm and modern amenities. This area is a tapestry of cobbled streets, ancient architecture, and cultural landmarks, creating an atmosphere that is both timeless and inviting.

Unlike newer developments in Faro or other regions, the Old Town offers a sense of history and identity that's hard to replicate.

When it comes to its popularity, it's interesting to note that the historic center of Faro began to gain significant interest among property buyers in the early 2000s.

This surge was primarily driven by the growing trend of investing in properties with historical significance and the appeal of a lifestyle that combines the old-world charm with the conveniences of modern living.

Historically, properties in areas rich in heritage have maintained a steady appeal, suggesting that the interest in Faro's historic center is likely to persist. This is supported by the ongoing demand for properties that offer a unique character, something that modern constructions often lack.

Faro's historic center attracts a diverse range of individuals. It's particularly appealing to those who appreciate cultural richness and historical depth in their living environment.

This includes expatriates, history enthusiasts, and people looking for a second home in a culturally rich setting. It's also popular among retirees who wish to spend their golden years in a serene and picturesque location.

However, every rose has its thorns, and the historic center of Faro is no exception. One of the potential drawbacks of investing in this area is the upkeep and maintenance of older properties.

These buildings often require more attention and investment to preserve their structural integrity and historical value.

Additionally, the area might not offer the same level of modern amenities or spacious living arrangements as newer developments. This could be a deterrent for those who prioritize modern comforts and spacious living.

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Why is the historic center of Faro a nice place to live?

Living in the historic center of Faro, often referred to as the Old Town or Cidade Velha, offers a unique and enriching experience that blends traditional charm with a comfortable lifestyle.

One of the most striking aspects of life here is the rich cultural and historical ambiance. The area is dotted with architectural marvels from different eras, including medieval buildings, which provide a daily backdrop of history and beauty.

The lifestyle in this part of Faro is relatively laid-back, reflecting the overall atmosphere of the Algarve region. Residents enjoy a relaxed pace of life, where leisurely walks through cobbled streets and casual café visits are a norm.

This is interspersed with vibrant cultural activities, from local festivals to art exhibitions, keeping the spirit of the area lively and engaging.

For expatriates, Faro's historic center is particularly appealing. The expat community here is growing and welcoming, making it easier for newcomers to integrate and feel at home. There's a sense of camaraderie among residents, which is supported by various expat clubs and social groups.

Cost of living is an important factor to consider. While living in a historic center often comes with a premium, Faro's Old Town remains relatively affordable compared to other European historic centers.

However, costs can vary depending on the lifestyle choices and the type of property one chooses to live in.

Safety is a crucial aspect, and the historic center of Faro is generally considered safe. Like any urban area, it's always wise to be aware of your surroundings, but residents typically feel comfortable walking around, even during the evening.

Amenities and facilities in and around the area are adequate for a comfortable living. While the historic center itself might not have large shopping centers, there are plenty of local shops and markets offering a variety of goods.

For larger shopping needs, the Forum Algarve shopping center is not far away. In terms of healthcare, the Hospital de Faro is the main hospital in the city, providing a wide range of medical services. Educational facilities, including international schools like the Algarve International School, cater to the needs of families with children.

The infrastructure in the historic center of Faro is a mix of old and new. The roads and buildings retain their historical charm, which sometimes means they might not be as modern as those in newer parts of the city.

However, essential utilities and services like electricity, water, and internet connectivity are reliable.

Accessibility is another strong point for the historic center. It is well-connected to other parts of Faro and the Algarve region. The Faro Airport, a major transport hub, is conveniently close, making travel in and out of the region easy.

Public transportation options include buses and trains, providing good connectivity to various parts of the city and beyond. The bus network in particular is quite extensive, offering an affordable and convenient way to get around.

How much does it cost to buy real estate in the historic center of Faro?

If you need a detailed and updated analysis of the prices, rents and yields, you can get our full guide about real estate investment in Portugal.

When considering the cost of buying property in the historic center of Faro, also known as Cidade Velha, there are several factors to take into account.

The types of residential properties available in this area are quite diverse. You'll find a mix of apartments, traditional townhouses, and occasionally, luxury villas. The nature of the historic center means many of these properties carry a significant historical and architectural value.

In terms of demand, apartments and renovated townhouses are particularly sought after. This demand is driven by buyers' desire for properties that combine historical charm with modern conveniences.

These renovated properties offer a blend of traditional Portuguese architecture with contemporary interiors, making them highly appealing.

The market in the historic center is predominantly focused on resale properties. Given the historical nature of the area, there are limited new developments.

Any new construction tends to be heavily regulated to preserve the area's historical integrity. This limitation on new developments adds a premium to existing properties, as the supply is relatively fixed.

Now, let's talk about pricing. The price range for properties in Faro's historic center can vary widely, but as a general guideline, prices per square meter can range significantly.

This variation is influenced by factors like the property's condition, size, historical significance, and exact location within the historic center. Remember, properties that have been recently renovated or have unique historical features tend to command higher prices.

Over recent years, property values in this area have shown an upward trend. This increase is partly due to the growing popularity of Faro as a tourist destination and a favored spot for expatriates, especially those from northern Europe.

The limited availability of properties in this historic area also contributes to the rising prices, as demand continues to grow.

Looking into the future, there are no specific upcoming developments or city planning changes announced that would significantly alter the property landscape in the historic center.

However, any such developments would likely impact property values, either positively or negatively, depending on the nature of the change.

Predictions for the real estate market in the historic center of Faro suggest a continued increase in value. Factors that indicate this potential increase include the ongoing demand for properties in historic and culturally rich areas, the limited supply of such properties, and the general trend of property appreciation in popular tourist destinations.

Where is the best area to buy a property in the historic center of Faro?

When exploring the best area to buy property in the historic center of Faro, also known as Cidade Velha, it's important to understand how diverse this neighborhood is.

Each part of the historic center offers a unique atmosphere, different property types, and varying price ranges.

One of the most sought-after areas within the historic center is near the Faro Cathedral and the Arco da Vila. This area is renowned for its picturesque streets and close proximity to key historical sites.

Properties here are typically traditional townhouses and apartments, some of which have been beautifully renovated to blend modern amenities with historical charm.

Due to its prime location and the allure of living near important cultural landmarks, properties in this area tend to be priced higher.

Another area worth considering is around Largo da Sé and Rua Rasquinho. This part of the historic center is a bit quieter but still offers the charm and character that comes with living in a historic area.

The properties here are similar in style to those near the Faro Cathedral but might be slightly more affordable.

For buyers looking for up-and-coming areas, the streets branching off the main pedestrian areas are gaining popularity. These areas offer a more tranquil living experience while still being close to the heart of the historic center. They are ideal for those who want to be near the action but prefer a quieter residential environment.

On the other hand, areas closer to the city's nightlife and bars, such as those near Rua do Prior, might not be advisable for everyone.

While they offer the excitement of being in a lively part of the city, they can also be noisier, especially during the evenings and weekends. This might not be suitable for those looking for a more peaceful living environment.

Here is a summary table to help you visualize better. If you need more detailed data and information, please check our property pack for Portugal.

Area	Description	Property Types	Price Range	Advisability for Buyers
Near Faro Cathedral and Arco da Vila	Picturesque streets, close to historical sites	Traditional townhouses, renovated apartments	Higher	Recommended for those seeking cultural proximity
Largo da Sé and Rua Rasquinho	Quieter area, characterful	Similar to Faro Cathedral area	More affordable than Faro Cathedral area	Good for quieter, central living
Off main pedestrian areas	Tranquil, up-and-coming	Varied, potential for renovated properties	Moderate, potential for growth	Ideal for investment and quieter lifestyle
Near Rua do Prior (nightlife area)	Lively, close to bars and nightlife	Varied, often older properties	Varies, often more affordable	Less advisable for those seeking peace and quiet

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Is there a strong rental demand in the historic center of Faro?

In the historic center of Faro known as Cidade Velha, there's indeed a strong demand for rental properties.

This demand, however, varies between short-term and long-term rentals, catering to different demographics and preferences.

Starting with short-term rentals, they are particularly popular in this area due to Faro's status as a tourist destination. The target demographic for short-term rentals primarily includes tourists and travelers, both domestic and international.

These individuals are often drawn to the area for its cultural and historical significance, and they usually look for properties that offer a blend of traditional charm and modern comforts. The most sought-after properties for short-term rentals are typically well-furnished apartments and townhouses, especially those with traditional Portuguese architecture and modern amenities.

Areas near major attractions, like the Faro Cathedral or the marina, are especially popular for short-term rentals.

On the other hand, there's also a significant demand for long-term rentals. This demand comes from expatriates, professionals working in Faro, and students attending local universities.

The profiles of these potential tenants vary, but they generally look for properties that provide a balance of comfort, convenience, and affordability.

For long-term rentals, apartments and smaller townhouses are in demand. Areas slightly away from the main tourist spots, which are quieter yet still accessible, are preferred for long-term living.

When it comes to amenities that can help reduce vacancy, properties with modern facilities such as reliable internet, air conditioning, and well-equipped kitchens are highly valued.

Additionally, proximity to local amenities like shops, restaurants, and public transport can be a significant draw for potential tenants.

Regarding the potential returns on investment, properties in the historic center of Faro can offer attractive yields, though exact numbers vary based on factors like property type, location, and rental strategy.

Properties aimed at short-term rentals can command higher rental rates per night, but they also come with higher management and maintenance costs. Long-term rentals might offer lower rates but provide more stable and consistent income.

As for the types of properties gaining increasing demand, renovated traditional homes that maintain their original character while offering modern conveniences are becoming increasingly popular. These properties cater to the growing trend of seeking authentic, culturally rich living experiences, both for short-term and long-term tenants.

Investing in such properties could potentially yield better returns due to their unique appeal and growing demand in the rental market of Faro's historic center.

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Is it easy to buy a property as foreigner in the historic center of Faro?

Before we answer the question, please know that we have an article dedicated to the experience of buying real estate as a foreigner in Portugal.

Buying property in the historic center of Faro, Portugal, as a foreigner is generally straightforward, but there are nuances and considerations that need attention.

Firstly, in Portugal, there are no specific regulations or restrictions for foreign buyers. This means that, as a foreigner, you have the same rights as local buyers when it comes to purchasing property.

This openness makes Portugal, and particularly attractive locations like Faro's historic center, popular among international investors.

The purchasing process in Faro’s historic center typically involves several steps. After finding a property you're interested in, you'll make a proposal and, if accepted, sign a promissory contract (Contrato de Promessa de Compra e Venda) with the seller. This contract usually involves a deposit, often around 10-30% of the purchase price.

Then, before the final deed (Escritura Pública de Compra e Venda) is signed, due diligence is conducted to ensure the property's legal status is clear.

This process culminates in the final deed, signed in front of a notary, where the remaining balance is paid, and ownership is transferred.

The primary risks associated with property investment in Faro's historic center include potential legal issues related to property titles, especially in older properties where historical records may be unclear or incomplete.

Additionally, investing in older properties may carry hidden costs related to maintenance or required renovations to meet modern standards.

A classic pitfall for foreign buyers in Portugal is underestimating the importance of thorough due diligence, especially regarding legal and tax implications. It's not uncommon for foreign investors to overlook specific legal nuances unique to Portugal, such as the implications of the local urban lease law if they plan to rent out the property.

Working with a local real estate agent and a lawyer is highly advisable. A knowledgeable local agent can provide insights into the best properties and market trends specific to Faro's historic center.

A lawyer, on the other hand, is crucial for navigating the legal intricacies of property transactions in Portugal, ensuring that all legal requirements are met, and protecting your interests.

Common exit strategies for property investors in this area include selling the property after its value appreciates or renting it out, either as a short-term vacation rental or a long-term residential rental. Given the area's popularity with tourists and expatriates, rental properties can provide a steady income stream.

Additionally, the option to sell to other international buyers or locals remains a viable exit strategy, given the area's enduring appeal.