Algarve Real Estate Investment: Everything You Need to Know

Algarve real estate investment is in high demand internationally and locally due to its stable and resilient market, tourism appeal, and variety of property options. Property investors are drawn to the beautiful beaches, strong rental market, and year-on-year capital appreciation. These key factors indicate that the Algarve region is set to remain one of the most popular coastal areas for investment in Europe in 2025.

The gross average rental yield is 5.6 percent, with prime locations like Lagos, Vilamoura, and Albufeira reaching up to 8 percent. The average property price in the Algarve is €4,385 per square meter. The “Golden Triangle” of Quinta do Lago, Vale do Lobo, and parts of Vilamoura is a main destination for luxury living with some of the most exclusive real estate in Europe, where prices for higher-value properties reach well over €10,000 per square meter. In this article, we will provide the latest statistics on why buying property in the Algarve is a great investment.

Read more about:

• Why buy property in the Algarve, Portugal?
• Algarve Property Prices
• Real Estate Investment Opportunities in the Algarve, Portugal
• Best Towns For Property Investment in the Algarve, Portugal
• Property Types in the Algarve
• Algarve Taxes and Fees

Why buy property in the Algarve, Portugal?  

There are many reasons why foreign nationals are buying property in the Algarve, including the wide range of property types, high quality of life, investment potential, and excellent infrastructure. There are no restrictions placed on international buyers purchasing property, making it relatively easy to enter the Algarve property market.

The strong expat community, very good healthcare and education opportunities, and the fact that English is widely spoken add to its appeal.

The safety and stability aspects are also big draw factors. Portugal is one of the safest countries, as it takes the seventh position in the 2025 Global Peace Index. The Algarve is considered a very safe part of the country, with stable governance and transparent property purchases.

Other reasons to invest in real estate in the Algarve include:

• Strong tourism demand: The Algarve is a popular tourist destination, so there is a high demand for holiday rentals and buy-to-let properties.
• Affordable property: Property in Portugal, including the Algarve, remains relatively affordable compared to other European countries.
• Property price growth: Property prices in the Algarve have grown significantly in recent years.
• Easy accessibility: The Algarve is easily accessible via Faro International Airport.
• Rental yields: High-quality properties in prime locations, such as Lagos, Albufeira, and Vilamoura, can achieve rental yields of up to 8 percent, while average properties in less touristy areas can achieve around 5 to 6 percent. The average rental yield for the Algarve is 5.6 percent, according to the Portuguese real estate databank, Confidencial Imobiliário.
• Lifestyle: The Algarve boasts a high quality of life with excellent healthcare, top international schools, a beautiful coastline, and a strong expat community.
• Excellent infrastructure: The Faro International Airport, good transport links, and modern amenities are appealing to incoming investors, with the region also becoming a blossoming tech hub.

According to CBRE Portugal, the commercial real estate market is also booming, presenting opportunities for foreign buyers seeking to invest in retail and touristic properties.

Algarve Property Prices

Property prices will vary depending on the region, but are generally considered affordable compared with other prime coastal areas in Europe. As a rule of thumb, the further north you venture, the more affordable the property prices. The Alentejo region, bordering the Algarve to the north, is another excellent region to consider if you are looking for spacious rural properties or countryside homes at very reasonable real estate prices by Western European standards.

The Algarve real estate market has something to cater to each buyer. Below, you can see the average property prices for Algarve municipalities, taken from data by the real estate databank, Confidential Imobilário.

Real Estate Investment Opportunities in the Algarve, Portugal

The Algarve has become a popular choice for foreign buyers seeking a lucrative real estate investment. As demand for both long and short-term rentals continues to grow, this trend is likely going to continue in 2025, offering attractive options for property investors.

• The Algarve continues to steal the show as a prime investment hub.
• There is a wide array of stunning luxury properties on the market in the region.
• The region has high capital appreciation potential and strong rental yields, particularly for properties close to beaches or golf courses.
• The Algarve was pinpointed as having the fourth fastest-growing luxury real estate market, according to a recent study by Knight Frank.

Last year, the Algarve region outperformed other major international property markets, including the UK, North America, and the EU, despite geopolitical challenges and international uncertainty.

Investing in Portugal real estate is a smart move. Out of all the European countries, Portugal has one of the most vibrant real estate markets. The Algarve has experienced a massive growth in prices in recent years, with the average price jumping from €1,950 to €4,385 between 2017 and 2025. However, compared to other waterfront properties in Europe, you will find prices, generally, to be quite reasonable.

Real Estate Investment Strategies for Algarve

The beautiful Algarve region has a lot to offer. Due to the influx of tourists, stable market, and year-on-year capital appreciation, it provides several compelling real estate investment strategies. The best approach depends on your goals, risk tolerance, and willingness to take on hands-on management. Here are some of the most effective real estate investment strategies for the Algarve.

Buy-to-let (short-term rentals)

Property buyers interested in high gains often choose to rent Algarve property short-term. You can capitalize on the Algarve’s status as a major European holiday destination. You purchase a property with the primary goal of renting it out to tourists.

Tourist destinations such as Lagos, Albufeira, and Vilamoura offer properties close to beaches, golf courses, and town centers. In prime, attractive destinations, short-term rentals can have a higher gross rental yield of up to 8 percent compared to long-term rentals.

Buy-to-let (long-term rentals)

This strategy is for property investors who want a steady, reliable income stream from rental property, without all the hassle of managing seasonal bookings and guest turnover. You rent out the property on a long-term lease, typically to locals, expats, or digital nomads.

While you can do this anywhere, areas with large expat communities and year-round populations are great choices. Towns like Loulé, Faro, and even the more affordable inland areas are good options.

Capital appreciation (buy-and-hold)

This strategy is for property buyers who are less focused on immediate rental income and more on the long-term increase in the property’s value. You buy a property in a growing area and hold it for several years, relying on market growth to generate a substantial return when you eventually sell.

The entire Algarve market has shown consistent appreciation, but premium areas like the “Golden Triangle” are prime locations for this strategy due to limited supply and high demand. They are a great option for higher-value properties, like luxury villas and luxury apartments. However, you can also find investment properties in up-and-coming towns like São Brás de Alportel and Silves, which are experiencing rapid price growth.

Renovate and resell (fix-and-flip)

This strategy is for property buyers who have a good understanding of construction and local market demand. You purchase an older or dilapidated property at a low price, renovate it to modern standards, and then sell it for a significant profit.

Renovation projects can cost €100,000 to €500,000 or over, depending on the property’s location. This strategy is more viable in areas where you can find older, character-filled properties, such as the historic centers of towns like Loulé, Silves, or Tavira, or in more rural, inland areas.

Best Towns For Property Investment in the Algarve, Portugal

So, where is the best place to invest in property in the Algarve? While the entire region is beautiful in its own way, we’ve outlined some of our favorites, split conveniently into the Western Algarve, Central Algarve, and Eastern Algarve.

Western Algarve

The Western Algarve is a top choice for nature lovers and sports enthusiasts. You’ll find many modern properties here that come with ocean views.

Lagos

Lagos has a rich history and culture, and is popular with water sports enthusiasts. If you are seeking a modern apartment by the coast with beautiful ocean views, Lagos comes highly recommended, with demand, particularly amongst American buyers, really picking up in the past few years. Its ever-increasing popularity as a vacation destination creates property investment opportunities for hotels, holiday rentals, and property development, catering to both local and international visitors.

Sagres

In the Western Algarve, Sagres’ rugged coastline and surf-friendly beaches offer a unique appeal to tourists seeking a more laid-back experience. The area’s potential lies in eco-friendly accommodations, surf schools, and outdoor adventure activities. North of Sagres, the area close to Aljezur is also becoming increasingly popular among digital nomads and remote workers seeking a stunning location by the coast to call home.

Central Algarve

The most highly sought-after part of the region, with excellent connectivity, and where there is always something happening.

Portimão

Once a sleepy fishing village, Portimão is now one of the Algarve’s most beloved areas, particularly popular amongst sailing and water sports. With a booming cultural scene, lively nightlife, and an array of dining options, you’ll never be bored in Portimão. Additionally, its luxury resorts and lively atmosphere make it a suitable area for investing in tourism-related ventures, such as hotels, restaurants, and leisure facilities.

Loulé

Loulé provides a breath of fresh air for buyers, with tree-lined open spaces and charming narrow streets. This is a more relaxed part of the Algarve, away from the hustle and bustle of more popular resort towns. You’ll find stunning properties on the market, and they are also just a short distance from Faro and the Faro Airport, perfect for international travelers.

Albufeira

Albufeira has a thriving tourism industry with stunning beaches, vibrant nightlife, and various entertainment options, which makes it an attractive investment opportunity in the hospitality sector and real estate market. The thriving expat community in Albufeira makes it easier for foreigners to feel at home, and families will find excellent education opportunities nearby.

Vilamoura

This upmarket resort town calls to those in search of luxury. If you are looking for a world-class golf course, fine dining, and chic bars, Vilamoura is the perfect place. You have access to some of the best golf courses in the world, and you can enjoy leisurely meals paired with fine wine in a modern seaside town. The strong demand for upscale properties, coupled with its reputation as a luxury travel destination, makes it an excellent investment option for real estate developers and hospitality businesses.

Faro

Faro serves as the gateway to the Algarve and is home to the region’s international airport. With its rich history and proximity to popular tourist destinations, Faro presents excellent Algarve investment opportunities for real estate development, commercial ventures, and tourism-related services. If you are seeking to buy in Faro, make sure you have a trusted real estate agent in Faro by your side.

Carvoeiro

A popular place for hikers and summer tourists, Carvoeiro is located right in the middle of a stunning stretch of coastline. This area is family-friendly, offering the opportunity for exciting day trips to surrounding areas and cheaper property investment options.

Eastern Algarve

The Eastern Algarve offers peace, tranquility, and authenticity, and is becoming increasingly popular each year given the opportunities to be found here.

Tavira

Tavira, in the Eastern Algarve, offers a more laid-back atmosphere. The cobbled streets here are lined with small white houses, and the architecture provides a glimpse into the city’s rich history. Here, a real estate agent in Tavira can guide you to the properties you desire, whether that be homes close to an international school or homes with great dining options nearby.

Property Types in the Algarve

In the Algarve, you can find both residential properties and commercial properties for investment. Here, we will provide you with more information on some of the most common types of each.

• Apartments
• Villas
• Country homes
• Townhouses
• Luxury properties
• Holiday homes
• Vineyards
• Farms
• Land to create your dream property, exactly as you envision it

Practical Information About Investment in Algarve

The Algarve is one of the top destinations for both relocation and real estate investments, evidenced by the large number of expats and foreign buyers drawn to this stunning area in Portugal. In this section of Algarve real estate, we offer essential practical information about the country’s most popular region.

Climate in the Algarve

The Algarve’s fantastic climate is a massive draw for expats, tourists, and foreign buyers. The Algarve enjoys a Mediterranean climate with hot, dry summers and mild, wet winters.

With over 300 days of sunshine each year, summer temperatures often exceed 30 Degrees C (86 Degrees F), ideal for beach enthusiasts, but the gentle coastal breeze keeps the heat from becoming too much. Winters are comfortably mild, rarely falling below 10 Degrees C (50 Degrees F), making the Algarve a year-round destination where it is possible to stay active throughout the year.

Beaches in the Algarve

The Algarve has a fantastic selection of stunning beaches and a dramatic coastline characterized by limestone rock formations, arches, and caves. Popular beaches in the Algarve include Praia da Marinha near Carvoeiro, Quinta do Lago near Faro, and Praia da Rocha in Portimão.

Many of the beaches also offer a wide array of water sports options, from paddle-boarding to kayaking, which you can enjoy for much of the year given the mild climate.

Lifestyle and culture in the Algarve

The Algarve is known worldwide for its relaxed lifestyle and affordable living costs. The region is steeped in history and a blend of cultures, evident in the Moorish architecture seen in cities like Faro and Albufeira, as well as in medieval castles such as Silves Castle and the Castle of Paderne.

In addition to these historic landmarks, you’ll find a variety of museums in major cities and numerous festivals throughout the year celebrating music, food, and local traditions. Some of the most popular include the Silves Medieval Fair, the vibrant Carnival of Loulé, and the renowned sardine festival in Portimão, celebrating the region’s culinary heritage.

Transportation in the Algarve

Although the Algarve is well-connected by train and has local bus services between towns, the most practical way to navigate the region is by car. Faro International Airport allows international travelers to easily get around Europe and further afield, including to the USA (the first flight from the USA to Faro launched in 2024), while train links from Faro to Lisbon usually take around three to four hours.

Expats in the Algarve

While the Algarve has long been a favorite among British retirees, the region now attracts expats from around the globe seeking a better quality of life, with around 20 percent of the population being expats. Building a strong social network is quite easy here, thanks to numerous activities that facilitate meeting both fellow expats and locals.

The Algarve, a top choice for families

Families are increasingly relocating to this picturesque region of Portugal for its affordability, high quality of life, and the ability to enjoy outdoor activities for much of the year. The Algarve also boasts 12 excellent international schools offering various curricula, from British to American styles. Some of the best schools include the Nobel British International School, Colegio Santiago Internacional, Vale Verde International School, and the Aljezur International School.

Step-by-Step Algarve Real Estate Investment Process

The property purchase process in the Algarve has several steps and can take one to three months to complete. First, you need to obtain a Portuguese tax number and preferably open a Portuguese bank account to save on transaction fees.

Obtaining your Portuguese NIF number

Before buying property in the Algarve, you will need a Portuguese tax number, or NIF. The Portuguese NIF number is necessary for all major financial transactions, like purchasing Algarve real estate and securing a mortgage.

Non-EU citizens also need a local fiscal representative, and you can sort this out at a local tax office, online, or through a migration consultancy like Global Citizen Solutions, which can get the NIF on your behalf.

Opening a bank account in Portugal

After you have your NIF, you will then need a Portuguese bank account. Although you are not obligated to open a bank account in Portugal to buy real estate, it makes life easier since it cuts the transaction fees and gives you access to local mortgage options. Below is a simple step-by-step guide to walk you through the whole process of buying real estate in the Algarve.

Algarve Taxes and Fees

When buying property in the Algarve, you’ll want to ensure you are up to speed with the taxes that you will need to pay.

Taxes to consider at the time of purchase

Below are the taxes that you will need to pay when purchasing a property.

IMT (Property Purchase Tax)

The property acquisition price, location, and type determine the Property Purchase Tax (IMT; Imposto Municipal sobre as Transmissões Onerosas de Imóveis).

• The rate within the 0 to 8 percent range depends on factors such as the property costs, location, property type, and intended use—whether it will serve as a permanent residence or secondary housing.
• The 10 percent rate is applicable when the buyer has connections to territories with favorable tax regimes, often referred to as blacklisted jurisdictions.

Stamp Duty Tax

The Imposto do Selo (Stamp Duty) is one of the oldest state taxes and serves as an additional transaction tax for Algarve real estate transfers. It typically amounts to 0.8 percent of the deed’s total value and must be paid at the time of purchase.

Taxes to pay on an annual basis

Below, we provide you with information on the taxes that you will need to pay on an annual basis.

IMI (Municipal Property Tax)

The Imposto Municipal sobre Imóveis (IMI), also known as the Municipal Property Tax or Immovable Property Tax, is an annual property tax that property owners in Portugal are required to pay. The municipality where the property is located determines the tax rate.

The IMI is based on the Property Tax Value (VPT) rather than the purchase price of the property. For urban properties, the IMI rate ranges from 0.3 to 0.45 percent of the VPT, which can increase to 0.5 percent in some cases. The IMI rate for rustic buildings is set at 0.8 percent.

AIMI (Additional to IMI)

If you invest in a property valued at over €600,000, you may be subject to an additional annual property tax known as Adicional ao Imposto Municipal sobre Imóveis (AIMI). This tax applies to Algarve real estate assets owned by Portuguese residents, whether individuals or entities, based on their properties’ Tax Asset Value (VPT).

AIMI is calculated as follows:

• 0.7 percent tax on property valued between €600,001 and €1 million
• 1 percent tax on property valued between €1 million and €2 million
• 1.5 percent tax on property valued above €2 million

The €600,000 threshold applies on an individual basis. If the property is jointly owned with a partner, then AIMI will only apply if the combined value of their properties exceeds €1.2 million.

Capital Gains Tax

When you sell a property in Portugal, any profit made from the sale, known as capital gains, may be subject to taxation. The Capital Gains Tax rate varies based on whether you are a resident or a non-resident.

Tax on rental income

If you plan to rent out your property in Portugal, it’s important to consider the Portuguese property taxes. Rental income from residential properties is taxed at a rate of 25 percent, while rental income from other types of properties is taxed at 28 percent.

The specific tax rate applied, whether 25 percent or 28 percent, depends on the type of rental agreement. While these rates may experience occasional adjustments, they generally fall within this range.

It’s important to note that, starting from 2023, the 25 percent tax rate applies to long-term rental income for the entire year, as per the Mais Habitação package implemented in October 2023. This package also allows for reductions in the 25 percent rate based on the duration of the rental contract, provided the monthly income does not exceed specified income thresholds:

• 25 percent for rental contracts lasting up to 5 years
• 15 percent for rental contracts lasting 5 to 10 years
• 10 percent for rental contracts lasting 10 to 20 years
• 5 percent for rental contracts lasting more than 20 years

These adjustments aim to incentivize longer-term rental agreements under the Mais Habitação initiative. There are also exemptions to general rental income.

Goldcrest: How We Can Help You 

Goldcrest is a buyer’s agent that is based in Lisbon. We provide expert, impartial advice on real estate investments and how to buy property in Portugal. From scouting out the perfect property through to property acquisition, we have you covered throughout the process.

If you are looking to purchase property in Portugal, don’t hesitate to get in touch. Our team of skilled experts is available to solve all your real estate doubts, helping you with the property search and offering insightful expertise and strategic advice.

Why choose Goldcrest?

• Local knowledge: With offices located across Portugal, our presence nationwide allows us to assist you personally across the country.
• Independent service: As an independent buying agent, we do not represent any development or project. Our service is entirely tailored toward each individual client, providing you with everything you need to secure the perfect property at the best possible price. As an impartial advisor on the market, we work solely on behalf of our client and provide a service tailored to your needs and requirements.
• Streamlined process: Our real estate agents speak English and Portuguese, and our service is completely focused on providing you with a hassle-free buying experience, saving you time.
• Experienced team: Our expert real estate team has a vast local knowledge of the Portuguese property market. We have cutting-edge technology and metasearch tools at your disposal to provide full market coverage, ensuring the best investment choices and negotiated prices.
• Network of partners: We have a close network of partners, including lawyers, property management services, builders, architects, designers, and landscape gardeners, again saving you time and hassle by providing you with trusted experts in their field of work.