An Overview of the Algarve’s Real Estate Market in 2024

The Current State of the Real Estate Market in the Algarve

Portuguese and foreign investors from the UK, USA, and other non-European countries are attracted by the perfect weather, the coastline, and the high quality of life the Algarve region offers. Whether expats are looking for rental apartments, a summer holiday apartment, or a secure villa for retirement on the coast, you will discover a variety of incredible options available when buying property in Algarve, Portugal.

According to by Expresso and CNN Portugal, the Secretary of State for Tourism, Commerce and Services, Nuno Fazenda, reported that the tourism sector in Portugal generated revenue of 25 billion euros in 2023. All regions of the country, including the sought-after Algarve region, are expected to experience more growth in the tourism sector in 2024.

In February 2024, the Portugal National Institute of Statistics released the preliminary results for recorded visits and revenue received from tourist accommodation in 2023. The Algarve, known for being the main national tourist destination in Portugal made up 26.4 percent of overnight stays recorded by the hotel industry and accommodation units.

In a recent housing market survey wrapping up insights about Portugal’s 2023 real estate market insights, Confidencial Imobiliario Director, Ricardo Guimarães, shared that despite the challenging housing conditions in the past, which saw 20 percent decline in the number of real estate transactions, the market has steadied and recovered with a 2.5 percent increase in quarterly sales since the second quarter of 2023. These stats serve as a testament to the resilience of the country’s real estate market, economy, and investment value.

Property prices in the Algarve

In 2024, the Portugal National Institute of Statistics reported that the Algarve is one of the five sub-regions with the highest average house price when compared to the most sough-after municipalities in Portugal. However, growing expat and touristic interest in the coastal region ensures property investors can look forward to promising Return on Investment (ROI).

In the table below, we have provided a comprehensive overview of the average asking prices per square meter for both apartments and villas in different areas of the Algarve region in 2023.

The Algarve real estate market’s rental yields

Taking Return on Investment (ROI) into consideration, it is important to note that according to statistics based on data from the final quarter of 2023, average rental yields on investment properties in the Algarve region currently stand at 5.6 percent. In the Algarve region of Portimão rental yields are 5.5 percent while rental yields in the regional capital city, Faro, stand at 4.8 percent.

The top investment opportunities in the Algarve

According to CBRE insights and research, a 15 percent increase in investment volume in the second half of 2024 is expected within the real estate market. The Royal Institution of Chartered Surveyors (RICS) also reported that the Portuguese economy will gain momentum in 2024, spurred on by foreign investment and tourism in the country.

It is no secret that the Algarve region is a popular tourist hot spot with world class golf courses, stunning beaches dotting the Atlantic coastline and the uniquely vibrant Portuguese coastal culture calling to visitors across the globe.

With this in mind, the reality is that an investment in Algarve, Portugal real estate is not the only opportunity foreign investors will be leaning toward in the new year. The hospitality and retail spaces in the region are expected to draw more interest from investors.

Factors Influencing Algarve’s Property Market

As in every country, there are factors that affect the property market and investments in the Algarve region. Let’s explore three of these factors below.

Fluctuating interest rates

Early reports this year predicted an increase of interest rates between 8.7 and 13 percent on property purchases in Portugal in 2024. However, interest rates are always fluctuating, making it impossible to precisely predict. On the brighter side, RICS Senior Economist Tarrant Parsons has predicted that despite interest rates being high at present, they are set to fall, creating favorable market conditions for real estate investments in the coming year.

Influx of Digital Nomads and Remote workers

With the remote worker and digital nomad’s increasing interest in Portugal as one of the best European destinations for expats, the Algarve region will have an influx of expats seeking short-term and long-term rentals.

Increase in demand and decrease in supply of new property

Despite the potentially favorable future of the real estate market, the lack of houses available is still a significant restriction, according to the Confidencial Imobiliario. Portugal News recently reported that only an average of 3,000 new units are introduced to the market each year, which does not meet the high demand for property rental or purchases in the Algarve or other regions of Portugal.

Predictions for the Portugal Real Estate Market in 2024

Despite facing challenging housing market conditions and amidst purchase price and interest fluctuations, the Algarve region has a resilient tourism sector and great potential for rental yield, making it the perfect coastal region for property investment and potential trajectory in 2024.

Additionally, despite a slight decrease in purchases by foreign buyers and the 7.6 percent year-on-year increase in the House Price Index (HPI) reported in the third quarter of 2023 by the Portugal National Institute of Statistics, the overall outlook is positive. Buyers who make strategic investments in the Portugal real estate sector hold the promise of beneficial investments and great potential for ROI in the year ahead.