Real Estate Investment Algarve 2025: Everything You Need to Know

The Algarve is one of the most highly sought-after property markets in the world, due to its stable and resilient market, tourism appeal, and variety of property options. With a beautiful coastline, natural beauty, modern amenities, a growing economy, and year-on-year capital appreciation, this region looks set to remain one of the most popular coastal regions for investment in Europe.

The Algarve region offers a promising real estate investment landscape in 2025, with strong tourism demand, particularly for short-term rentals, and a thriving property market. Popular areas for investment include Lagos, Sagres, Portimão, Vilamoura, Tavira, and Albufeira.

In this article, Real Estate Investment Algarve, we’ll provide you with a thorough rundown on the essential information that you’ll need to be aware of should you be considering a property investment in the region.

Why buy property in the Algarve, Portugal?  

The Algarve property market offers a range of areas to choose from, whether you’re looking for somewhere family-friendly, a buzzing nightlife, areas with luxury accommodations, or more affordable locations.

Factor in an excellent healthcare system and a high quality of life, and it’s easy to see why. Foreigners also have no restrictions placed on them when it comes to buying property, which is not the case in many other countries.

The Algarve also boasts a significant expat community, notably from the UK, France, Germany, the Netherlands, and Sweden, but increasingly Americans are also relocating here. English is also widely spoken across the region. The safety and stability aspects are also big draw factors.

Portugal ranks in seventh position in the Global Peace Index, with the Algarve being considered a very safe part of the country, while the governance in the country is stable with transparent real estate 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.

Algarve Property Prices

The Algarve real estate market has something to cater to each buyer. Property prices will vary depending on the region. As a rule of thumb, the further north you venture, the more affordable the property prices. The Alentejo region boarding 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.  

Below, you can see the average property prices for Algarve municipalities.

Real Estate Investment Opportunities in the Algarve, Portugal

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, with high capital appreciation potential and strong rental yields, particularly for properties close to beaches or golf courses. Currently, the average rental yield for the Algarve stands at 5.6 percent,

Last year, the region outperformed other major international property markets including the UK, North America, and the EU, despite geopolitical challenges and international uncertainty. As demand for both long and short term rentals continues to grow, this trend is likely going to continue in 2025. The region was also pinpointed as having the fourth fastest-growing luxury real estate market, according to a recent study by Knight Frank.

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.

Best Towns For Property Investment in the Algarve, Portugal

When looking to make a property investment in the Algarve, it is helpful to have an idea of where to start looking based on your unique requirements. Property prices in the Algarve region vary based on the area.

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 beach 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 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 large 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 home, exactly as you envision it

Practical Information

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 our Real Estate Investment Algarve article, we offer essential practical information about the country’s most popular region.

Climate in the Algarve

The pleasant 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

Key Considerations when Buying Property in the Algarve

Legal considerations  

Understanding the legal implications of buying property is crucial. We recommend working with an experienced real estate lawyer in the Algarve who will be able to guide you through the process. 

It can also be beneficial to work with a property surveyor in Portugal, who will be able to ensure that there are no problems with the interior or exterior of the property.  

Financial considerations  

There are many banks that offer mortgages for foreigners in Portugal, and you will want to spend some time determining which one suits your needs. The mortgage process itself can also take longer than expected, so it is best to get the ball rolling as soon as possible. 

An Overview of the Property Buying Process

In this section of our Real Estate Investment Algarve article, we provide you with a simple step-by-step guide to snapping up property in the Algarve.

Before buying property in Portugal, you will need to get a Portuguese NIF number and we highly recommend opening a Portuguese bank account to save on transaction fees. 

Key Considerations for an Algarve Real Estate Investment

Understanding the local market

When investing in the Portuguese property market, one of the main challenges is getting a good grasp of how it works. You will need to conduct thorough research on property prices, demand and supply, local regulations, and market trends. To make it easier, seek advice from experts who know the ins and outs of the market.

Due diligence

Doing your homework is essential. This means carefully checking all the legal aspects of the property, such as title deeds, permits, and any potential issues that might come up. To avoid trouble, it’s wise to hire a real estate lawyer who can guide you through the legal complexities. Also, make sure the seller is trustworthy and financially stable to avoid disputes down the road.

Market volatility and economic influences

Like any real estate market, the Portuguese one is affected by market ups and downs and economic factors. Before diving in, be sure to consider the potential return on investment and how things like inflation rates might impact your investment. The Portuguese real estate market responded well to the COVID-19 pandemic, indicating that the market is quite resilient to external pressures, while GDP in Portugal is also increasing.

Real Estate in the Algarve: Understanding Taxes

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. In this section, we briefly delve into the property taxes that you will need to be aware of. Taxes will fall at the time of purchase and on an annual basis, which we neatly separate and outline below. Following this, we will provide you with information on Capital Gains Tax and taxation on rental income.

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 Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT), or Municipal Tax on Onerous Transmissions of Real Estate, is a property transfer tax in Portugal, also known as the Property Purchase Tax. This tax rate varies from 0 to 10 percent and is applied to the purchase price of the property.

The rate within the 0 to 8 percent range depends on factors such as the property’s price, location, 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. When calculating the Property Purchase Tax (IMT), the following criteria are considered:

• Type of property: Urban or rural
• Buying purpose: Principal or secondary residence
• House location: Mainland Portugal or its autonomous regions
• Blacklisted jurisdictions: Whether the property owner is connected to territories benefiting from favorable tax schemes

Stamp Duty

The Imposto do Selo (Stamp Duty) is one of the oldest state taxes and serves as an additional transaction tax for 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 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 higher-end property valued at over €600,000, you may be subject to an additional property tax known as Adicional ao Imposto Municipal sobre Imóveis (AIMI). This tax applies to 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 non-resident.

For Portuguese residents, Capital Gains Tax is calculated on 50 percent of the total capital gain. This amount is then combined with your other annual income and taxed according to the applicable income tax rates, which range from 14.5 percent to 48 percent, depending on your income level.

Non-residents selling property in Portugal are subject to a flat rate of 28 percent on the entire capital gain from the property sale.

The Capital Gains Tax is calculated based on the property’s added value, which is determined by subtracting the property’s acquisition cost from its sale price.

Tax on rental income

If you plan to rent out your property in Portugal, it’s important to consider the applicable 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 rental income. For more information, you can check out our article on Property Taxes in Portugal.

Is now the time to buy property in the Algarve?   

Yes, investing in the Algarve remains a profitable investment, despite the sharp increase in prices. Given the popularity of the region, there is the potential for high yields – depending on where you buy – and strong returns on investment in the long term, with rental averaging at 5.6 percent. The Algarve is a competitive market that looks set to continue to thrive in the coming years.

The Eastern Algarve is set to move into the spotlight, alongside the area close to Aljezur as digital nomads seek a foothold in the market here, given the sheer beauty of the region and relaxed pace of life. Surfers will also find some of the best waves in the country close by, with Sagres also within striking distance.

Goldcrest: Who We Are and How We Can Help You 

Goldcrest is a buyer’s agent that is based in Lisbon, Porto and the Algarve. We provide expert, impartial advice on real estate investments and how to buy property in Portugal. From scouting out your dream 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, 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 property 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: 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.