Portugal

House prices in Portugal have continued to fall this year. Overall prices of dwellings fell by 7% during the year to September 2012, according to Statistics Portugal (INE).

In the Lisboa Region, which includes the capital city, apartment prices fell by 8%, while house prices fell by 9%, again according to INE.   In the Algarve, house prices did not fall by so much, only by 5%, but apartment prices fell by 8%.

These findings of INE are broadly in line with the Global Property Guide’s latest survey, which finds that in the Lisboa region, average square metre (sq.m.) prices of apartments fell from EUR 2,260 to EUR 1,870, while sq. m. prices of houses and villas fell from EUR 2,743 to EUR 2,179 during the year to September 2012.  In Algarve, average sq. m. prices of houses and villas fell by 11%, from EUR 2,571 to EUR 2,298, according to our survey.

Despite these prices falls, local realtors are confident about Algarve’s real estate market. Algarve is the most popular tourist destination in Portugal. “Despite uncertainties in the housing market, areas in the Golden Triangle in Algarve still stand firm as a positive investment”, says local real estate expert Alison Buechner. The slowdown in construction has actually helped by maintaining the supply of properties therefore sustaining the demand for the existing properties.

A 150- sq. m. villa or house in both Lisboa and the Algarve costs around EUR 2,100 per sq. m.  But apartments are more expensive in the capital region.  in Lisboa, a typical 120 sq. m. apartment in an elite area changes hands at around EUR 1,700 per sq. m. while in Algarve, a 120 sq. m. apartment costs on average EUR 1,400 per sq. m.

Gross rental yields from villas in the Algarve, i.e., the gross return on investment if fully rented, are very poor, at around 2% only.  Algarve apartments return better rental yields, ranging from 3.84% to 4.32%. Rents from apartments in the Algarve range from around EUR 5 to EUR 7 per sq. m. per month, so you can expect monthly rental income of about EUR 500 from a 120 sq. m. apartment.  Villas in the Algarve rent from around EUR 4 to EUR 6 per sq. m. per month, so you can expect monthly rental income of about EUR 1,000 from a 250 sq. m. villa.

Lisboa apartments obtain much better yields, ranging from 5.29% to 6.31%. In Lisboa, rents from apartments range from about EUR 8 to EUR 10 per sq. m. per month, so that a 120 sq. m. apartment can be rented for about EUR 1,000 per month.  Villas in Lisboa rent out for around EUR 7 to EUR 10 per sq. m. per month, so a 250 sq. m villa can be rented for EUR 2,250 per month.

Smaller apartments tend to be most profitable.  A 50 sq. m. apartment in Lisboa returns around 6.31% rental yields, whereas a 200 sq. m. apartment returns only 5.29% rental yields.  Moderately good rental yields are also observed from villas in Lisboa, except for large villas of 600 sq.m., which return poor rental yields of 3.54%.