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Portugal one of the most promising investment destinations
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nightrider
Portugal one of the most promising investment destinations
According to A Place In the Sun..Portugal is one of the most promising investment destinations.
Last edited by nightrider on Fri Mar 17, 2006 12:15 am, edited 1 time in total.
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nightrider
Maddi,
I feel that the following answers your question:-
http://portugalresident.com/portugalres ... p?ID=11435
I feel that the following answers your question:-
http://portugalresident.com/portugalres ... p?ID=11435
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e-richard
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I wonder, as I read the details of the report, how much of the 360% growth is real and how much is a result of re-valuation from arbitrary undervaluations so prevalent in the Algarve to realistric values now being applied.
And secondly, if this is true, where are the mega rich buyers going to be coming from as we try to sell in 10 years time for 3.6 times today's value ?
Inspiring as these numbers are, I feel a small note of caution is warranted. Hope I am wrong !
And secondly, if this is true, where are the mega rich buyers going to be coming from as we try to sell in 10 years time for 3.6 times today's value ?
Inspiring as these numbers are, I feel a small note of caution is warranted. Hope I am wrong !
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nightrider
Yes Richard, your oh so right...only time will tell. N.R.e-richard wrote:I wonder, as I read the details of the report, how much of the 360% growth is real and how much is a result of re-valuation from arbitrary undervaluations so prevalent in the Algarve to realistric values now being applied.
And secondly, if this is true, where are the mega rich buyers going to be coming from as we try to sell in 10 years time for 3.6 times today's value ?
Inspiring as these numbers are, I feel a small note of caution is warranted. Hope I am wrong !
Put into perspective, a €300.000 property (average 3 bedroom, average location, average equipment) should be worth € 1.080.000 in ten years time.
First things first: When I read "return on investment" in the same sentence as "rentals", I always feel like hitting something with a large hammer.
€ 300.000 invested over 10 years with a 2% annual return should give you about € 66.000 return (22%).
Now instead of investing financially, with that money you go and buy a 3 bedroom villa in the Algarve that is up to current standards. (that would already be quite a feat)
Lets say the average annual turnover for a 3-bedroom villa in an average rental year currently lies between € 14.000 and € 20.000.
The running costs with staff, licences, taxes, maintenance, etc, etc for a 3 bedroom villa lies around €12.000 per year.
After taxes you are left with about €1.000 to €6.000 net profit. For arguments sake, lets say you are left with € 6.000 at the end of a year. That would mean you have a return on investment of about €60.000 after 10 years. (20% as opposed to 22%).
All this does not take into consideration, that a house will inevitably require larger investments and repairs over the course of 10 years and chances are, most of what you earn will at some stage have to be re-invested to keep the property up to scratch.
During that phase the following criteria also have to be met:
No recession.
No natural disaters, political disorders or other events that could disrupt the travel industry.
Constant upkeep of the regional standard as well as maintaining the price/quality of services associated to tourism.
Also not accounted for here, are those cases where the rental has to cover a mortgage - in that case you will most likely be left with next to no profit and if you are just a little bit unlucky, you are going to have to invest some of your own hard earned cash to keep the property up to speed.
If you do not keep the property up to speed, you can just forget about that wonderful calculation of 360% value increase over 10 years - by that time there will be so many newer, better equipped properties on the market, that you would be lucky to get twice what you invested 10 years ago. Not to mention, that on the rental side a degrading property will also bring less revenue year after year because the customers will have more and more better properties to choose from.
....and as Richard pointed out, as we will only be earing about 35% more on average in 10 years time, where are all the wealthy buyers going to come from?
One thing should be avoided at all cost:
Never buy a house on a mortgage if you intend to rely totally on rental revenue to pay it off - that can very quickly end in tears.
Buying a house in the Algarve should IMHO only be done for the following reasons:
1. If you come here very often and/or plan to move here/retire here in the future.
2. If you have money to spare, as an investment alternative.
Expect to receive enough from the rental to keep the property up to speed and in good working order.
NB: these figures are a rough calculations and there are so many more small things that have to be factored in - The example above is for an average property - you can certainly make more money off an "above-average" property, but if you did not get really lucky, you will not have bought an "above-average" property for €300.000 either.
First things first: When I read "return on investment" in the same sentence as "rentals", I always feel like hitting something with a large hammer.
€ 300.000 invested over 10 years with a 2% annual return should give you about € 66.000 return (22%).
Now instead of investing financially, with that money you go and buy a 3 bedroom villa in the Algarve that is up to current standards. (that would already be quite a feat)
Lets say the average annual turnover for a 3-bedroom villa in an average rental year currently lies between € 14.000 and € 20.000.
The running costs with staff, licences, taxes, maintenance, etc, etc for a 3 bedroom villa lies around €12.000 per year.
After taxes you are left with about €1.000 to €6.000 net profit. For arguments sake, lets say you are left with € 6.000 at the end of a year. That would mean you have a return on investment of about €60.000 after 10 years. (20% as opposed to 22%).
All this does not take into consideration, that a house will inevitably require larger investments and repairs over the course of 10 years and chances are, most of what you earn will at some stage have to be re-invested to keep the property up to scratch.
During that phase the following criteria also have to be met:
No recession.
No natural disaters, political disorders or other events that could disrupt the travel industry.
Constant upkeep of the regional standard as well as maintaining the price/quality of services associated to tourism.
Also not accounted for here, are those cases where the rental has to cover a mortgage - in that case you will most likely be left with next to no profit and if you are just a little bit unlucky, you are going to have to invest some of your own hard earned cash to keep the property up to speed.
If you do not keep the property up to speed, you can just forget about that wonderful calculation of 360% value increase over 10 years - by that time there will be so many newer, better equipped properties on the market, that you would be lucky to get twice what you invested 10 years ago. Not to mention, that on the rental side a degrading property will also bring less revenue year after year because the customers will have more and more better properties to choose from.
....and as Richard pointed out, as we will only be earing about 35% more on average in 10 years time, where are all the wealthy buyers going to come from?
One thing should be avoided at all cost:
Never buy a house on a mortgage if you intend to rely totally on rental revenue to pay it off - that can very quickly end in tears.
Buying a house in the Algarve should IMHO only be done for the following reasons:
1. If you come here very often and/or plan to move here/retire here in the future.
2. If you have money to spare, as an investment alternative.
Expect to receive enough from the rental to keep the property up to speed and in good working order.
NB: these figures are a rough calculations and there are so many more small things that have to be factored in - The example above is for an average property - you can certainly make more money off an "above-average" property, but if you did not get really lucky, you will not have bought an "above-average" property for €300.000 either.
Thanks for the link to Algarve resident NR - I can't believe they have got it wrong. I watched the programme and there has already been a thread on here about it which says pretty much what I did by PM last night - that the area in Portugal where they were predicting 360% growth is the relative undiscovered seaboard north of Lisbon.
I wonder if The Resident has made a genuine mistake or whether they receive too much advertising venue from developers in The Algarve to risk upsetting them.
Curious and curiouser!!
Maddi
I wonder if The Resident has made a genuine mistake or whether they receive too much advertising venue from developers in The Algarve to risk upsetting them.
Curious and curiouser!!
Maddi
If you are a seller, obviously this is not a favoured subject....but it has to be possible to sell a product without misleading a buyer to think he will benefit more than is realistcally possible.
The figures are real for a number of Carvoeiro properties and whilst there will always be individual exceptions, more and more often the statements made during a sales pitch will not withstand scrutiny.
The figures are real for a number of Carvoeiro properties and whilst there will always be individual exceptions, more and more often the statements made during a sales pitch will not withstand scrutiny.
Gambrinus...my God, all those figures!!! 
Anyway, as far as I know there are many projects for many regions in Portugal that now want to catch up with the Algarve, offering their own diverisified products.
Alentejo for example has for the past years become a "posh" area to buy country cottages. Many properties were bought and rebuilt to the highest standards. In my own village, prices doubled...unfortunately this was after my parents sold my deceased grandparents properties, one of which had a first floor and 4 master bedrooms!!!
Yet, although prices did go up it's still a bargain to buy there.
They are also going to build another dam in the area (Alqueva is not far from my village) which is going to reach one of our properties. We know that because we have been contacted regarding compensation (? I think there is a better word?) for them having to reach our property.
Around the Alqueva dam there is a project for a golf course. At the beggining I thought it was really absurd due to accessibility but after some thought, Seville and Lisbon are easy to access from there, so it might work.
There are also projects under study for the Alentejo coastline; and as far as the whole region above Lisbon is concerned I think they can compete with the Algarve if they want to. Although the Algarve has a beautiful coastline and a safer and warmer sea the truth is that most English people I know do not swim in the sea and prefer pools.
So, resorts up north near the sea is a good idea.
Sorry I am rambling but still too early!!!
Anyway, as far as I know there are many projects for many regions in Portugal that now want to catch up with the Algarve, offering their own diverisified products.
Alentejo for example has for the past years become a "posh" area to buy country cottages. Many properties were bought and rebuilt to the highest standards. In my own village, prices doubled...unfortunately this was after my parents sold my deceased grandparents properties, one of which had a first floor and 4 master bedrooms!!!
Yet, although prices did go up it's still a bargain to buy there.
They are also going to build another dam in the area (Alqueva is not far from my village) which is going to reach one of our properties. We know that because we have been contacted regarding compensation (? I think there is a better word?) for them having to reach our property.
Around the Alqueva dam there is a project for a golf course. At the beggining I thought it was really absurd due to accessibility but after some thought, Seville and Lisbon are easy to access from there, so it might work.
There are also projects under study for the Alentejo coastline; and as far as the whole region above Lisbon is concerned I think they can compete with the Algarve if they want to. Although the Algarve has a beautiful coastline and a safer and warmer sea the truth is that most English people I know do not swim in the sea and prefer pools.
So, resorts up north near the sea is a good idea.
Sorry I am rambling but still too early!!!
Has anyone seen this site? (I only mention it because a friend of mine designed it 
)
http://www.mondegoproperty.com/indexmondego.php
Up Coimbra way you can buy a new, detached, villa for €77,000 (I think)
Maybe this is the kinda thing that prog was referring to.
)http://www.mondegoproperty.com/indexmondego.php
Up Coimbra way you can buy a new, detached, villa for €77,000 (I think)
Maybe this is the kinda thing that prog was referring to.
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nightrider
http://the-news.net/Default.aspx
I have not got my hands on a copy of this week's Portugal News yet, when I do I will post the full report.
N.R.
The country is still poor!-
nightrider
PORTUGAL:
EU Membership Has Not Spelled Wealth for All
Mario de Queiroz
LISBON, Oct 21 (IPS) - Nearly two decades after Portugal joined the wealthy European Union, poverty and social exclusion continue to plague a full 20 percent of the population.
To the contrary of what was expected back in 1986, when Portugal became part of what was then called the European Economic Community, the social gap has widened, and today "the rich are richer and the poor are poorer," noted João Fernándes, chairman of the executive council of the non-governmental organisation Oikos-Cooperation and Development.
http://www.ipsnews.net/news.asp?idnews=30730
EU Membership Has Not Spelled Wealth for All
Mario de Queiroz
LISBON, Oct 21 (IPS) - Nearly two decades after Portugal joined the wealthy European Union, poverty and social exclusion continue to plague a full 20 percent of the population.
To the contrary of what was expected back in 1986, when Portugal became part of what was then called the European Economic Community, the social gap has widened, and today "the rich are richer and the poor are poorer," noted João Fernándes, chairman of the executive council of the non-governmental organisation Oikos-Cooperation and Development.
http://www.ipsnews.net/news.asp?idnews=30730