Research article

The Residential Markets Of The Algarve

Prices for the very best properties in the Prime Algarve in 2015 exceeded 2007 levels

The region is a favourite of British buyers

▲ The region is a favourite of British buyers

The prime residential markets of the Algarve are concentrated in the ‘Golden Triangle’, incorporating Quinta do Lago, Vale do Lobo, Vilamoura and the smaller resorts in between. These are privately owned and operated resorts, benefiting from a high standard of infrastructure and an array of leisure amenities including golf, luxury retail, hotels and restaurants. Bordered by beaches and nature reserves, they are among the premier resort destinations in Europe.

Prices, and performance, are comparable to other international resorts (rather than other parts of Portugal) which represent the region’s direct competition (Fig 5).

Resort real estate is nearly always a discretionary purchase, made when economic conditions have created spare cash in the hands of second-home buying households.

In common with other resorts around the world, these markets slowed during the global economic downturn (the major casualty being transaction levels). Because much of the prime Algarve residential market appeals to wealthy endusers, it is typically less mortgage-dependent and so less vulnerable during times of economic uncertainty. Consequently it was relatively protected after the global financial crisis and forced sales were few.

With improving economic conditions in the source markets (notably the UK), buyers have returned and prices are appreciating once again. Transaction volumes have recovered from a low in 2012, with a marked uptick in activity recorded in 2014 and 2015. In Quinta do Lago, prices for the very best properties have exceeded their pre-crisis peak.

Unlike competing resort areas in other European sunbelt and Mediterranean markets, the Prime Algarve did not see high levels of overbuilding in the run up to the market peak. As a consequence, stock levels remained low, and this has been a major driver of price growth as demand has returned.

The region has long been a favourite with British buyers. For sterling buyers, the weakening of the Euro over the past three years has presented further investment incentives. To a GBP buyer, a €2m property cost £1.67m in January 2013. At the euro’s weakest in November 2015, a property of the same value costs a UK buyer £1.41m – a currency saving of 15%. However, it is probably fair to say that price rises have since offset these savings.

Figure 5

FIGURE 5Global price league

Source: Savills World Research

Quinta do Lago

Quinta do Lago was founded in 1971 by property developer Andre Jordan on the site of a 300 year old beach front estate. Spanning 2,000 acres, the resort is home to 695 villa plots (of which 650 are built) plus 1,267 apartments and townhouses. Resort facilities include five golf courses, a tennis centre, spa, boutique malls, numerous restaurants and two five-star hotels.

The resort is characterised by its spacious villa plots, varying in size from 1,600 to 3,600 m2, with development on each plot restricted to just 20% to 25% of the plot area. No development is permitted on the main spine road and the presence of golf courses and the Ria Formosa nature reserve grants properties exceptional privacy. This makes Quinta do Lago appealing to those seeking a private retreat. Plot values average €1,000psm, rising to €5,000psm for frontline plots. Built villa prices range from €5,000psm for an unmodernised villa to €8,000psm for a new build villa, and €3,500psm for an apartment.

Sales volumes increased 70% between 2014 and 2015, and have now surpassed 2007 levels.

Some 63% of Quinta do Lago’s residents originate from the UK, with Irish, and other Europeans accounting for the rest (Fig 6). Outside of Europe, Quinta do Lago attracts small numbers of purchasers from South Africa, Russia and Nigeria.

Figure 6

FIGURE 6Purchaser nationality, Quinta do Lago (2011–2015)

Source: Savills World Research

Retirees are present, accounting for 23% of buyers in the last four years, but the majority are business owners (54%), or employed in a professional capacity (20%). Many residents bring with them young or teenage children, attracted by the large properties, safe and secure environment and leisure facilities on site. This is reflected in the age range of buyers (Fig 7). Sunshine and a warm climate are tempered by Atlantic sea breezes and properties are designed to take advantage of this.

Quinta do Lago, in common with other Algarve resorts, is foremost a place for second homes. The permanent population is estimated at only 10% of the peak summer population. Investment in the resort is ongoing by the current owners, Quinta do Lago S.A. A €50m investment programme was initiated in 2009 completing in early 2017 and will include a new sports centre offering football pitches, a gym, tennis courts, a clubhouse and outdoor pools.

Figure 7

FIGURE 7Purchaser age, Quinta do Lago (2012–2015)

Source: Savills World Research

Vale do Lobo

Founded in 1962, three years before Faro International Airport was opened Vale do Lobo was the first resort development in the Algarve. This low density resort extends to 1,100 acres and includes 800 villas, 700 apartments and townhouses. Golf is a major attraction; Vale do Lobo Royal and Ocean courses are among the region’s most iconic. The Vale do Lobo Tennis Academy is one of the largest tennis facilities in Portugal.

In common with Quinta do Lago, the buyer profile is predominantly British, accounting for around two thirds of purchasers. The remainder comprises mainly other northern Europeans, notably the Irish, Germans and Dutch.

Plot sizes average 1,000m2. Plot values are variable, ranging from €800psm, and rising to €7,500psm. Built villa prices average €7,000psm with apartments at around €3,000psm. In contrast to Quinta do Lago, the resort has room for expansion with land earmarked for a further 600 units and additional luxury hotel.


Vilamoura is a large resort, more than twice the size of Quinta do Lago and Vale do Lobo combined. Adjoining the town of Quarteira, it has a distinct commercial core, focused around an 825 berth marina (the largest in Portugal), and offers a wide range of hotels, bars, restaurants, retail, equestrian facilities and a casino. Five golf courses provide the setting for lower density villa development.

Prime prices are lower here, averaging €4,000psm for prime villas, with the bulk of properties at between €2,000 and €3,000psm.

Vilamoura has recently announced a new master plan for the 400 hectare, second phase in its development. The €1 Billion project represents one of the largest real estate developments in Portugal. The master plan comprises an approved low density gross construction area of 680,000 sqm in a total development area of 4,000,000 sqm. 18 development projects are available with development areas ranging between 1.5 hectares and 168 hectares, which will accommodate a mixture of residential, leisure, tourism and retail uses.

In the near-term, significant investment will take place in and around the marina and beaches in the form of new bars, restaurants, leisure and recreational facilities and a new international yacht club. Sunseeker will be opening a sales suite and lounge in the Vilamoura Marina.

Sheraton Pine Cliffs

Pine Cliffs is a Sheraton-branded resort comprising hotel, beach club, restaurants golf course and 500 residential units, located to the west of Vilamoura, adjacent to Albufeira. The development has been one of the few in the Algarve to attract a small number of buyers through the golden visa scheme, drawn in part by rental guarantees on offer. Product ranges from apartments aimed at the investment market, and although outside the golden triangle, large villas on cliff top plots command in excess of €9,000psm.

New development

Developed in the 1960s and 70s, the prime resorts of the Algarve are established and mature. Changes in purchaser preferences mean that original properties are being redeveloped to meet the demands of modern day living.

In the depths of the recession, opportunistic developers purchased first generation properties in Quinta do Lago and Vale do Lobo and redeveloped them into modern villas. This trend has continued with end-users, replacing first-generation properties with contemporary homes fitted with modern conveniences.

Restrictions on plot ratios mean that replacement properties must adhere to strict building codes, but the price premium they command is significant, on average 31% higher on a price per square metre basis (Fig 8). Older villas are often smaller than the maximum size allowed, which also sometimes allows some room for expansion in the rebuild.

Aside from individual plot-level development and redevelopment, new supply in the Prime Algarve remains relatively limited.

Figure 8

FIGURE 8Contemporary premium Quinta do Lago

Source: Savills World Research

Lettings market

The Algarve is an established tourist destination and some owners rent their properties to tourists. The integrated facilities of the major resorts are especially appealing to the vacation market, and demand is strong between Easter and the end of August. The best equipped houses in Quinta do Lago rent out for between €9,000 and €15,000 per week, typically for at least 12 weeks per year.

Rentals are an effective way to pay for running costs. These vary by resort and property, but equate to around €50,000 for a 4-bed villa at Quinta do Lago, or between 1% and 1.5% of property value. The running costs are usually covered at around 4-5 weeks of let.

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