Resorts Return En Masse to Portuguese Market

9 June 2018

New resorts are being built in Portugal and demand is growing. The English are the main buyers of this tourism/real estate product, but there are also buyers from over 40 other countries.

Between 2000 and 2007, the Portuguese real estate market experienced moments of glory, with the construction of large tourist-real estate projects, most of them designated resorts, some of which are considered Projects of National Interest – PIN. Many were completed and went into operation, while others were caught up in the financial crisis, with some never going beyond the proposal stage.

In 2014, the market began to get off its feet. Now, with tourism on the rise, the resorts are once again staking out their niche. Some of the resorts which never took off have come back on the radar. Just in the Algarve, 50 housing projects with tourist potential are in the pipeline, and the price of homes integrated into resorts is expected to increase by an average of 7.1% this year, Confidencial Imobiliário revealed. The data was provided by the “Resorts Market Sentiment Survey”, a survey started within the framework of the SIR-Residential Tourism, a statistical system developed by Confidencial Imobiliário in partnership with APR – the Portuguese Resort Association, with the support of Turismo de Portugal.

Not even the growing demand for urban real estate, especially in the city of Lisbon, has weakened interest and foreign investment in resorts. Pedro Fontainhas, the executive director of APR, revealed that most of the resorts offer a product that is distinct from the alternatives in the city centres. “Investors in resorts seek quality of life, in a healthy and secure environment, with complementary services, and the possibility to monetise their investments both through letting their properties to tourists and through the appreciation of their investment for future resale. Most resorts, however, can offer the best of both worlds, as many are within a short distance to the national urban centres while benefitting to easy access to transport links,” he stated.

Eduardo Abreu, a partner at Neoturis, a strategic and business consultancy specialised in tourism, entertainment and leisure, explained that some plans for resorts are being revived after years of gathering dust. However, he also believes that the real estate projects will be smaller than originally envisioned. The executive explained that the main difference compared to the pre-crisis period lies in the need to have, at a minimum, some ongoing construction or even the end-product almost completed before the start of sales. This time around, the projects are presented with guarantees for completion, using well-known developers and solid financial backers.

“A solid strategy for generating returns through the rental of the properties for tourist use is also required, including credible management partners and guaranteed income, backed by business plans – much as in the traditional hospitality sector,” he stated.

Mr Fontainhas added that demand for this product has risen, “2017 was a positive year, and the forecast for 2018 is for the continued growth of demand.” The main issuing markets continue to be the UK, Benelux/Scandinavia, and France. However, there are buyers from 40 other nationalities on five continents investing in Portuguese resorts. Eduardo Abreu also refers to the growing interest on the part of the Germans, as well as the markets with buyers in the regions of Lisbon or Porto that may eventually buy second homes in Portugal, such as Brazil, for example.

In fact, according to the study “a second important group, totalling about 25% of the market, consists of buyers from Germany, Ireland, China, the Middle East and North America. This group gained share between 2016 and 2017, in particular through increased demand by Middle Eastern investors. Other buyers, from Italy and Brazil, increased their relative shares.

Prices between 3,500 and 5,000/m2

Mr Abreu stated that prices vary from resort to resort but “they range from €2,500 to €3,000/m2 up to €8,000 to €10,000/m2 at the top of the market. However, more than 50% of sales will be for between €3,500 and €5,000/m2.”

In fact, in the third quarter of 2017, the Algarve recorded a quarterly increase of 2.6%, and prices have been positive and above the pre-crisis level since the second quarter of 2015.

To see how the market is growing again, just take a look at some of the projects announced recently.

The Ombria Resort, a new luxury real estate development located in the municipality of Loulé in the Algarve, developed by the Finnish investment company Pontos. The resort will have an initial investment of 100 million euros for a 5-star hotel, the Viceroy at Ombria Resort, with 76 luxurious rooms and suites, the Viceroy Residences at Ombria Resort and the Alcedo Villas and Oriole Village.

Construction at ‘La Réserve’, the Natural and Spa Resort, in Comporta – Carvalhal officially began last May 17, and the resort is being developed by the French Group Terresés. Opening for the summer of 2020, the ‘La Réserve’ will include ten hectares of protected areas close to the dunes and will have three different types of real estate: an apartment-hotel, fishermen’s houses and villas.

A project for the West Cliffs, in the municipality of Óbidos, was also taken up again last year. The five-star tourist complex, which occupies an area of 230 hectares, will have a golf course and Club House, which have already been built, two five-star hotels, the 130-room Hotel da Falesia and the 60-room Hotel do Pinhal and a real estate component designed by the architect Sua Kay.

Sales for the first project at Vilamoura World were also announced in 2018. The Central, a closed condominium with 80 houses, will have prices starting at 630,000 euros. The development’s first units will be ready in early 2020. The Uptown at Vilamoura World was also announced in May. The development will include houses which will be ready for occupation in 2020, with prices beginning at 294,400 euros.

Another project under development is the Muda Reserve, a Real Estate/Tourist development that will be built in the village of Muda by Vanguard Properties in a 200-million-euro investment.

Original Story: Jornal Econômico – Fernanda Pedro

Translation: Richard Turner