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Price Drops Reflect Accurate Values for Luxury Properties in Portugal - 22 February 2011

Despite concerns about the falling home prices in Portugal, experts say that the market isn’t as shaky as it seems and that Portuguese property remains a both a popular and a smart investment for overseas investors.

The recently reported price drops are a reflection of developers having set prices too high to begin with, not of declining values, according to real estate experts. Property prices needed to come down, they say, and now reflect their correct value.

Consequently, overseas investors have taken note of the lower price tags on new luxury condos and are expressing interest in snatching up these developments before market values rise again.

A growing number of investors are also looking to buy outside of the traditional regions of Algarve and the Silver Coast, where prices have dropped the most, and are instead shopping for second homes in central Portugal and the island of Madeira.

Unlike the coasts of mainland Portugal, Madeira hasn’t been overdeveloped. Supply hasn’t superceded demand there, so prices remain reasonable and the odds of appreciation higher. Madeira, a long-time favourite destination among British holidaymakers, has been touted by many real estate experts as a top investment in the country.

The property-price scare began when Portugal reported that year-on-year prices went down by 0.7 percent in the third quarter of 2010, the first time prices fell since 2009. However, by comparison, Portugal’s neighbors Spain and France saw home prices fall significantly last year—about 4 to 6 percent—and those markets continue to be favourites among overseas investors.

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