OPW KEY FACTS… PORTUGAL

"Lisbon prices have stabilised this year and the prime property market is showing signs of recovery."

Portugal is Europe's most south western point, offering both an Atlantic coastline and a balmy Mediterranean climate. Europe's warmest country has been a popular second home choice since British tourists first claimed it in the 1960's. Skiing can be enjoyed in the winter and summers tend to be hot and sunny, particularly inland. The proportion of overseas visitors to Portugal has increased by an average of 5% per year from 10.6 million in 2004 to 12.4 million in 2007. Visitors from other European countries comprise more than 80% of arrivals to Portugal, led by Spain and the UK.

PORTUGAL PRICES CONTINUE TO STABILISE

Portugal's residential sector has been no exception to the downward trend in house prices that have been witnessed across much of Europe since the onset of the credit crunch. Reduced buyer confidence and limited financing capacity has contributed to significantly fewer transaction levels, reflected in falling levels of mortgage lending. Price movement turned negative in 2007 and has subsequently continued to decline. Portugese bank valuation data shows that during 2009 the rate at which prices fell has reduced across the country in general.

While statistics indicate that villa prices in the region fell by almost 9% between 2008-2009, evidence suggests that in some areas prices are up to 30% below their mid 2007 peak. This is particularly evident in locations where there has been a high level of new supply coming to the market, and where product is aimed mostly at investor buyers rather than end users. The top end of the market has been less affected by global recessionary conditions. Quality residential product in the most sought after locations such as Quinta do Lago which are close to the sea with access to amenities such as golf and spa, and with easy access to the airport, have not suffered the deep price cuts seen elsewhere. While lifestyle buyers have dominated the market during 2009, increased price stability in this segment of the market has also already sparked some investor interest.

RESELLING IN PORTUGAL

When reselling a holiday home in Portugal, capital gains tax of 25% on the proceeds is payable by non residents. However, you will not have to pay capital gains tax as long as the proceeds are reinvested in another Portugese property (or other permanent assets such as shares) for a minimum of two years after the sale, or if ownership of the property was held by an offshore company. Apart-hotel projects such as the Sesimbra Bay Beach & Spa resort are classified as being commercial property, and therefore attract a lower tax liability of only 15%.

THE POPULARITY OF LISBON AND THE ISLANDS

The Madeira archipelago benefits from a subtropical climate. Most second homes are located in the south of the island, traditionally attracting British, Scandinavian and German buyers for retirement and holiday purposes. The development of new golf courses has added to the local appeal. Portugal's capital city Lisbon is steeped in culture. It is home to two million people and economic output is primarily commercial. Its residents benefit from the capital's ideal location in relation to nearby summer resorts such as the stunning and very popular Sesimbra Bay, local fishing villages and sites of national heritage such as the National Palace at Sintra. Lisbon's housing market has been characterised by uncertainty and challenges to sourcing finance, which has led to low levels of transactions across the board. Prices are expected to stabilise at around 10-15% of their peak in 2007, with signs of recovery already in full swing.