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Risk management - Food for thought in a buoyant property market << Back

In the current buoyant property market, there is logic in taking a step back and reassessing your investment goals in light of potential risks, especially as some areas are becoming priced for perfection.


If you bought an investment property or are considering to down size you may want to consider selling into a strong market. Can property prices go higher? Yes, but nobody ever lost money taking a profit. When new price records are set it is often due to foreign buyers who are less familiar with price development in an area. Buying a property in the Algarve is also made easy when one sells up back home in a strong market. People who apply for the Non Habitual Residence program can also justify spending more on their ideal property, as the program offers a 10 year tax holiday.


Sometimes people pay over the odds for their ideal home. We call this an emotional buy in which case other considerations are more important than just making a return on investment. There is no right or wrong in this and whether the purchase was a good decision can only be decided in hindsight and may vary from homeowner to homeowner.


The continuous popularity of the Algarve as a destination has led to increasing prices for both hotels and private rental accommodation alike. After two consecutive record breaking years of total number of visitors, it remains to be seen if 2018 will bring even better results. The combination of higher prices for accommodation and flights can eventually lead to a decline in demand.


Here are some reasons for caution:



-        Possible changes to the NHR program

-        Rental yields have topped out

-        The taxation on short term holiday rental income has increased and may increase further in the future

-        Possible introduction of a tourist tax

-        Possible introduction of limiting factors regarding short term holiday letting (AL) legislation


….and from a macro economic point of view:


-        Possibility of a trade war between the US and Europe spreading beyond steel which could cause damage to the economic recovery.

-        The balance sheets of European banks are still not healthy. More deleveraging needs to be done. A populist government in Italy may revive financial instability across Europe. Unlike Greece, Italy may be too big to fail but also too big to save. Banks may not be strong enough to deal with the fall out.


A return of financial instability and slow down in economic activity in Europe may hurt the property market. Food for thought when you are considering selling your property or pursuing your dream home in the Algarve.





Our multilingual consultants at Land & Houses Algarve have been living in the Algarve for a great many years and are experts in walking you through each step of the buying and selling process. We are currently looking to add quality properties all across the Algarve for both our Portuguese and International buyers. Why not contact us today?





Robert Bijker


(First published by Land & Houses Algarve in June 2018 in the East Algarve and Simply Algarve magazines)
Published on 30/11/2018 14:53:55
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