Portugal offers potential as a property investment market and below you will learn a little more about the main growth factors currently affecting the Portuguese property market.
Amongst the likes of France and Spain, Portugal is already well established as a foreign property investment location. Investors are safe in the knowledge that historically stable returns can be obtained from carefully selected property in Portugal. Portugal's low prices and highly affordable cost of living are an added advantage to investors on a lower budget.
Investors looking for short term gains should look elsewhere as, in line with the country's economic growth (GDP 1.3% in 2006), Portugal's property investment growth process is relatively slow, requiring concentration on generating maximum profit and keeping it for at least five years before reaping worthwhile returns on investment property in Portugal.
Property Investors have been concentrating on areas of major tourism along the coast, particularly on the Algarve, due to the potential for year round rental income from golf and beach lovers. Other emerging investment areas of Portugal are now gaining popularity with prices still at an average 30% lower than in better known resorts on the Algarve. An increase in modern transport and tourist infrastructures in rural Portugal make growth potential high in carefully selected areas. Across the board, current capital growth and rental yields can average at 10% per annum, provided your property is situated in a high demand location.
Portugal is still undergoing economic reforms since EU membership and growth is a relatively slow process. Some investors who are seeking a solid and reliable bet within the medium to long term are enjoying healthy returns on investment of around 10% per annum, meanwhile cashing in on rental yields from their buy-to-let investments in key resort areas.
Economically Portugal is in the process of creating a more dynamic business environment through structural reforms in product and labour markets and this is set to have a knock-on effect on both the local and holiday property markets. With increased business activity in many of the major Portuguese towns, investment is now going into regeneration and construction of property to satisfy a steadily growing need for quality accommodation to serve the local resale and rental markets.
Ever increasing competition in cheap direct flights from Europe and elsewhere make Portugal easily accessible for budget holidaymakers. This renders Portugal a strong market for buy-to-let investment, particularly in hotspot areas of the Algarve, where year-round yields of some 10% are being achieved by tapping into the golf and beach holiday markets. In addition, local rentals within the major cities are now experiencing a recovery as demand grows for quality accommodation and commercial premises to complement increased business activity.
EU membership in 1986 and subsequent Euro qualification have done much to raise Portugal's economy to the levels of its European neighbours, and exchange rate stability and falling inflation and interest rates are positive signs for investors. With the help of strengthened private investment due to structural reforms and measures to reduce the nation's fiscal deficit by EU sanctions and tighter financial supervision, Portugal is on a slow but steady path to economic growth. Portugal has also raised its standard of living and purchasing power is now on par with its EU partners.
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