Celebrities and luxury property leading the way in the Portuguese real estate market

It may be that footballer Cristiano Ronaldo and actress Angelina Jolie know a thing or too about real estate investment as both are reported to be seeking property in Portugal, but they are not the only ones and an increasing number of inquiries are helping to revive the market in a country that has often been ignored in favour of its more gregarious and flashy neighbour, Spain.But Portugal has never been as brash as Spain and certainly never seen the huge number of apartment and villas that hav

Golf has always been, and still is, one of the big draws of Portugal. It has built up a niche market, according to analysts, and although there are still second home buyers who seek out renovations in small villages, Portugal is associated with golf resorts for many international buyers.

Prices have fallen in the last year in Portugal, down around 5% but its market is more stable than in Spain. Some even say it is more elitist than Spain, with a different kind of buyer, a buyer that takes their time rather than rushing in for a bargain.

The quality of the construction is often described as excellent and while the market has slowed, especially for apartments, the luxury end of the market has held well.

'The market has been slower. But it is no longer about buying an apartment in a sleepy village. People want more for their money. They want facilities so that they can do something different on every visit,' explained Brigitte Urbano, Head of Sales at Oceânico Prestige Residence Club which has a number of luxury resorts in Portugal.

In direct response to changing demands the company has added new products including its fractional packages with added lifestyle extras. The freehold properties are divided into fractions and sold to different buyers rather than as a whole to a single buyer. Investors can also use the companies other resorts in other parts of the world for the same cost and use a yacht moored in Lagos port and book an executive limousine to fetch them from the airport that comes with its Residence Club.

'It is the luxurious touches that buyers want,' added Urbano.

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The slowdown is coming to an end according to Joost Last, director at Pine Cliffs Resort in the Algarve. 'Economic factors mean that we had experienced a slight slow down in sales in 2008, but we have noticed things pick up considerably moving into 2009,' he said.

'Portugal remains one of the most popular destinations for UK overseas property buyers. Investors are realising that unlike other EU countries, Portugal has very strong investment potential and the guaranteed return is definitely encouraging buyers. Portugal is also easy to get to from the UK and hasn't experienced the corruption and over-development that has recently blighted the Spanish property market which is highly reassuring in the current economic climate,' he added.

But even in the high end market buyers still seek a good price, according to James Harrison, sales director of Pestana Golf Resorts. 'Because we are an operator rather than a developer our margins are lower and our prices are competitive,' he explained. 'Buyers want the location and the price to be right and they don't necessarily rush into making a decision. Many of our buyers have played golf at our resorts, they talk to owners on the course, in the bar, and then they might buy several years later,' he added.

This is typical of Portugal where the boom and bust that has dogged the Spanish market simply did not happen.

Then there is the celebrity factor. Ronaldo currently owns a flat near Portugal's capital Lisbon and is now reported to be looking to increase his property portfolio in the country. There can be little doubt that the chance of seeking a glimpse of one of the most famous players in the world will be a draw.

Hollywood actress Angelina Jolie is apparently looking for a property near Lagos in the Algarve. Locals claim she is interested in a recently renovated traditional Portuguese farmhouse on a cliff top with its own bridge to a private island.

Infrastructure is also important and with the Algarve being one of the most popular areas for foreign property investors the links from other European countries to Faro airport are vital. It has also been recently announced that the capacity of Faro airport will be increased from six to nine million in the next two years.

Buyers who intend to rent out their property during the tourist season are being backed by the Algarve Tourist Board. According to chairman António Pina, more money is being spent this year promoting Portugal abroad to combat any effects the recession might have on visitor numbers.

There has been a 20% increase in the allocation of funds for the promotion of tourism in Portugal this year – the biggest public push the country has ever undertaken in this area.

Other resorts are becoming more popular. Porto Dona Maria near the picturesque villages of Luz and Burgau some 60 kilometres from Faro airport has panoramic views of the Atlantic Ocean and is well known among Portuguese buyers, with a number of high profile politicians owning villas there.

Portugal has also escaped the kind of illegal building and subsequent demolition debacle that still haunts Spain. Buying is straightforward and annual property taxes are based on a combination of the location, market value and the standard of local services available.

Also according to the European Central Bank property prices in Portugal were not as hard hit as other European countries. For example from June to September last year property prices rose 4.8% compared with the same period in 2007. Similarly in the last quarter of 2008 they increased 4.7% compared with the previous year. Overall, property prices rose by an average of 3.9% in 2008 compared with 2007.

Estate agents have found that fluctuating exchange rates have held UK buyers back but in the last few days an improvement in the fortunes of Sterling against the Euro has re-kindled a lot of interest. 'Many prospective buyers have decided to buy they are just waiting for an improvement in exchange rates,' said one long-standing agency in the western Algarve.

In recent months prices have fallen around 4.8% according to the Instituto Nacional de Estatistica but this is small compared with the 20% decreases experienced in much of Spain. Also Portugal never experienced the boom that saw property prices spiralling in Spain from 2001 to 2006.

Portugal is also unlikely to suffer from the kind of oversupply that is causing so many problems in parts of Spain.

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Residential construction, which accounts for the largest share, about 38%, of total construction activity, has been declining since 2002. The number of family properties completed in 2007 fell 52.2%, to only 60,000 from a peak of 125,000 units in 2002.

Other factors are also putting Portugal on the world stage. The fact that the Portuguese city of Guimaraes has been chosen as one of two European Capitals of Culture for 2012 will have an affect on property prices. Liverpool saw property prices increase by 76% when it was the culture capital and in Newcastle real estate prices rose 64% according to figures from the Halifax.