Should You Retire to the Algarve?

Should You Retire to the Algarve?

Portugal was one of the biggest casualties of the 2008 crash but the past few years have seen things there begin to brighten up. By 2015, tourism had risen 12 per cent on the previous year and property sales hit a five-year high.

The Algarve is the most popular area for buyers of second homes or those relocating. It stretches for 90 miles, with busy towns such as Vilamoura and Albufeira at the centre, along with Faro airport, which is well served from the UK. Flights take around two hours, and a motorway connects holidaymakers to the western coast, around Lagos, in an hour and to Tavira, in the east, in 30 minutes.

In addition to year-round sun, the Algarve coast has a lot of perks, such as low crime, good infrastructure and communications, and quality amenities, including Michelin-starred restaurants and championship golf courses. Portugal also ranked above the UK in 2014 in terms of healthcare and the cost of living remains affordable for Britons, with consumer prices around 60 per cent lower than the UK.

The country has also introduced a number of important benefits for homebuyers, in particular retirees, and these measures have kick-started the property market. Despite this, prices remain low and it's possible to find boltholes in attractive coastal locations for under €200,000.

"Prices are rising but are not yet at pre-crash levels," says Connie Vitto, owner of UK-based Portuguese agency Quadrant Overseas Property ( "You can still buy a one-bed apartment, 100 metres from the beach, for around €80,000."

Over the past year sales were up 30 per cent according to Chris White, owner of Ideal Homes Portugal ( "There is more confidence in the Algarve, new businesses and developments are launching, there's a feeling the crisis is over," he says.

Areas for everyone

Away from popular and busy resort towns like Lagos and Portimao, the western end of the Algarve is less developed. Much of the coastline is rugged and protected, with small villages and fewer amenities. Lagos is a popular, thriving town, offering a marina, good beaches, historic walled centre and castle, plus access to several golf courses.

"People like Lagos because it has a lot going on, it's good for families and those who want activities such as golf and sailing," says White. "If you want beachfront, you can get some good two-bed off-plan and new-builds from around €300,000."

Quadrant Overseas has one- and two-bed apartments from around €70,000 a short walk from the beach at Meia Prai. Vitto also suggests Prai de Luz, where apartments can cost from €60,000 and three-bed villas from around €300,000.

The busiest and most popular location, stretching from Carvoeiro to Faro. It's here you'll find bustling Vilamoura, with its world-class marina and well-developed leisure facilities, and the renowned golf resorts Quinta do Lago and Vale do Lobo.

"Buyers generally know the area well, have maybe been holidaying there for years," says White. "They love the proximity to golf courses and the airport."

Both Quinta do Lago and Vale do Lobo offer excellent amenities, including quality restaurants, spas and sports facilities, plus proximity to fabulous beaches. At Quinta do Lago ( you can get two-bedroom apartments from €330,000, with two-bed townhouses from around €375,000.

Vale do Lobo ( has more availability sub-€500,000 with one-bed properties from around €200,000 and three-bed linked villas from around €400,000. In off-resort locations such as the centre of Albufeira, Carvoeiro and Vilamoura, or in rustic areas inland, you can buy one-bed apartments or ruined village homes from under €70,000.

The central Algarve is scheduled for growth as new phases of established resorts are being released for sale. Chief among these is the expansion of Vilamoura, which was announced in September. The resort will release 18 new sites to independent developers, with the aim of creating a variety of residential and leisure zones at different price points.

The project is still in the planning stages but it's worth keeping an eye on it if you want to buy into an established residential resort with large-scale amenities, including a marina, shops, restaurants and bars.

Connie Vitto thinks Vilamoura is significantly undervalued. "And it needn't be expensive, especially if you're happy to take on a refurbishment project," she says.

More peaceful and rural, the eastern Algarve is bordered by the fabulous Ria Formosa coastal nature reserve. If you're happy to be inland, you can find houses from around €50,000, depending on location and condition.

If all you want is a little getaway pad, White says you can find nice two-bedroom apartments in coastal towns such as Olhao or the resort of Cabanas from €125,000. "The eastern Algarve has caught up with other areas, though you can get more land for your money," he says. "But it's still quite rustic, it doesn't suit everyone."

In the pretty and historic riverside town of Tavira, it's possible to buy two-bed apartments from around £110,000, and four-bed villas from around €280,000.

Tax-free pension perks

Non-habitual resident status (NHR) applies to people who have not been resident in Portugal for the previous five years who make it their main country of residence. This allows exemption, if qualifying criteria are met, from paying tax on income from outside Portugal for ten years, a rule that also applies to pension income.

To qualify you need to reside in Portugal for more than 183 days per year or own a property you intend to use as your habitual residence. You must also meet HMRC's criteria for non-residency in the UK, which are now quite stringent and depend on how much time you spend in Britain each year or in consecutive years. Income generated in Portugal for certain occupations is taxed at a fixed rate of 20 per cent.

There is no inheritance or gift tax for immediate family, no wealth tax, and tax on income from dividends or investments can be reduced or deferred. Seek expert advice.

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Originally published in the A Place in the Sun magazine - Issue 124