2020 was as unexpected as it was unprecedented.
It has been a very difficult year for people around the world. Many have suffered terrible losses, battled the virus and struggled to keep businesses above water. The vaccine is a light at the end of the tunnel but as we write this in early 2021 for many it’s a small light and the tunnel long.
The local property market is certainly not immune and has experienced shifts in what people are looking for, how people buy property and importantly how much they are willing to invest. Surprisingly, these shifts were not all negative. The lower and middle markets have suffered. The level of demand decreased as people’s financial situation made investing in property more difficult and even if they still could and would invest, the travel restrictions made viewing properties only possible virtually. And as the levels of transactions reduced so did prices and what vendors might accept.
The top of the market has proven to be a little more resilient to market influences and we can report an increase in enquiries, transaction, and property values.
The first change we all felt was the lockdown in March 2020 and spending a great deal more time at home. But in fact, what we have seen is possibly only an acceleration of trends which were predicted and already happening. The way we live, work and play all changed but many of these changes were already happening in slow motion in the years running up to 2020.
Working from home 10 to 15 years ago was still quite rare. As commuting became more time consuming and costly, not only the way we work but live and play over the past five years, all moved more and more online. 2020 only made more of us look more closely at the possibility of working from home and gave us the extra push or should we call it a shove, to making working at home a real possibility.
Spending more time at home then made us look more closely at the properties we live in and many decided that how and where they lived could be improved. No longer do most of us need to live within commuter distance to cities and according to our Savills colleagues in the UK, there has been a lot of talk about the increase in London based buyers moving to the country, whether purchasing a main residence or second home. Their buyer and seller survey from 2020 revealed that 48% of respondents now find a village location more attractive and 53% think a countryside location is more attractive than pre-COVID-19. These figures increase to 54% and 57%, respectively, for respondents with school age children, suggesting that families may be more likely to be considering a move out of the capital.
Home working also looks set to become a long term phenomenon, over half (56%) of respondents said they are more inclined to work from home more and this suggests they would be willing to accept a longer commute.
Analysing Savills properties that have exchanged in recent years shows a strong uptick in London buyers, as a proportion of all buyers. In the market above £2m, where London based buyers have always been more prevalent, they accounted for 39% of buyers last year, an increase from their previous five year average of 29%.
In Portugal, we have also felt the effect of this trend. Enquires were up and so were the number of sales. 2019 was an extraordinary year at the top end of the property market. If we had had another year like it in 2020 we would have been delighted. The fact is, 2020 turned out to be even better. As soon as we were released from lockdown, and after a few months of no sales, the pent-up demand was unleashed, and it was all hands on deck at QP. Statistics at the end of 2020 show that enquires were up 67% on 2019.
Looking a little closer we can see why. Historically our buyers have been predominantly interested in holiday homes. Over the past year, we have seen many more enquiries from buyers wishing to establish Residency in Portugal. We see that this was spurred on not only by a relatively safe and healthy environment the Algarve represented in terms of lifestyle and the desire to work from a home in Portugal, but also by the fact that many Brits were keen to reserve themselves the right to travel to and stay as long as they liked in Portugal; a right they would otherwise post Brexit no longer have.
What was also unexpected was the average sales value hike in 2020. Between 2012 and 2014 the average sales price was 1.45m. In 2018 and 2019 it was 1.8m and in 2020 it climbed to 2.3m.
The purchase of a holiday home or a permanent or semi-permanent home are two very different projects. Not least of all with regard to the amount people might be willing to spend on each. It is clear to see that our enquiries came in with bigger budgets and from people looking for exceptional properties in which they were planning to spend more time. And as a result, they were often on the search for bigger, better homes and better locations. And, many of our existing property owners also came to the conclusion that they wanted to spend more time in the Algarve and also wanted a better property. This stimulated the top end of the property market beyond all expectation. So much so that there was more demand than supply and consequently a noticeable hike in property values.
Price tags for private villas within Quinta do Lago and Vale do Lobo of between Euro six to eight million have become quite normal over recent years. Over the past two years, more and more exceptional properties have achieved sales prices of over Euro 10m and Euro 18.000 per square metre. This is an important milestone for the country’s property market and represents values not seen before nationally. Top values, standards of construction and design which are able to compete with the best in the world.
Another development we observed in 2020 is that historically buyers have come out to view properties two or three times before deciding which property was right for them. This changed in 2020. With the British losing some of their travel freedom within the EU at the end of 2020 and the increased amount of transactions taking place, buyers were more motivated to make faster decisions or face losing out on some of their top choices. It was quite common that multi-million Euro properties were bought upon a single viewing.
Our sales team has had to adapt. Virtual tours and dealing with our clients online soon became the norm. But not only that, while our enquiries are still predominantly from the UK, there is a substantial increase in the number of other nationalities coming to the central Algarve. We have grown the team to over 20 not only to be able to cope and maintain the level of service we provide but to also introduce more languages into the sales force. Inquires of French and Spanish is up 20% and no longer are these buyers looking to invest between Eur 500.000 to 750.000, they too are looking to relocate to Portugal and are also in search of top properties.
And money has never been cheaper. Helping more buyersto buy and buy bigger, local banks are offering incredibly good rates. Buyers across all budgets are borrowing more frequently to buy. In years gone by, we would possibly have a buyer a year who purchased with a mortgage. Today we estimate that up to 25% of our buyers are borrowing. Interest rates are low and this has also allowed people to invest in properties with slightly higher price tags. Millennium BCP are lending up to 80% with interest rates of between 1.1 and 1.5%.
The Golden Visa program continues to bring a good number of non-European investors into Portugal mainly investing in properties between Euro 500k and 750k in the Lisbon and Porto areas. The total investment this scheme has brought into Portugal to-date stands at Euro 5.6bn, 5.09bn of which was invested into the property market. To encourage more of this investment from the Golden Visa scheme to go to supporting the property market in the interior regions of Portugal, the government has decided that as of July 2021, property investment for purposes of acquiring a Golden Visa will no longer be possible in the Porto, Lisbon or Algarve regions. Very few of our buyers in the central Algarve have been Golden Visa buyers and so we do not anticipate this to have a huge effect on our market.
At QP Savills, we saw a 67% increase in enquiries, the average sales price jump from Euro 1.8m to 2.3m and a total sales volume increase of 15% to Euro 169.7m.