The price of property on Portugal’s Algarve is now 32pc cheaper than homes in the UK. Meravista, a listings website with 24,000 properties in the region which produced the analysis, said a positive signal for the market, however, was that homeowners were now selling their homes in line with the valuations of banks, rather than up to 20pc higher as had happened for several years.
"The fact that estate agents and home owners are meeting or undercutting the values set out by the banks demonstrates that the market has reached a significant low," the report said.
The company's optimism is shared by some analysts - but not all. We report on some of these views below.
Before the financial crisis began in 2008, the price of property was higher in Portugal than in many other countries popular with British buyers looking for a holiday home but values have declined throughout the crisis amid the country's economic turmoil.
Anita van Huson, co-founder of Meravista, said: “Algarve property was experiencing inflated growth in advance of the recession, so it was hit particularly hard when the markets crashed. I don’t think we’ll see valuations as low as these for a long time to come."
Borrowing costs for the are now at their lowest level since 2009, reflecting growing confidence in its prospects. But the country still faces long-term economic problems.
OECD on Portugal
Research by the OECD last year suggested property in Portugal was undervalued by between 5pc and 10pc when price ratios for rents and wages were compared with the long-term average.
Portugal's market was estimated to be cheaper than any of the other bombed-out Mediteranean states. Spain was said to be as much as 20pc too high. Read the report.
Rics on Portugal
A report on Portugal published last week by the Royal Insitution of Chartered Surveyors (Rics) remained cautious about the prospects, despite a recovery in confidence (see the chart). It said: "House prices remain in decline, but at the slowest pace in the survey’s history. Despite this, respondents are still projecting further falls in the coming three months.
"House prices remain in decline, but at the slowest pace in the survey’s history. Despite this, respondents are still projecting further falls in the coming three months."
It added: "Lisbon was in fact the only area to see a pick up in activity, whilst Porto remained stable and the Algarve experienced a marginal decline."
A spokesman for CI, the Portugese partner of Rics, said: “The comments produced by the real estate agents that participate in the survey reflect some positive expectations, driven by the improvement in the economic environment. However they also carry concern, especially due the strong credit restrictions still imposed by the financial institutions.”
Tavira is near Faro, the Algarve's primary town
Fitch on Portugal
A Global Housing and Mortgage Outlook report by the credit ratings agency Fitch, published earlier this week, predicted house prices would increase in Germany and the UK "due to low interest rates, sound GDP growth and improved credit availability".
It forecast further house declines in the Netherlands and Italy with greater decreases in Greece and Spain, which should see prices "bottom out" in 2015.
“For all seventeen countries we evaluated, the mortgage and housing market outlook has either improved or remained broadly the same compared with twelve months ago,” says Gregg Kohansky, a managing director at Fitch.
“This is partly in step with the economic recovery for a number of countries but also as a result of government and central bank policy changes which are boosting supply and demand for residential mortgages and housing. The outlook has improved most notably for markets in Ireland, Portugal and the UK,” Mr. Kohansky added.
