Saturday, June 27, 2015
Portugal's Algarve region is the country's best-known vacation destination. The Algarve is the narrow strip of land that runs along Portugal's south-facing coast. It's a stunning coastline of wide, long beaches, sandy coves, and cliffs. Tourism here is strong and well established. The Algarve caters to beach, golf, and family vacationers. It's mostly higher end. There is some lower-end mass tourism in the Algarve, too, but it's limited to two or three areas.
Development of the Algarve followed the corridor west from the international airport. Resorts, golf courses, hotels, and condo communities developed around that. Then development moved farther west.
But the area to the east has been overlooked.
It's a truly special place with world-class beaches and quaint towns. Here you find a more traditional Portuguese feel and a unique environment. This is an area of protected wetlands…and a series of islands and spits that form some of Europe's best beaches.
A trip to the beach is a two- or three-minute ride in a water taxi across flat lagoon waters. These taxis constantly hum back and forth. Boardwalks trail through the dunes and out to open, wild, beautiful undeveloped beaches. There is no development out here. Nor will there ever be. These are classic Atlantic beaches…like the Hamptons, Nantucket, or Uruguay's Rocha.
As the real estate market peaked in 2007/08, a small number of developers homed in on a few underdeveloped beach towns.
Here they built communities of condos. In one spot, I've found a strong fire-sale opportunity just a few blocks back from the seashore, and close to a natural park.
High-end condos have been newly constructed to high standards—with modern conveniences like video-entry systems. Inside is a fully fitted kitchen, open living/dining area with large patio doors onto the balcony, family bathroom, and two double bedrooms.
There is a communal swimming pool and underground parking for each apartment. The location makes for a perfect rental. The local bars and restaurants are a short stroll away.
Fishing was the big industry. Now that plays into the new big industry of tourism with excellent fish restaurants.
Condos list at $142,800. That's a strong opportunity. I'd figure on renting for 10 weeks of the summer at $790 per week and another 10 weeks of the year at an average rate of $505 per week. At those rates full occupancy means a gross yield of 9%.
Back in 2007, a condo like this could have listed for close to $225,000. In three to five years' time, when this location is back on its growth trajectory, I expect values will have recovered to close to that level.
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