Tax-free pensions' helps push up house prices in Portugal's Algarve for the first time since 2008
Changes that means pensions can be drawn tax free have helped push up house prices in Portugal for the first time since 2008.
Knight Frank, the property company, said prime property prices in the Algarve were finally rising because of “realistic pricing, the availability of cheap finance, strong investment in infrastructure and tax initiatives”.
Prices rose by 6.9pc in 2015. Portugal introduced rules in 2009 that exempt non-residents who spend 183 days a year in the country from paying income tax on non-Portugese incomes for 10 years, including pensions.
Knight Frank said UK, Irish and German buyers were still evident but South Africans and Chinese were increasing in number.
It noted a rise in Scandinavian buyers but also a particularly strong surge in French buyers over the last two years due to the pension tax rule changes.
Alex Koch de Gooreynd, partner and Head of Knight Frank’s Portugal network, said: “In 2013 we saw vendors start to adjust their prices, keen to progress sales which led to an upturn in transactions and by 2015 the Algarve recorded its first annual increase in prime prices since 2008.
“Buyers are investing in the Algarve again. They are buying, extending and improving. Increased liquidity is now returning with good quality stock offered at sensible prices selling quickly.”
Data compiled by the OECD shows that among its member countries, Portugal's property market is the fourth cheapest behind Germany, Korea and Japan.
It compares house prices compared with their historic norms. Against wages, prices in Portugal are 5pc too low, against long-run averages, and 17pc too cheap based on rental values. It does not break out figures for the Algarve alone.