Costa del Sol Property or Algarve Property?

Country:  Algarve; Costa del Sol; Portugal; Spain

Portugal's Algarve and Spain's Costa del Sol are two of the holiday destinations most favoured by Britons, and it's not hard to see why: superb climates, excellent year-round infrastructure (including some of Europe's best golf facilities) and first-rate access from throughout the UK and the continent. Understandably, this has seen both coasts establish themselves as prime property hotspots, and at the upper end of the market too: Costa del Sol property is the most expensive in Spain outside the major cities, while values of Algarve properties are comfortably the highest in Portugal (though compared with similar properties in the UK, prices are eminently affordable).

Nevertheless, these values in both areas have been, until recently, backed up by significant annual capital growth, and if the property markets (in particular on the Costa del Sol) have slowed somewhat over the past couple of years this has simply created a number of lower-level opportunities for buyers to grab their own slices of the property pie.

Investment potential

The Algarve
The Algarve tends to be divided into its western and eastern halves, with Algarve properties in the west priced, roughly speaking, at around 30 per cent higher than their eastern equivalents. The west has traditionally seen a more active and dynamic market, with a greater number of homes available and prices rising at a faster rate, although with greater development in the east it seems that both prices and appreciation are heading for parity (though this will take some years yet). Appreciation on the Algarve as a whole was around six per cent in 2006. Meanwhile, thanks to solid infrastructure and the prospect of year-round golfing rentals, rental yields of between four and seven per cent are perfectly achievable.

Costa del Sol property used to be the pride of the Spanish housing industry, enjoying truly frenetic capital appreciation, but overdevelopment (especially in the apartment sector) has led to stagnation in the last year or so, and in some cases prices have been forced down as owners look to liquidate their assets. This isn't to say profits can't still be made - particularly through distressed sales - but the Costa del Sol is now looked at as a much longer-term investment, with end-users currently having the upper hand. Rental yields can still be appetising, especially on golf developments, but, again, high supply levels pertain and yields of around five per cent should be considered the maximum.

Climate

Costa del Sol
Thanks to its peculiar geography, sheltered by mountains to the north and enjoying warm winds from the African continent, the Costa del Sol has laid claim to having one of Europe's best climates: well over 300 sunny days a year, summer temperatures regularly in the high thirties degrees Celcius (and rarely below 30) but without the oppressive humidity of other locations, while the winters are generally very clement with night-time temperatures rarely falling below ten degrees Celcius.

The Algarve
While the Algarve lies more or less on the same latitude as the Costa del Sol, it does not enjoy the same mountainous shelter; moreover, where the latter bounds the Mediterranean the former meets the Atlantic and is therefore subjected to colder sea-borne temperatures and frequent strong (and occasionally cold) winds. Nevertheless, temperatures remain high - averaging in the high twenties throughout the summer and frequently reaching the high thirties and above - with, again, well over 300 sunny days per annum.

Accessibility

Thanks to their immense popularity among holidaymakers both the Algarve and the Costa del Sol boast excellent access.

The Algarve
Most travellers to the Algarve come into the region through Faro International airport (about two and a half hours from London) but road routes from Spain via Huelva and from other Portuguese destinations are also popular. The yachting community has a number of options, with some top-class marinas found along the coast; ferries also use the port of Portimao.

Costa del Sol
Some two million passengers a year use Malaga International airport (served by 28 UK airports; just under three hours from London), which provides good access to the whole coast. Those looking to visit the western stretch of the costa might prefer coming in through Gibraltar (three hours from London) which is less busy but less well-served. Road links from the rest of Spain are good and improving, as are rail connections, with billions being spent on upgrading these services during this decade. Plenty of marinas also serve various parts of the coast.

Facilities and amenities

Costa del Sol and The Algarve
The infrastructure of both locations is heavily oriented towards the tourist sector, with countless bars, restaurants, beach clubs and discos to keep holidaymakers amused, and with a number of theme parks operational along both coasts. Golf is big business in both regions, with some of Europe's most famous courses offering spectacular and affordable play. In terms of more resident-centred infrastructure, the Costa del Sol (being the more heavily populated zone year-round) perhaps comes out on top, providing world-class healthcare and very decent educational opportunities - though what the Algarve has to offer in these sectors is certainly not to be sniffed at. Thanks to the substantial and increasing retiree populations in both areas health facilities in particular are increasingly important, and the growing trade in health tourism from around Europe to the Costa del Sol is indicative of the calibre of these services.

Cost of living

The Algarve
Prices of Algarve property, especially right on the coast, are among the highest on the Mediterranean and the area cherishes its upper-end reputation. However, Portugal in general remains one of Western Europe's poorest regions and while the Algarve is pricey compared with the rest of the country it remains affordable relative to the UK; dining out, transport, accommodation, official charges and professional services are all cheaper, sometimes substantially, than back in Blighty. Imported goods, however, tend to be more expensive.

Costa del Sol
As on the Algarve, the Costa del Sol's high property prices have established it as a relatively exclusive destination compared with the rest of Spain and its lifestyle is priced accordingly - but again, most goods and services are cheaper than they would be in the UK. Prices tend to be highest in and around the hotspot of Marbella and in certain upper-end developments such as Sotogrande, but day-to-day living costs along the rest of the coast are probably no more than three-quarters of their UK equivalents.

Legal

Costa del Sol  and The Algarve
Thanks to the established EU status of Spain and Portugal and the sheer number of British citizens buying property in Portugal and buying Costa del Sol property, property purchasing in either location is a relatively simple process and one well supported by legal frameworks that aim to protect both buyer and seller. However, particularly on the Costa del Sol, a number of high-profile planning scandals and various local legal anomalies have created an air of uncertainty in the marketplace and lawyers currently do not enjoy a superlative reputation on the costa. Homes Overseas advises that it is absolutely vital to retain the services of a professionally qualified English-speaking property lawyer before embarking on any purchase.
The costs including taxes and legal fees of buying property in Spain are normally estimated at around ten per cent of the purchase price, but this varies according to the size and type of the property being bought; ensure all fees are specified before signing. In Portugal purchase taxes are paid on a sliding scale up to eight per cent; legal fees normally come to about 1.5 per cent of the purchase price.

Conclusion

These two locations are so similar in many ways that choosing between them may come down to simple personal preferences, or even the choice between a Spanish- or Portuguese-speaking location. It's true that the Costa del Sol is no longer the dynamic market that it was only a couple of years ago and those buying for investment purposes in this location should be extremely sure of their plans and their exit strategies. However, the flipside to this particular coin is that a range of properties are now on the market at much lower prices than would have been the case even a year ago. On the Algarve the market exhibits more genteel behaviour as befits a location with a more laid-back pace of life, but the facilities and properties available are equally world-class. One factor which may prove determining is build-density: while parts of the western Algarve are equally as developed as the Costa del Sol, the east is less developed than anywhere on the Spanish coast and it may be that those looking for a quieter life may opt for that section of the Algarve while those wanting a bit more hustle and bustle could look to the costa and its superb nightlife.

Ladies and gentlemen: the choice between Costa del Sol property and Algarve property is yours.

First published in September 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.

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