Algarve sees housing costs surpassing the nationwide average

In 2024, the Algarve region witnessed a significant surge in house prices, defying the national trend and outpacing both Lisbon and Porto. According to Confidencial Imobiliário's Residential Price Index, house prices in the Algarve increased by 13.8% last year, with several key factors contributing to this growth.

**Regional Market Dynamics and Demand**

The Algarve has continued to attract high levels of domestic and international demand, driven by its desirability as a holiday and retirement destination, favourable climate, and quality of life. In 2024, Portugal saw a surge in property transactions, with more than 156,000 dwellings sold—a 14.5% year-on-year increase. This national momentum contributed to regional hotspots, even if some areas like Albufeira and Portimão saw slower growth.

**Economic and Regulatory Factors**

Successive reductions in housing loan interest rates stimulated demand, making property purchases more accessible for buyers. The introduction of the IMT Jovem legislation, which exempts buyers under 35 from certain property taxes, further boosted demand, especially among younger domestic buyers. The strong investment potential of Portuguese property has maintained upward pressure on prices, particularly in the Algarve, known for its high rental yields and tourism activity.

**Property Type and Location**

Luxury properties and new developments in prime locations, such as São Brás de Alportel, Silves, and Tavira, saw sharp price increases, boosting the regional average. While the overall Algarve region saw robust price growth, certain municipalities like Albufeira and Portimão may have experienced slower increases due to local market saturation, changing buyer preferences, or specific supply-side constraints.

**Market Composition**

Domestic buyers accounted for nearly 95% of home purchases in early 2025, but international buyers continued to pay significantly higher prices, exerting upward pressure on the market average. The total value of housing transactions surged, with more high-value sales in areas with new or luxury properties, helping to elevate the average price even if some localities decelerated.

Despite the deceleration in Albufeira and Portimão, the Algarve’s house price increase was driven by strong demand, favourable economic conditions, government incentives, and a focus on luxury and new builds in growing municipalities, which collectively lifted the regional average beyond what individual slower-growth areas could offset.

In 2024, 13 of the 16 municipalities in the Algarve region recorded an acceleration in interest. Loulé has consolidated itself as the most expensive market, with sales at €4,138/m2 in 2024. Lagos set prices at €3,460/m2, and Faro recorded an average sale price of €2,685/m2. Vila Real de Santo António recorded the highest price increase in the Algarve in 2024, with a growth of 26.0%.

The behaviour of prices in most markets in the Algarve region reflects the region's overall price growth in 2024. Despite the behaviour of prices, the region maintained sales in line with 2023, with an estimated 11,100 transactions in 2024. This volume reflects an annual variation of -2.5%. Albufeira's average sale price was €2,909/m2 in 2024.

In conclusion, the Algarve's house price growth in 2024 was driven by a combination of factors, including strong demand, favourable economic conditions, government incentives, and a focus on luxury and new builds in growing municipalities. While some areas like Albufeira and Portimão saw slower growth, the overall increase in the Algarve outpaced both the national trend and that of Lisbon and Porto.

**References**

1. Confidencial Imobiliário, "Residential Price Index – 4th Quarter 2024" 2. Diário de Notícias, "Algarve: house prices soar despite deceleration in some markets" 3. Público, " Portugal sees surge in property transactions in 2024"

The rise in house prices in the Algarve region in 2024, defying the national trend, can be attributed to a surge in demand, driven by factors such as its appeal as a holiday and retirement destination, attractive climate, and quality of life.
The strong investment potential of Portuguese property, particularly in the Algarve with its high rental yields and tourism activity, has contributed to the upward pressure on prices, with luxury properties and new developments in prime locations experiencing the most significant increases.
Economic factors, including reductions in housing loan interest rates and the introduction of the IMT Jovem legislation, have also stimulated demand, making property purchases more accessible for buyers and boosting the Algarve's housing market.
Despite slower growth in some areas like Albufeira and Portimão, the overall price increase in the Algarve was driven by a combination of factors, including strong demand, favourable economic conditions, government incentives, and a focus on luxury and new builds in growing municipalities, collectively lifting the regional average.