Portugal prepares for pension property buyers
Portugual is preparing for a predicted influx of property buyers when UK pensioners are allowed to withdraw their pot as a lump sum.
The Financial Conduct Authority (FCA) has said that the UK is entering "frankly unchartered territory', as pensions freedom day draws nearer. Those aged 55 and over will be given the freedom to manage their own financial future on 6th April. A study published by Hargreaves Lansdown has indicated that around 16 per cent of those who plan to withdraw their entire pension intend to put it into property.
While many in the UK have expressed concerns over a rise in "granlords" entering the buy-to-let market, Portuguese agents are bracing themselves for a predicted influx of mature house hunters from across the channel.
"There's a really exciting vibe running through the Portuguese property market right now," says Chris White, founding director of boutique estate agency Ideal Homes Portugal.
"Sellers here definitely feel that prices have bottomed out and are set to rise over the course of 2015. There's a feeling of optimism about the market and we're seeing buyer numbers pick up as both domestic and overseas purchasers look to buy before prices rise too far."
Indeed, as pension freedom day approaches, confidence in the country has reached a record high, according to the latest RICS/Ci market report.
Property prices grew for the second month in a row, albeit modestly, according to the market review. Prices rose in Porto for the first time since the recession, indicating that recovery is spreading across the country.
Growth in new buyer enquiries also accelerated for the second consecutive month, extending an uninterrupted positive run dating back to August 2013. At the same time, agreed sales increased at the fastest pace on record and have now been rising continuously for an entire year.
As a result, the report's confidence measure has reached a new record high for the second month in a row.
For buyers in the UK, there are other reasons to be confident in Portugal, as the weak euro boosts Brits' spending power on the continent.
With the best rate in years making headlines recently, many of those who were considering a property purchase are pushing forward their plans as they realise how much more they can get for their money with a well timed purchase.
"The soon-to-be available pension pots offer the ideal way forward for many buyers," argues White.
He says that Ideal Homes Portugal's villas with pools are particularly popular with British buyers who have had enough of the cold over the winter months. A three bedroom two bathroom traditional villa with pool, mature gardens and paddock, for example, costs just €385,000, the equivalent of just £30,000 above the average UK house price, according to Halifax, and less than half the average price of a London home (£458,293 - Land Registry).
"Portugal is within easy reach of the UK, has a wonderful climate in the Southern Algarve region and offers a low cost of living," he continues. It also benefits from the non-habitual residents taxation scheme, where those who live there for more than six months of every year can enjoy ten years of their income (from employment or a pension) tax free.
"We are definitely seeing a push of British buyers who have been encouraged by the exchange rate to purchase their dream home in the Algarve," he adds.
"Many clients are seeing their purchase as an investment in terms of the potential for capital gains. Some are planning to reside permanently in Portugal and enjoy the taxation benefits of doing so, while others plan to use their property for part of the year and benefit from rental income at other times. It is definitely a buyers' market at the moment."