The right moves: Portugal primed for investors
Last week was spent on the 'annual holiday' on The Algarve, which is seeing a strong resurgence in tourism and property values.
The first sign of this was the difficulty in finding accommodation and we eventually settled on Quinta do Lago, close to Faro airport. This estate, now owned by Denis O'Brien, totals approximately 1,600 acres of villas, hotels, commercial facilities and apartments, set around a lake, beach and golf courses. It is recognised as a top-quality location in Portugal and at least half a dozen Irish property developers have homes here. Values here are already back to 80pc or 90pc of their 2008 peak and developers can learn from the estate's success.
I chatted with an old contact, Constantino Jordan, a leading Portuguese developer, whose family developed the Quinta do Lago estate and which today is "almost unaltered from my father's masterplan".
The family company, which owned the estate, was nationalised after the "peaceful revolution" in 1974, but was returned to the family in the early 1980s, "although burdened with accumulated debt".
Jordan told me the success of the development is down to the original vision of his father, which was to create a scheme of the highest quality, with a heavy emphasis on "green spaces".
"The master plan reflects a vision of social life and how people interact. After that, it's all about quality of design - right down to lampposts and logos," he said.
While the original master plan envisaged only houses and hotels, the economic circumstances of the 1980s saw the creation of some 'villages' of apartments and townhouses.
Irish developers McInerney built one of the first of these, the 'Fairways' scheme, which is thriving today.
One interesting outcome from the creation of these 'villages', was that many timeshare owners went on to buy houses or build new houses elsewhere on the estate.
Today the development accommodates some 600 detached villas and plots and 900 apartments and townhouses. The Jordan family sold the estate in 1987 to a UK buyer and it was later sold to Denis O'Brien in the late 1990s.
Jordan remarked that "this was beautiful timing by O'Brien as land values doubled in the year after that deal, and doubled again the year after".
According to Jordan, there are now less than 20 undeveloped plots remaining at Quinta do Lago and the trend here, and in other good Algarve locations, is the demolition and replacement of houses of between 15 and 20 years old with higher quality properties.
He attributes this, partly, to a social shift.
"In the 1970s and '80s, it became popular to have a holiday home in southern Europe, and people were often happy to have a basic bungalow. Now, your holiday home is an extension of where you live, and styles and building quality have changed."
Jordan's company, Lusort, went on to develop and manage the 4,000 acre estate of Vilamoura for 10 years, up to 2004, which he describes as the biggest holiday destination in Europe, with five golf courses and a 900-berth marina. Again, he focused on raising standards, as "estate maintenance underpins property values, and a general sense of well-being".
There are limited opportunities to create "another Quinta", with "two or three locations left" near the sea. A Finnish group are developing a new estate and golf course inland at Quinta da Ombria.
Two Irish developers failed with a cluster of developments and acquisitions and Nama inherited five golf courses in the region.
Generally, Jordan commented that "property attracts people who think development looks easy".
"Development has a long life cycle. You need experience and long-term financial capacity. If you're new to the sector, you'll have a painful learning curve."
Commercially, Jordan is looking to replicate the success of Dublin and Lisbon in creating "tech hubs" on the Algarve.
He is also focusing on developing in the "retirement sector", where retirees to Portugal can benefit from "a triple whammy of rewards".
"Residents here for over six months a year pay zero income tax on 'passive income', such as pension and dividend payments, have a lower cost of living and can release equity by selling their existing house," he told me.
As I peer over my PC into the drizzle... it's tempting.