More Apartments in the Algarve
I've been asked to help sell yet another development in the Algarve.
Some idiot has decided there aren't enough apartments for sale, and is
apparently going to build a whole bunch more. There will be one-bed new
apartments over-looking the river at Alvor, and they will be going on
sale at €130,000 each.
It seems to have escaped the developer's notice that there are already
several hundred thousand apartments for sale in this part of the world,
and none of them appear to selling. They also seem to have missed the
fact that similar apartments, overlooking the estuary of the river
Guadiana, on the Spain/Portugal frontier, are still not selling when
two bed apartments have been available at €85,000 for the past year.
As I have already said on many occasions, Portugal suffers from the
London Underground Problem. That is a gap between the average
Portuguese brain and reality, so when you come here be certain to "Mind
the Gap!"
Dont buy one bed apartments for €130,000. Go over to Spain and buy two
bed apartments for €85,000. Even those prices still need to fall. As
you may recall, a year ago I predicted prices would hit €60,000 before
recovering. I have seen nothing yet to make me change my mind.
I suspect that those properties in Spain would sell for €70,000 at the
moment if you pushed the vendor, so there isn't much further for them
to drop to prove me right.
The view from the site in Alvor is pretty good, but not better than the
view of the Guadiana in Esuri in Spain, so the prices are still way up
where there are no sensible buyers. And there are more facilities in
Spain than here in Portugal, and you are closer to real towns.
Not a week after I was approached on the first deal another came along.
This time for the usual apartments, and for two hotels, and the
essential golf course.
The Algarve is a one-trick pony. Fifty years ago Sir Henry Cotton came
down from the UK and thought it would be a great idea to build a golf
course here. Since then, every tourist idea has copied that original
aim. The trouble is there are now about thirty courses scattered
around, almost every one totally empty. Three quarters of them are in
administration, yet some twerp wants to build another. I dont get it.
Not only that, but building more hotels is not a terribly bright idea
either. Three new ones were built in Lagos a couple of years ago. They
open for four months of the year, and remain shut for the rest of the
year. During the high season they are 80% full, that means their
year-round occupancy is about 27%, which is appalling. At that rate
they are already running at a loss, so why build more?
What is happening is that by building more of these empty beasts the
property market is being hammered even further into the ground. It will
takes decades to fill all these buildings. I see no hope of a property
recovery in Portugal before 2020, and probably even further down the
road than that.
Needless to say I have passed on both projects. They will run into
bankruptcy, and those who buy (if anyone does) into the projects will
lose money. I guarantee it.
john