The luxury real estate market in the Algarve: developments and trends

Consequently, the region is now positioned among the top three to four fastest growing luxury real estate markets in the world. In the first half of 2025, the Algarve recorded the highest increase in property prices in the European Union, with a year on year rise of 13.8%, nearly double that of Lisbon. Since 2020, the market’s cumulative growth has ranged between 33% and 38%, confirming its strength and global appeal.

A mature international market

The sector has consolidated its place as one of the most dynamic and high performing in the European real estate market. As such, it continues to attract international buyers thanks to its unique combination of quality of life, exceptional climate, safety, competitive pricing compared to other luxury destinations, and geographical diversity.

Beyond the traditional “Golden Triangle” (Quinta do Lago, Vale do Lobo and Vilamoura), new areas are emerging on the radar of investors. Silves, Ferragudo, Lagos and Tavira, for instance, are attracting growing interest due to their authenticity, tranquillity and excellent balance of quality and price.

Current and future trends

The future of the luxury real estate market in the Algarve looks bright, with strong growth potential beyond the classic hotspots.

Ultra prime properties (valued above 5 million euros) remain especially resilient, acting as prestige assets for international investors. Similarly, branded residences are on the rise, often priced 20% to 25% higher than conventional properties, setting new standards for exclusivity.

There is also a clear shift in architectural preferences. While traditional Algarve villas with Moorish influences remain desirable, demand is growing for contemporary, sustainable homes that blend into the landscape, featuring large windows, open spaces and direct connections to the outdoors.

At the same time, sustainability is becoming increasingly important, with developers incorporating solar energy, smart systems and efficient landscaping solutions in response to an environmentally conscious clientele.

Value and pricing by region

According to the Engel & Völkers Portugal Market Report 2024–2025, the median price per square metre in the Algarve reached 2,321 euros in 2024, representing a 10.1% increase compared to the previous year. However, prices in prime areas far exceed this average:

• Lagos: 4,200 €/m²

• Portimão and surroundings: 3,045 €/m²

• Albufeira / Carvoeiro: 4,642 €/m²

• Vilamoura: 3,814 €/m²

• Vale do Lobo: 9,171 €/m²

• Quinta do Lago: 12,793 €/m²

• Faro: 4,069 €/m²

• Tavira: 2,641 €/m²

Nonetheless, price increases are expected to moderate to single digits, with average annual growth around 5% over the next 12 months. This steady appreciation is driven by limited supply, strong international demand and a robust local economy.

Additional confidence factors include improved infrastructure such as transport, hospitals and international schools, which reinforce the region’s positioning as an ideal destination for living and real estate investment in the Algarve.

What buyers are looking for

The profile of buyers is becoming increasingly diverse. In prime locations, buyers seek prestigious properties, golf resorts, private security, panoramic sea views and direct beach access.

Meanwhile, the concept of luxury is being redefined. The pandemic accelerated the value placed on space and privacy: large gardens, swimming pools, home offices and quieter settings have become decisive factors. As a result, many buyers now view the Algarve as a primary residence rather than a holiday destination.

Monchique, Aljezur and the Costa Vicentina, for instance, have gained popularity among those seeking nature, wellbeing and tranquillity. At the same time, coastal lifestyle, golf, marinas, gastronomy and wellness experiences remain major attractions.

That said, American buyers tend to prefer new builds or turnkey homes with advanced technology, while Europeans alternate between modern architecture and charming restored properties.

The most sought after areas

The Golden Triangle remains the epicentre of luxury in the Algarve, offering exclusivity, golf and beach resorts, marinas and high end dining.

In the western Algarve, Lagos is establishing itself as an authentic luxury destination, with golden beaches and a vibrant historic centre. Sagres attracts nature lovers and those seeking eco luxury, while Alvor, Ferragudo and Carvoeiro appeal to those who value elegance without the crowds.

The eastern Algarve stands out for its serenity and authenticity, with Tavira and Olhão offering historical architecture, proximity to the Ria Formosa and preserved nature. The Algarve’s inland areas (Silves, Monchique, São Brás de Alportel and rural parts of Portimão and Loulé) are popular among those seeking privacy, sustainability and countryside landscapes with easy access to the sea.

Purpose of purchase

Before 2020, the luxury real estate market was largely dominated by second homes, often used seasonally and rented out when vacant to offset maintenance costs. This segment still represents the majority of the market, accounting for around 50% to 60% of buyers.

Next come investors, who represent around 25% to 30% of acquisitions. This group mainly targets short term rentals and branded residences, which offer yields of between 4% and 6% per year, in addition to strong capital appreciation potential.

On the other hand, the main residence segment, historically less prominent (between 10% and 20%), has seen the most significant growth since the pandemic. This shift is largely due to the rise of remote work, the relocation of retirees and the increase in Portuguese high net worth individuals who now see the Algarve not only as a holiday destination, but as an ideal place to live year round.

Most active nationalities in the market

Currently, around 80% of property buyers in the Algarve are foreign nationals. Among these, British and Irish buyers remain dominant, accounting for between 45% and 50% of transactions in the luxury segment. They are followed by German (10–12%), French (8–10%), Dutch (6–8%) and North American (6–8%) buyers, the latter showing particularly fast growth in recent years.

Other European buyers, such as Swiss, Belgian, Scandinavian and Spanish nationals, make up about 10% of the total, while Brazilian and other nationalities account for approximately 5%.

In terms of market interest, there has been a marked rise in enquiries from the United States, making this group the fastest growing, especially in luxury resort areas. This dynamism is largely fuelled by geopolitical tensions, political instability and a shift in lifestyle priorities, with a growing demand for improved quality of life.

At the same time, a significant increase in Portuguese buyers entering the luxury segment reflects a clear sign of confidence in the market and points to rising domestic wealth, reinforcing the strength and attractiveness of the sector in Portugal.

The impact of the end of the Golden Visa and NHR scheme

The end of the Golden Visa and Non Habitual Resident (NHR) programmes has had a visible impact on international interest in luxury property. In early 2024, demand for properties valued above one million euros fell to 22.8%, the lowest level since 2021. This decline represents a drop of 6.3 percentage points compared to the end of 2023, largely due to a 4 point fall in interest from the United States, one of the markets that benefited most from the Golden Visa scheme.

Despite these changes, the luxury property market in the Algarve has shown remarkable resilience. Local demand remains strong, and the region continues to attract wealthy buyers from the United Kingdom and the United States, although the investor profile is shifting away from residency based programmes.

In addition, alternatives such as the D7 visa (aimed at retirees and passive income holders) continue to boost the Algarve’s appeal to international buyers seeking stability and quality of life.

A promising future for luxury in the Algarve

With solid international demand, sustainable appreciation and an increasingly diverse offering, the luxury real estate market in the Algarve continues to strengthen its position as a premier destination for living, investing and enjoying life.

Ultimately, the combination of authenticity, Mediterranean climate, safety and elegance makes the Algarve an exceptional choice for those in search of a sophisticated and balanced lifestyle.

To discover exclusive opportunities and luxury properties currently available in the region, visit us and explore our selection of homes for sale in Portimão.