Algarve Property Value Explained

(Coast vs Countryside vs Long-Term Gains)

The Algarve property market has remained one of Portugal’s strongest over the last decade, but rising prices and shifting buyer habits have made one question more relevant than ever: Where is the real value now?

According to Confidencial Imobiliário’s Q1 2025 report, property prices in the Algarve have continued to climb, with average prices increasing 6.3% year-on-year, but that growth hasn't been evenly spread across the region. Some areas are seeing double-digit increases, while others are offering better space and future returns for less money.

So, if you're buying property in the Algarve now, it’s worth asking: Is the coast still worth the premium? Is the countryside underrated? And where do long-term gains really lie?

Let’s break it down.

Coastal Algarve

Coastal areas like Tavira, Lagos and Vilamoura remain hotspots for international buyers, particularly those seeking lifestyle properties and rental income. However, the premium for coastal proximity is significant.

• Average Prices: Loulé (€5,258/m²), Lagos (€6,303/m²), and Tavira (€3,947/m²) are among the most popular municipalities across the Algarve.

• Rental Yields: While short-term rental income remains strong, yields are tightening due to higher entry costs and regulatory changes.

What’s changing? Recent restrictions around local lodging licences (AL licences) in coastal hotspots have added new challenges for investors relying solely on holiday lets. Municipalities like Faro and Lagos are already tightening rules to limit short-term rentals in certain urban zones.

Where the value still exists:

Smaller coastal towns like Cabanas de Tavira, Fuseta, and Burgau offer lower prices and good rental potential, especially for buyers looking at mid- to long-term lets rather than purely seasonal income.

Inland Algarve

Inland towns offer more space and lower prices, attracting buyers seeking peace without sacrificing accessibility.

• Affordability: Municipalities such as São Brás de Alportel (€3,614/m²), Monchique (€2,066/m²), and Portimão (€3,943/m²) offer more affordable options compared to coastal areas. 

• Growth Trends: São Brás de Alportel experienced a 17.7% annual price increase, indicating growing interest in inland properties.

• Buyer Profile: Remote workers, early retirees and families are increasingly considering inland areas for their lifestyle benefits and investment potential.

Why now?

• Hybrid working means more buyers can live inland full-time.
  
  
• Less regulation for short-term rentals in rural areas.
  
  
• Infrastructure improvements, especially road upgrades and the removal of A22 tolls,  have improved access across the region.

Long-Term Investment Zones

Investors are identifying areas with strong fundamentals for long-term growth.

Long-term investors aren’t just chasing beach views anymore. They’re looking at areas with strong fundamentals: stable communities, improving transport, international schools, and year-round demand.

Three areas consistently come up in property trend reports and forecasts:

1. Tavira & Eastern Algarve
   While prices are rising, they’re still behind the western and central Algarve. Tavira offers charm, demand, and room for growth - especially in its suburbs like Luz de Tavira or Conceição.
   
   
2. Loulé (Inland)
   A short drive from Faro Airport, Loulé combines proximity with a growing full-time population. The local council is also actively investing in schools, healthcare, and town infrastructure.
   
   
3. Western Algarve & Eco Zones
   Municipalities like Aljezur and Bensafrim are attracting eco-conscious buyers and digital nomads. The Alentejo-Litoral corridor, which borders the Algarve's western edge, was even featured in a 2024 study by Público as a rising zone for sustainable living and low-density housing demand.
   
   

Quick Comparison

Source: Investropa

This information is based on current market trends and public data as of 2025. Figures are estimates and may vary. It does not constitute financial or investment advice.

Final Thoughts

The Algarve is still a strong market, but the definition of "value" is changing. While the coast remains desirable, it’s no longer the only place worth watching. Inland towns and up-and-coming municipalities, those offering strong yields without intense AL scrutiny, are offering better space, less competition and more sustainable growth potential.