Algarve Scarcity, Lagos Momentum, and What Comes Next

Episode Summary

In this episode of Notes From the Field, Ronan McMahon checks in from Portugal’s Silver Coast before heading to Lisbon, sharing fresh observations on both his own property and the accelerating opportunity in the Algarve.

From stronger-than-expected rental demand on the Silver Coast to rising scarcity, soaring values, and tightening inventory in Lagos and the wider Algarve, Ronan explains why this market feels increasingly urgent—and why access to the right deals matters more than ever.

Episode Description

Broadcasting from his condo on Portugal’s Silver Coast after five weeks on the ground, Ronan opens this dispatch with a personal update on the property he bought there as a lifestyle investment. While he did not purchase it primarily for income, he shares early signs that the rental market may be much stronger than he first expected—particularly for premium inventory that appeals to northern European buyers seeking sunshine, terrace space, and a higher-end coastal experience.

But the heart of this episode is the Algarve.

After spending eight full days on the ground in the region, Ronan comes away even more energized about the strength of the opportunity there—especially in Lagos. He lays out the powerful forces now converging in the Algarve: demographic tailwinds from northern Europe, the rise of remote work, lifestyle migration, tight development constraints, ultra-cheap borrowing, and a market structure increasingly tilted in favor of sellers.

That creates a powerful long-term story—but also a challenge. In a market where available inventory keeps shrinking and owners have little reason to sell, finding the right opportunities requires a different approach. Ronan walks through the three main ways he sees value being created in today’s Algarve: bank repossessions, member-only access to high-quality new developments, and overlooked abandoned or unfinished properties that can be repositioned.

He also reflects on what he’s seeing in Lagos specifically, where earlier deals are already pointing to the kind of future he believes is coming for more recent opportunities. For Ronan, the message is clear: this is one of those moments when the broader thesis is playing out exactly as expected—but accessing it profitably depends on being connected, moving early, and staying selective.

In This Episode

Ronan covers:

• Why the Silver Coast rental market may be stronger than he originally expected
• How premium product can outperform even in less obvious rental markets
• Why Lisbon still looks fragile despite broader real estate strength
• The demographic and lifestyle trends powering Algarve demand
• Why low rates and limited development are creating a seller’s market
• How bank repossessions can still create standout opportunities
• Why Lagos remains one of the strongest stories in the region
• How member-only launches created access to better pricing during lockdown
• Why abandoned or incomplete villas may be the next overlooked angle
• Why urgency is rising as values continue to move higher

Key Takeaway

The Algarve story is no longer theoretical. Demand is rising, supply is tightening, and the right inventory is becoming harder to access. In this kind of market, the edge comes not from following the crowd—but from finding the overlooked, getting in early, and buying selectively.

Transcript

SPEAKER_00 0:14

Welcome to your notes from the field. This is where I bring you my latest boots on the ground, research, observations, basically all the stuff that we can profit from. So I'm talking to you from my condo on the Silver Coast. I'm looking out across my terrace, seeing the wild Atlantic waves roar and crash. It's a stunning spectacle. I've been here in Portugal for the past five weeks. I'm getting ready to leave. This afternoon I leave for Lisbon and from there on to Ireland. So I'm leaving Portugal energized. I'm leaving Portugal energized about our Algarve opportunity. Just last week I spent a full eight days with boots on the ground in the Algarve. And I'm also leaving energized and excited about this condo that I've bought here on the Silver Coast. So before I dive into the Algarve, before I dive into our opportunity for profit, just a couple of observations. Firstly, about the Silver Coast and then about Lisbon. I have, as of this afternoon, I'm handing my condo over to a rental manager. I'm going to make it available for rent through the first week in September, through the 1st of September. I didn't buy this property as a financial investment, but it will be interesting to see what happens in terms of income over that period. The condo right next door to me has been a rental. It has been booked out solid in the five weeks since I've been here. So pretty much, with the exception of maybe three nights, it has been occupied every single night. And I bumped into the rental manager the other day. So this is this indicates that there's potential for a much stronger rental market here than I anticipated. My neighbor rents primarily to Germans and Scandinavians. They're looking for something very particular, they're looking for something that's higher end, they're looking for terrace space with lots of bright, warm, sheltered sunshine. So, you know, it seems that my first impressions of the rental market here being being weak, you know, don't necessarily hold true across all niches that for premium product, for premium inventory, there's a much stronger rental market. And you know, watch the space, I'll fill you in on how I do. Again, with this, you know, even though I bought this condo as a as a lifestyle second home, I did still look for value. And one of the big reasons I was able to make a good deal on this condo is that the owner had bought it as a bank repossession when the developer failed. So the the backstory to my building here is the developer failed, a bank took it over, then the bank failed in the kind of the Portugal banking crisis of 2015, and then after that bank failed, inventory was released and sold as bank repossession. So it's much easier to snag a deal from an investor who came in just looking for a quick flip than some of the other condos in the building I've looked at were bought by the original owners back around the time of the 2008 and 2009 crisis and real estate bubble, and they paid much, much more. Watch this space. I mean, I think I could be scratching at a niche that could be a very, very profitable rental niche, but but still make no bones about it. The rental story here is nothing like what we see in the Algarve and nothing like what we see in Lagosh in particular. Um, secondly, I'm leaving for Lisbon in a matter of hours. I've got two or three days there. I'll be pounding the pavements, meeting with banks, checking in with contacts. Um word is that things are very shaky in Lisbon. So to remind you, the last time I was here in Portugal, back tail end of last year, um, I put up my crash alert flag on Lisbon. Basically, speculation and this kind of golden visa, quasi-fake demand from China and South America and other parts of Asia had just driven prices silly high. You know, I mean, I'm talking about $700,000 for a 50-meter or 600 square foot studio. So it was just silly cheap. It just didn't make any sense at the at the top end of the Lisbon market, and there was just more and more of this inventory. So just this kind of speculative machine was created whereby a developer would buy a dilapidated building, turn it into these small, high, you know, very nicely finished units and resell them to speculators. And now we've got just the the pricing made no sense, then COVID hit tourism. Um so it's it's a very, very shaky picture. And what's happening in practice now is that as these units are coming to completion, banks who are asked to write mortgages on these inventory say, hey, you know, I know you paid 700,000 euro for that little apartment. We don't think it's worth that much, so we're only going to give you a mortgage based on a value of 600,000 or 550. So this is the first indication of fragility in in Lisbon. So we'll we we'll we'll watch how it how it plays out. If and when opportunity arises, we'll be there. That could come relatively quickly with some random fire sales, particularly given the kind of the impact COVID has had on the domestic economy. But in practice, these things move super slowly. So we'll be positioning ourselves to watch how this shakes out and you know be there when, if and when the banks do start kind of spitting out repossessions. But it's an interesting example because in Rita, our opportunities are we position our ourselves ahead of what I consider to be unstoppable trends. So even if things go go sideways, we can still do well. Lisbon, you know, even though we're in the mix, the midst of this like global real estate resurgence and global real estate, hesitant to use bubble, even though it is becoming very bubbly-ish in certain markets, particularly in parts of the US. But even though real estate is so much in favor, or Lisbon was coming from such a base of it being silly expensive, it can barely, barely stagger along. So this is why you always want to position yourself ahead of unstoppable trends when things go in our favor. Rocking, brilliant. If things don't quite go in our favor, we'll still do, we'll we'll we'll still do pretty well. So the Algarve. Um I again just spent a fabulous um trip and time in the Algarve. The weather was just absolutely perfect, mid-70s, warm sunshine, um, just beautiful coastline of those coves and beaches, just the great variety between kind of traditional historic Portuguese towns and fishing villages, and then also the resorts of the central Algarve and the Golden Triangle. So it's it reminded me what a truly special place it is to visit. It reminded me of the appeal, and it also again just flagged how how well positioned the Algarve, and in particular, I would say Lagos is to profit from everything that's happening in the world. Basically, we've got these powerful drivers like the work from home trend, like the internationalizing, living the international lifestyle trend. All of this is coming on top of very powerful northern European demographic trends where basically there's just more and more snowbirds, more and more people are retiring. Um there we've got the kind of the convergence of the work from home set plus the retirement set. These retirees are asset rich, they're cash rich, they're coming from affluent parts of northern Europe, Scandinavia, Germany, the UK. The surge in global real estate values and stock market values is making them richer, and they were always comfortable. So there's just this powerful demographic convergence that's coming to this really, really narrow strip, and it's a narrow strip of land with incredibly restrictive permitting and and and development potential. So yeah, when you get that surge in demand, limited supply, and then you put the kind of the fuel of the fire of like sub-1% interest rates on top of things, you've got a very, very powerful explosive formula. So but we need to tread super carefully here because this is a market that is primarily a seller's market. This is a market where you know where basically supply available inventory has been just cut, cut, cut, cut to the bone. So, you know, there's no prizes for for identifying the Algarve or pockets of the Algarve as places on on the up because you know you throw a dart at um at Algarve listings, and the likelihood is that nine out of ten times you're going to hit something that's that's overvalued because this is a seller's market, and what happens in a market where the psychology is so positive is that sellers start increasing their expectations. Other sellers increase their expectations and their medium-term expectations to the point where they say, Hey, I don't want to sell at all, I'm going to take that inventory off the market. And then you also have this added feature to the market in the Algarve, is that owners, let's say you're you're you're an owner and you need cash. Okay, instead of selling your property and triggering a capital gain, you can just go to your bank and say, I want to remortgage that, I want to take out 100,000 euro, 300,000 euro, and um take out cash tax-free because you're remortgaging, you're not triggering a capital gain, and I'll pay it back at basically a negative real rate, a rate that's under 1%, which is significantly less than inflation. So the trick for us and for us to profitably invest here is we need to get access to inventory, we need to get access to the deals. And this comes back to our kind of our three big ideas for the Algarve, our three big plays. And you know, one is this this idea of bank repossessions. And when I was there, I was very excited to visit the the Val de Lobo condo, the the condo that um that that I bought tail end of last year. This is a bank repossession. How I found it was I was in the right place at the right time with the right people, touring around the Algarve. I bumped into some bank contacts randomly in a conversation. It came up that they had they got some bank foreclosures in Val de Lobo. Um they asked me and my contact down there, Chris, if we want to go take a look. We grabbed the keys from them and we went opening the doors and we looked at about nine of these apartments. One was a standout deal. We looked at each other, we both wanted it, so we went 50-50 on it. And this condo today, we paid 410,000 euros. We had to buy it, we were able to buy it with um 100% bank finance because it was a bank repossession, so it was a no-money-down deal, but we had to buy it without even being able to fully see it because the elect the power had been been shut off, so we couldn't open the shutters, so we couldn't. But the thing is that I was able to factor in that so much could be wrong with it, and we were still ahead. So, for example, at the time one of the neighboring apartments was listed for 650,000 euros. Subsequent to this, I've seen a condo, an identical condo, in just the next building over listing for 830,000 euros. So basically, we got this opportunity because the banking, the banks just had got their pricing just way off and no one cared. So, you know, a lot of the the banks' pricing for the this kind of foreclosure inventory stems from what they owe. Frequently they just have a mandate that we need to recoup the outstanding balance plus or minus something. And then banks don't pay commissions to brokers on their repossession inventory. So the whole thing is you know no one no one is incentivized to match buyers and sellers. And then so much of their pricing is wrong on the upside, too. I mean, 98% of these bank repossessions are are a bad deal. So you you also need to put a lot of work into into into finding one. So I mean it's it's kind of it's a classic case of just information asymmetry. You know, brokers sell real estate, but brokers aren't going to sell a real estate they don't they don't make commission on, so they don't match buyers and sellers. You know, the banks could could could find buyers directly with the with making it easy and clear for people, but it's neither easy nor clear. You have to you have to be connected, you have to sift through, sift through reams of other listings to find the the good stuff. But um, but this is this is the world that we in kind of in in inventory scarce world we live in, this is what you need to do to find the deals. Because in hot markets like this, you don't want to be buying with the sheep because you know things are getting hot. And you know, in hot markets, we need to be a lot more careful than in in downbeat markets, because in hot markets we can get swept up with the euphoria and and and overpay. But I'm extremely excited with how how Val de Lobo is shaping out. I'm looking for other similar investments. As I said, we paid €410,000 um euro. I figure it will gross in the region of you know 40 to mid-50,000 um mid-1000 euros per year in rental income, and as I say, a neighbouring condo list for 830,000 euros. Now that 830,000 euros feels on the steep side to me. I think if if I were to sell this condo today, I'd probably list it more in the region of 730 to 750,000 euros. But the thing is, with the rental market, as strong as it is, this is a market where you can just buy and sit back and wait for that person who really wants that condo to arrive. So, you know, in most of my exits, I'm very comfortable to take a bit low, a bit below market, and um take a bit more, bit below market for a quick, clean, neat sale. In the case of the Algarve, I'm very happy to sit back indefinitely because the the rental income is is is so strong. Um another thing that I guess has been pretty welcome too in terms of this process is that rental income is is taxed relatively at a at a relatively low rate here. The calculation is is a bit complicated. There's different rates apply, but they only apply to a portion of the rental income. So the the tax authorities here in Portugal figure that 65% of your income is going to be costs, and they only tax you on the 35%. So on average you can expect to pay in the region of 8 to 9% of your rental income in tax. All the usual caveats, I'm not a tax advisor, go talk to your tax advisor before you make any decisions based on a based on a tax assessment. So then in terms of the other inventory or the next inventory bucket, and this is the one that's most accessible to us, and that's our our Rita member only deals. Um I based myself in Lagos for the duration of this trip. I based Myself in a condo in Puerto Damas, which is just outside Lagos. I I think of it as Lagos, it's technically another town, but basically it's a it's a nice walk down to the historic district of Lagos and it's a very quick Uber ride back up. And the condo I stayed in, these condos sold in 2011 for €280 to 300,000 euros. Today, if you could find a seller, they'd sell for close to 800,000, and in that period they have been generating 40 to 50 grand a year. It's just an incredible situation, again, because you know I loved the the the condo. I wanted to explore if there were if there were any any available. None were available, contacts were calling owners. The one owner who engaged most in the possibility of listing her property, she called back two days later and said, actually, I don't want to list my property, and if you find another listing, let me know I would like to buy another one. So again, there's no sellers, there's only buyers, and even the owners are buyers. Because again, what's the incentive to sell? Because, you know, I mean, this this is the the expectation is the prices are going to continue to rise. These are income-generating machines, so why would you sell? Why would you sell and trigger a capital gain? You can you can remortgage. It's only the only type of selling scenario, you know, or almost the only is you know, death, divorce, and delinquency. So, you know, it's and the the people who've bought here again are typically very comfortable people from affluent parts of Europe where where things are where things are going honky-dory. So these condos and this kind of Porta Damas area, this was the area that was on the up a decade ago. And this is the area that's largely built out now where there's pretty much no prospects for more inventory. And you know, it gave me a glimpse into how the future looks for our various other Rita member only deals in Lagos. So, you know, we've been able to get in in Edega, Santa Maria's, um and Donna Maria, and each one of these is, you know, these are landmark projects in never-to-be repeated locations because in Lagos you just have this scarcity of developable land, and some of these communities come with views and they command the the extra premium. So in Lagos, again, we just see this big convergence. We see everything converging, we see the path of progress of the improved accessibility of Lagosh. And this is something that's that's come over the past decade or so, but you know, Lagos historically was at the end of the line, you know, historically where when people came from you know places like Ireland or the UK to Portugal, they thought about the central Algarve, Lagos was not in the picture. So we've we've the path of progress, we've the unique attributes of all that beach, the rocky cliffs, shoreline, marina, plus the plus the historic town, we've got the low interest rates, and we've got those demographic factors that that that I was that I was calling for. And it's absolutely gorgeous, and it's pristine, and it's just a lovely place to spend time, to again just to have that mix of historic cobblestone streets, and then you've got beach, and then you've got marina and all that modern glitz and that. So I came back feeling even more bullish about our opportunities there. And again, we've been able to get access to this inventory because these bigger launches of bigger projects, they have they historically require footfall and traffic of tourists and visitors to sell them. So in lockdown, that's been absent. So we were able to take that lockdown moment where the developers were looking for an injection of sales, an injection of activity to get those discounts to lock in our pricing, and you know, and now things are back. You know, I won't say travel is is back in full swing, it's it's nowhere near that. We still have the kind of the whack-a-mole situation um like we saw last week with you know the status of British tourists in Portugal um changed overnight. The the conditions of what happens when they return changed. So they went from a situation where they didn't have to isolate when they came back from Portugal to um on Tuesday, I believe it it changed to anyone coming back after that has to isolate. So travel is still really, really difficult. But but the but it's coming back and things things are very much steaming forward, and we we were able to capture that moment of that moment of of no travel, that moment of anxiety around when people would return to get those bulk discounts. And then the final way to get access to inventory in the seller's market is to look for the overlooked and unloved, and this is something I keep coming back to in the Algarve and saw again on this trip that you can buy, you can find shelves of properties. These are villas that were construction started before the last crisis, the 2008 and 9 and on crisis, and remember the kind of the duration of that crisis in Portugal, you know, it ebbed and flowed from 2008-2009 right up to 2015. So villas construction started before 2008-2009, owner gets into difficulty, it's abandoned, and it's almost like the keys just get thrown into this abyss of banking and bureaucracy. And sniffing around, you can see these properties, they're they're they're overgrown, they're they're they they look abandoned. Um this is a way to find inventory, to create your your own inventory, because most of the market coming to the Algarve, they're they're affluent, they're cash-rich, time poor, they are looking for someone to do the heavy lifting for them. So if we do the heavy lifting of finding those deals, making a deal with a bank on them, and renovating them, we can unlock huge, very, very significant potential. You know, I looked at some shells that could be could be bought for, you know, just to use kind of round numbers. I mean, maybe you buy the shell for for a hundred and you put another hundred into it, and you're left with something that's worth 350 to 400. So those those are big jumps, and they get even bigger when you do it with the the the bank's money. So um, so very exciting times. Um I'm leaving for Lisbon shortly. You'll hear more about that in in coming dispatches, and I'll be keeping you posted on how these rental checks play out. But this is a this is a very, very exciting moment, and this is, I would say, a very urgent moment for for the Algarve because you know the the pressures are getting, you know, the the pressures and the challenges to find the right deals are getting getting more and more difficult as this becomes more and more of a seller's market and as values continue to soar. And just to leave you on one anecdote, I was quite taken aback by the amount of real estate professionals I heard of in the Algarve who are now homeless because when things got difficult with COVID, they sold their properties and now they can't get back in the game as either a buyer or a renter. So it's a good time, good time. Congratulations if you've got in there.