Case study – Portugal

Pauline Willis and soon-to-be husband David King from Hertfordshire decided bricks and mortar in the sun are their retirement fund. Fed up with the prospect of a poor pension return and feeling the UK property market has peaked, they invested in a two-bedroom apartment at Praia D’El Ray, on Portugal’s Silver Coast, one hour north of the country’s capital, Lisbon.

“We’ve bought primarily for investment purposes, both for ongoing rental income and for capital growth,” says Pauline. “Over the past five years, property in Portugal has risen by 20 per cent per year, and our reason for buying now is we don’t believe the market has peaked.” The couple, who are marrying in June, plan to keep the apartment, that will be completed in 2006, in the mid- to long-term to maximise the capital potential, let it out to family, friends and colleagues, and use it themselves during the UK winter months - to escape the worst of British weather.

“We don’t envisage retiring there, as we enjoy life in the UK, but we will have the opportunity to go over whenever we wish, for two or three months at a time if we like, to relax and play golf,” says Pauline.

Praia D’El Ray includes a links golf course – with several of the holes playing alongside the two-mile-long beach – bordered by sand dunes on the Atlantic coast, and with green fees from €65 (�45).

“I’ve started playing golf recently, so it’s a great draw to the area for us,” says Pauline. “But we also thoroughly enjoy visiting the miles of unspoilt beaches and the historical towns nearby, including Obidos.”

Obidos, a medieval town, historically was given as a wedding gift to his new queen by the king alongside the pretty coastal town of Peniche within the immediate vicinity. Historic maritime Lisbon, and its international airport, is an hour’s drive away by motorway and a world away too.

“What really sold the area to us was the fact you can walk for miles on the beaches and not come across another soul,” says Pauline, “and if you should stumble across someone they are as likely to be Portuguese as they are British.”

There is a cosmopolitan international ambience here, with 40 per cent of buyers coming from Portugal, 40 per cent from the UK and the remainder from Scandinavia, Germany, Holland and neighbouring Spain.

“One of the main reasons we are buying here is because the apartment blocks are only two storeys high,” says Pauline, “and because there’s only 45 apartments it’s well spaced out, with room to breathe.

“We paid €190,000 (£131,000) for our two-bedroom apartment and, for the size of the rooms and for not being too crowded; it’s good value,” says Pauline. “In total the apartment is 140 square metres, with high ceilings, and, being on the end of a block, we’ve got that little bit of extra space.”

“Having visited the development three times to look over the properties, we put down a five per cent deposit to secure the apartment, then paid a further 25 per cent with the balance due on completion.”

Due for completion in 2006, Pauline and David will be hoping their property is worth the predicted 25 to 30 per cent more than they have paid for it by the time they come to move in, and they equally hope to benefit from a potential 40 per cent saving by buying through a SIPP (Self-Invested Personal Pension).

“We see buying the apartment as a business venture and have taken advice from a financial consultant,” says Pauline. “We established that the property can be transferred into a SIPP we have set up, and that any rental income gained can be paid into the fund, so we don’t have to pay tax on it.”

Pauline and David, having done their homework thoroughly, are now set to reap the rewards of their diligence, providing Portugal’s property market continues to grow – economists predict Portugal will see a ten per cent growth in 2005 – but are in no rush to capitalise on the investment.

“We are in no hurry and will see how things develop, but as matters stand we are thinking we will take the keys, enjoy the apartment and see what happens in three to five years’ time,” says Pauline. “We aim to make a good profit before deciding what to do next.”

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Case study – Portugal

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