Everyone knows Madeira, but many have a vague idea where this island is and why it may be attractive for an ordinary tourist. Madeira is a resort area in Portugal, where the whole economy is based on tourism and entertainment industry. Iana Loskutova, Director of IMadeira Home Consult, tells what property may be bought in Madeira, how to earn on renting out and why it’s better to own a three-star hotel in this island than to produce a madeira.
Madeira is spoilt by tourists
- How opened is real estate market of Madeira to foreigners? How do the locals feel about newcomers?
- The Portuguese are very friendly people and they do not share newcomers by nationality. They are very spoilt by tourists (usually British and Germans), but always eager to help and make your stay in a country pleasant. Many even know a few phrases in other languages: as it is useful and may bring a decent tip, or just help to people. I suppose that many people, visiting Portugal, discover their interesting mentality: a non-Spanish serenity, slowness and kindness. For example, I lived in Madeira for seven years and I had never felt myself as an outlaw, on the contrary, the Portuguese want to now everything, they ask questions about Russia, ask whether there is cold and how life is there.
Buying property in Madeira is a good solution for those, looking for peace and happiness in retirement. As for young people, we also have something to offer to them, although we can’t compete with Ibiza beach parties.
View to Funchal - the capital of Madeira
- What do the overseas buyers think about buying apartments in Madeira – is it an investment or just a momentary whim?
- We have faced with a wave of wealthy and smart foreigners: in the last two years houses in Madeira have been bought not only for holidays, but also as an investment. Previously it used to be an emotional purchase: it’s a wonderful island where a summer is all year-round and flowers are beautiful. Here is +16 degrees in winter and +25 in summer. One had come here on tour - liked - bought and only then wondered what to do with his purchase. Now people are sober and they think about return in advance.
Major players in the real estate market of Madeira are neither the English, nor the Chinese or even not the Russians but these are the local residents and immigrants from Africa and South America. It happens that complexes remain half-empty - not because of unsold apartments but because one of the Venezuelan had come and made a call to his friends, who remotely bought all the apartments. This is a withdrawal of money and good investment in an interesting object in a stable country. Usually they come once a year or less just to have a look on their property.
Approaching to Funchal
Holiday Rental in Madeira is almost a general business
- What yield can be get from property renting out in Madeira?
- We have no such periods when the influx of tourists decreases. Season lasts all year round, although the high season is from late April to mid-October. Then come the Christmas celebrations, carnival, April Flower Festival ... The absence of this failure helps a lot, in terms of the lease. There are different types of markets: summer renting out period is often for the Russians, British and German tourists, winter period is for tourists from Northern Europe. Having chosen the right strategy, the apartment rent in Madeira may generate a year-round income. And this revenue is at the average European level - 5-8% per annum.
For example, a studio in the complex, located near the sea in Madeira costs €75,000-85,000 and it may be rented out for €250-350 per week with an average capacity about 80%. But don’t forget about utility costs: €35-50 per month for condominium services and another €50 - for electricity and gas.
Câmara Lobos
- How common is renting out and for how long are houses usually rented?
- Holiday rental in Madeira is almost a universal business and a kind of tradition. The locals have own housing but in addition they also buy apartments or build houses for rent. Usually holiday houses and apartments are rented for a week or two, although it happens that they may be asked for a months or the whole summer period. The price is lower in this case.
- In which cities of Madeira is the property rent more profitable? Where to invest?
- Many regions have their own attractive places. They all differ: there are beaches, mountains, forests, and the height difference allows coming from the summer directly to the offseason. The British are fond of refreshing places like the eucalyptus forests and others prefer to live near the sea. But there are regions that are a priori popular. Among them is the capital of Funchal, or rather the new part of town near the waterfront and beaches, where a half of the island population lives. There are more modern complexes, high-rise buildings and hotels. The private sector and villas are in small villages near Funchal.
Old Town of Funchal
Still more there is the Old Town of Funchal that has been abandoned for a long time. The interest to this area has increased because of annual art festival: contemporary paintings are created on the old walls and doors and that make an open-air exhibition. When I got there seven years ago, it was a depressed area but the situation has dramatically changed today and when one thinks where to open a shop or a restaurant, he always starts its research from the Old Town. And I recommend this area also for those who are focused on winter rental - when the beach is not important (as not many dare to swim when it’s just +18), people pay more attention to the color of streets and local architecture.
Funchal grew quickly and mainly high-rise buildings were developed. If there are houses and villas they're already on the hillsides and are not intended for rent. Speaking about renting out should be mentioned two other cities: this are Calheta on the south coast to the west from Funchal and elite Garajau village located closer to the capital. The Russian and the English are buying their Madeira homes there. Probably a half of Garajau are the British and the Germans, 30% are the wealthy Portuguese and 20% are the Russians. Prices for a small house under renovation start from €300,000, the average price for a proper house with an ocean view, a pool and a garden is from €500,000 up to 700,000.
The central part of Funchal
- What are the prices for real estate in the Funchal?
- It is clear that prices for apartments in capital are higher than for the similar in neighboring towns. Prices start already from €50,000, but you need to know the places and agents. It may be, for example, a debt real estate. Apartments that may be interesting for the Russians are located closer to the sea and cost from €60,000-70,000. A 3-bedroom apartment costs €120,000-250,000. A square meters will cost approx. €1,200 - but it is a finished apartment with equipped kitchen. While on the apartments in Madeira - the island area is only 50 km by 30 km. It should be noted that the decent offers, including a lease, are not a lot, just a hundred or two.
- And how much are the expenses for such property?
- The monthly charges for the one-bedroom apartment may vary from €30 to €100. Depending on the state and surrounding area - whether there is a garden or a pool.
Santa Cruz
Banks sell real estate, but do not give mortgages for the non EU residents
- Is the bank property in Madeira in demand?
- Such offers exist, but foreigners are simply "not in time" for them. The locals wait for profitable real estate objects and reacting quickly just buy such housing up. Realtors earn on such transactions less than on the secondary market as bank commission is small. But still we are happy and we actively sell banking real estate. But debt real estate market gradually begins to decline and compared with the three years ago situation, the release bank offers is not so big, so those who wish to acquire commercial properties in Madeira have to hurry up.
We face with unusual sales cases, related with popular real estate. Man comes, leaves a deposit and asks us to contact him, if there are offers in a particular house. When we catch one, we send photos of apartments and the client quickly returns to Madeira or send a power of attorney and makes a deal.
Luxury villa on Madeira
- Is it difficult to make a transaction involving the credit?
- The non EU residents face with difficulties when getting mortgages in Portugal. Foreign customer is not completely transparent for the Portuguese bank and even when you provide documents from your employment company they are not sure whether it’s original or made with a home printer. We expect that Portugal banks will work through partners in other countries in the near future. So the client will take out a loan in his national bank but the money will be allocated by the Portuguese one. Bids for foreigners are of 4-5% and offers for residents are about 2.8% per annum. In any case, you are obliged to have 30-50% of equity capital.
Câmara Lobos
Off to Portugal for permanent residence. How to live and run a business in Madeira
- Currently we hear a lot of news about the Chinese, buying property in Portugal on a massive scale in order to obtain a residence permit. Have you noticed this in Madeira?
- Unfortunately or fortunately the Chinese are a few in Madeira. A lot of them are in Portugal mainland - Lisbon, Cascais, on the Silver Coast and Algarve, but they haven’t reached us yet. The Chinese are active in obtaining a residence permit in Portugal, along with the Russians and immigrants from former colonies in Africa.
- Do the foreigners ask about the "golden visas" in Portugal?
- You know, they do. But the paradox is that those who are able to acquire property in Madeira for €500,000 or for €1 million, are not interested in getting a residence permit most of all. They have already solved all visa related problems. Residence permit is more interesting for those, who have a budget of €200,000 - and they also have a chance to get it, following the standard program procedure.
A picturesque serpentine
- How attractive is purchase of commercial real estate in Madeira and business immigration to Portugal?
- On Madeira, for example, there is a Franco-zone (free economic zone) i.e. the territory of the preferential taxation: income tax is only 5% there. Within the area is highly developed so-called "screwdriver production" - when the components, imported from abroad are collected in place and so a label “Made in Portugal” is attached. In this case the products exempt from duties and get a free access to the European markets.
Hotel business is another interesting investment destination. Madeira market is currently oversaturated with five-star hotels, but three-star ones are in trouble. This is a fertile territory for local and foreign investors. 3 star hotels in Madeira, located near the sea are generally almost a nonsense, those are literally 3-4 ones that are always booked by 90%.
Statue of the Sacred Heart of Christ
- What may attract foreigners on Madeira, besides the sun and the sea?
- Madeira is a great place for ecotourism lovers, hiking through the famous irrigation canals, diving, surfing, paragliding, boating and biking tours, etc. Madeira is also well-known by its Cristiano Ronaldo and "Zenith’s" player Danny, who by the way is Madeira’s wine Ambassador in Russia. An interactive Ronaldo’s museum has been opened recently: there are his wax figure, many prizes and awards, among them are two gold balls. Visitors may even make an interactive photo, as if holding a golden ball in their hands. Ticket price is €5.
Madeira is easy to come at any time of year. Even if there is no direct flight from your city to Funchal, you may always fly to Lisbon and from there get another flight to Funchal. Although having a transfer, in Amsterdam or Rome, sometimes turns out to be even a cheaper option.
Interview: Kyril Ozerov, ee24.com
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