Who would have expected that at the end of the first half of this year the property market would be stronger than in pre-pandemic times? Prices increased last year, by an estimated 6% on average across the Algarve, and, during the first six months of this year, we estimate that prices have already increased by at least that much again.
As we see it, the market is somewhat overheated at the moment with demand far outstripping supply, and as long as this goes on, prices can only go one way. At Fine & Country Algarve, our inquiries from buyers in May and June increased by almost 100% compared to last year. And last year, enquiries were significantly higher than in 2019. Other agents report a similar trend and there is no doubt that buyer interest in the Algarve, both from the international and domestic markets, is at an all-time high. In terms of the number of new sales agreed at Fine & Country Algarve, the first six months of this year is also higher than ever before.
But what could be around the corner? In the absence of a crystal ball, we can look at some facts that are driving the market, one being the Golden Visa rush. Recent months have seen more Golden Visa buyers in the Algarve than ever before, due in part to the emergence of the UK as a market for residency by investment but primarily by the rush to buy before the December 31 deadline from when the Golden Visa will no longer be applicable to residential property in most parts of the Algarve. This trend is already starting to slow down as time starts to run out for buying a property and completing the application process in time for the deadline. Time will tell if the Golden Visa will still be applicable to properties on touristic developments, but this is far from clear and during the second half of this year we are expecting to see a significant drop in Golden Visa buyers. This will soften demand slightly, but any cooling of the market can only come from an increase in supply, and this is where we are starting to see signs of more properties coming onto the market. Many owners of second homes in the Algarve who depend on income from holiday rentals to service their running costs and / or mortgages are now faced with two years of reduced income due to travel restrictions. In addition to this, we are seeing more and more disgruntled British owners looking to sell, as they are unable to spend as long in the EU as they wish as a result of Brexit.
The market has changed almost beyond recognition over the last two years, with our buyers coming from 28 different countries. We expect to see a slight cooling of the market over the second half of the year with a return to more sustainable growth in 2022.