The old adage suggests that the rich summer in the Hamptons, but the wealthy go to Europe. Will this year be any different? After a year and a half of quarantining on the East End, we suspect some may be feeling the itch to travel again and even invest in a vacation home abroad.
Yacht charters in Greece and Croatia are already a hot ticket, and Italy has begun to allow leisure travelers with France close behind.
An unsung hero of European investment options is Portugal, which offers a diverse landscape and supports an active, outdoor lifestyle, much like the beloved Hamptons. With special incentives for luxury buyers, Portugal is worth a nod when researching where to purchase a vacation home.
Similarly, the Amalfi Coast and Cote d’Azur are seeing added long term international investment extending beyond short-term vacationers who come to admire the costal cliffs and old-world sophistication.
THE HAMPTONS
Tried and true, always a good time. With each hamlet offering a different vibe, everyone can find their perfect Hamptons.
In April, there were 136 new listings between Southampton and Montauk, another 149 signed contracts, and 176 sold listings.
In May, we are seeing a surge in new listings as the summer high season approaches. The number of contracts signed increased 29% week over week and have been on an upward trend since the beginning of April. More new listings coming on the market has caused days to contract to drop while prices continue to rise, with an average of just 3.8% average discount under list price.
In reviewing the previous year’s trends, it seems that the market may have peaked between November – December 2020, though it will show continued strength for the foreseeable future as habits and preferences have shifted. Many more are buying in the Hamptons with the intention of making it a primary residence while maintaining a pied-à-terre in NYC. Infrastructure advancements, like schools and hospitals, will need to play catch up in order to accommodate. The potential of significant income generation from vacation home rental is still top of mind, as well.
That said, as the Hamptons market has tightened for more than six months in a row, high net worth buyers are increasingly looking at options in other parts of the country and abroad, like Portugal, The Amalfi Coast, and the Cote d’Azur.
Portugal and the Iberian Peninsula
Carlos Alves, Nest Seekers International Real Estate Advisor in Portugal explains why it has been such a magnet for American and European investors: “Portugal is located just three hours from most European capitals and seven hours from New York. The country offers over 3,000 hours of sunshine yearly, has an immense and diverse landscape, superb gastronomy and wines, grants compelling tax benefits, and is the third safest country in the world.”
The 850km coastline is conducive to an active lifestyle; offering surfing, sailing, skiing, scuba diving, and some of the best golf courses in the world, with dazzling landscapes and breathtaking views. Much like California, you're able to ski the Estrela mountains in the morning and watch the sunset on the beach in Algarve by the evening.
Considering lifestyle, the Algarve region is famous for its beautiful weather and fantastic golf resorts. This is where luxury and lifestyle meets investment. Portugal’s Silver Coast in the North is also a popular destination among real estate buyers. The area stretching from Ericeira (a 1-hour drive from Lisbon) to Nazare is well-known for its unique landscapes and the steady stream of tourists.
It is possible to buy an ultra-luxury villa for 5,750.000 euros in Vilamoura, Algarve. In comparison, similar homes would sell for $10,000,000+ in the Hamptons.
International buyers represent nearly 10% of the total transactions in the country, with the French leading in volume, followed by British, Brazilian, German, and US investors. Property prices in 2020 rose 8.4%, in spite of the pandemic, and the total transaction value was 26.2B euros, a 2.4% increase over 2019.
International demand for Portugal keeps increasing through the support of programs like the Non-Habitual Resident tax regime, which grants a set of tax exemptions and flat rate taxation for a period of 10 years, and the Golden Visa program, which allows real estate buyers to obtain Portuguese citizenship and freedom of movement throughout the entire Schengen Zone. By becoming Portuguese non-habitual residents, high net worth individuals are able to accrue wealth in a tax-friendly environment and pass on their estate without inheritance or gift taxes.
As shown, the Golden Visa program attracts additional investment outside of Europe, with the following distribution of international applicants:
● China: 4,899 applicants
● Brazil: 1,019 applicants
● Turkey: 463 applicants
● South Africa: 399 applicants
● Russia: 373 applicants
AMALFI COAST
Located in the Campania region of Italy, the Amalfi Coast covers 34 miles of majestic terrain inclusive of Positano, Capri, and Ravello and 10 other towns featuring sky-high costal cliffs, vibrant vegetation, and multicolored towns side-by-side with the turquoise waters of the Mediterranean.
General recovery of the Amalfi Coast is lagging that of the Hamptons by about a year, though according to Eurostat, the statistical office of the EU, the prices of properties for sale have increased by 1.3% in the UE area in the third trimester of 2020 compared to the second trimester and by 5.2% compared to the same trimester of 2019.
Foreigners can buy property in Italy without restriction; the only requirement is a tax identification number. 10-20% is required as a non-refundable down payment and expect to add a minimum of 10% for expenses to the total property price for transaction costs. This is on top of VAT if you’re buying a new property or if buying a second-hand property expect the imposta di registro registration tax.
CÔTE D’AZUR AND MONACO
Even during the coronavirus pandemic, the French Riviera saw consistent demand and stable price development in the luxury segment. The appeal of the South of France has intensified as the region proved to be a safe haven for both owners and investors. Traditionally an international market, 2020 saw exceptionally high demand by domestic French buyers, with a particular concentration of Parisian clients, followed by cross-border buyers from Italy, Belgium, Switzerland and Germany. Effective sales have nevertheless remained in line with the market; with 50% of foreign buyers in Cannes and 75 % percent foreign buyers in Saint-Jean-Cap-Ferrat.
Nearly 30% of the villas in the area are second homes, about 8% are primarily used for vacation rentals, and 62% are primary residences.
Monaco recently hit the milestone of having one millionaire for every three residents. With zero income tax, balmy weather, and a gorgeous cliffside setting, it’s easy to see the attraction.
In Monaco, property is double the price of similar spaces in New York City, averaging $9,000 per square foot. Foreign purchasers, in particular British, Italians, French, Swiss, Indians, and citizens of Middle Eastern countries, are helping to increase the attraction of the Monacan property market.
CONCLUSION
Overall, the trajectory of pandemic recovery is steeper in The Hamptons than in Europe, which is lagging behind in reopening. This gives vacation-home buyers more of an opportunity in the Mediterranean to lock-in favorable prices. The Hamptons saw record traffic over the Memorial Day Weekend, with expectations of being the busiest season ever and a continued seller’s market.
