Lagos, with its stunning coastline and vibrant culture, is not only a sought-after tourist destination but also a promising location for real estate investment. The confluence of booming tourism and a steadily appreciating property market creates a unique opportunity for investors seeking both capital growth and rental income.
Lagos Tourism: An All-Time High
Portugal’s tourism sector has experienced exceptional growth, with 31.6 million guests in 2024, a 5.2% increase from 2023 Tourism – Savills. The Algarve region, including Lagos, welcomed 5.2 million visitors in 2024, surpassing the previous record Algarve breaks records – The Portugal News. This influx of tourists translates into high demand for short-term rentals, making investment properties in Lagos particularly attractive.
Real Estate Price Evolution in Lagos: A Decade of Strong Growth
The Lagos property market has shown remarkable appreciation over the last decade. According to Idealista, a leading real estate portal, the average price per square meter in Lagos was €1,669/m² in May 2015. Fast forward to May 2025, and this figure has surged to €4,214/m² [Idealista.pt – Lagos Price History].
This represents a total increase of over 150% in property values in Lagos over the past ten years. In annual terms, this translates to an impressive average annual percentage increase of approximately 9.70% over this period. This consistent upward trend underscores the robust investment potential in Lagos real estate.
ROI Example: A €380,000 Apartment and its True Returns
Let’s consider a hypothetical example to illustrate the combined power of rental income and capital appreciation, taking into account all the costs involved:
- Apartment Purchase Price: €380,000
- Estimated Closing Costs: When buying property in Portugal, you should factor in an additional 7% to 10% for closing costs. These typically include Property Transfer Tax (IMT), Stamp Duty, Notary & Registration Fees, and legal fees. For our €380,000 apartment, let’s allocate an average of 8%, which equates to €30,400.
- Total Initial Investment Cost: €380,000 (Purchase Price) + €30,400 (Closing Costs) = €410,400
Now, let’s look at the potential income:
- Potential Gross Annual Rental Income (Holiday Rentals): €30,000. (This is highly achievable for a well-located and managed property in Lagos, based on average nightly rates around €118 and 70% occupancy.)
Management Costs and Net Rental Income:
Property management for holiday rentals in the Algarve typically ranges from 20-30% of the gross rental income. Let’s use an average of 25% for our example:
- Annual Management Costs: €30,000 * 0.25 = €7,500
- Net Annual Rental Income: €30,000 – €7,500 = €22,500
ROI from Net Rental Income (calculated on Total Initial Investment):
ROI = (Net Annual Rental Income / Total Initial Investment Cost) * 100 ROI = (€22,500 / €410,400) * 100 ≈ 5.48%
True ROI (Including Price Appreciation and All Costs):
Here’s where the long-term investment truly shines. When we combine this net rental yield with the historical average annual price increase of 9.70% we just calculated:
True ROI = ROI from Net Rental Income + Average Annual Price Increase True ROI = 5.48% + 9.70% = 15.18%
This comprehensive calculation illustrates the substantial potential for a significant return on investment when purchasing property in a high-demand tourist destination like Lagos. You are not only generating a healthy annual income from rentals but also benefiting from the consistent appreciation of your asset.
Conclusion
Investing in Lagos real estate presents a compelling opportunity for high returns on investment (ROI), driven by strong tourism and consistent property price growth. While management costs should be considered, the overall return potential remains very attractive, particularly over the long term.
Disclaimer: The ROI calculations and price increase estimates provided are for illustrative purposes only and do not guarantee future returns. Real estate investments involve risks, and past performance is not indicative of future results.
Ready to explore the lucrative real estate market in Lagos? As your expert real estate agent in the Lagos and Western Algarve area, I can help you find the properties that are not only ideal for your lifestyle but also poised to generate excellent income. Visit sunnysteve.com or contact “Sunny Steve – Real Estate” today to begin your journey to a successful investment in this stunning region!
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