Rising Investor Interest in Rental Properties in the Eastern Algarve - Olhão and Tavira

While much of the spotlight in the Algarve falls on the western hubs like Lagos or central areas like Vilamoura, the eastern Algarve has quietly become one of Portugal’s most attractive regions for property investors. Towns such as Olhão and Tavira are seeing increased demand for both short- and long-term rentals, driven by a mix of tourism growth, lifestyle relocations, and relative affordability compared to the western coast. For investors looking for sustainable returns and long-term appreciation, the eastern Algarve offers a compelling blend of tradition and opportunity.

Why the Eastern Algarve Is Gaining Momentum

Several dynamics are making Tavira, Olhão, Santa Catarina and nearby towns increasingly appealing to rental property investors:

1. Competitive pricing compared to western Algarve

Property prices in the eastern Algarve are generally lower than in hotspots like Lagos or Albufeira. This makes entry costs more manageable while still allowing for attractive rental yields, particularly in historic centres or waterfront locations.

2. Strong growth in tourism - especially cultural and eco-tourism

Unlike the high-volume beach tourism of the west, the eastern Algarve attracts visitors seeking authenticity: fresh seafood markets in Olhão, Tavira’s historic architecture, the Ria Formosa Natural Park, and quieter island beaches. This creates year-round tourism demand, particularly among Europeans looking for longer winter stays.

3. Rising demand for long-term and seasonal rentals

As remote work and lifestyle relocation continue to grow in 2025, more expats and professionals are choosing to base themselves in Tavira or Olhão for 6- to 12-month periods. With limited long-term rental supply, this trend is pushing rents steadily upward.

4. Infrastructure and accessibility improvements

Upgrades to Faro airport connections, better rail links, and growing ferry routes to the barrier islands make the region more accessible, boosting both tourism and residential demand.

Who Is Renting in Olhão and Tavira?

The rental market in the eastern Algarve is supported by a diverse tenant mix:

• Expats and retirees drawn by lower living costs and a more traditional pace of life compared to western hubs.
• Digital nomads and long-stay tourists, especially Northern Europeans, who prefer smaller towns with authentic Portuguese culture.
• Seasonal and local workers employed in fishing, hospitality, and tourism who need well-located, affordable accommodation.
• Second-home owners who use properties part of the year and rent them out during other months.

What Types of Properties Perform Well?

In the eastern Algarve, the following property types are showing strong rental potential:

• Historic townhouses 
• Apartments with terraces
• Small villas or cottages
• New developments
  
  

Simple upgrades; air conditioning, high-speed internet, tasteful furnishings, can significantly increase desirability and rental income.

Yields, Risks, and Investor Considerations

• Rental yields: Gross yields in Olhão and Tavira typically range between 4–6 %, with upside potential in well-located or renovated units. Lower entry prices compared to western Algarve markets mean better cash-on-cash returns in many cases.
• Seasonality: The summer season is strong, but shoulder months (spring and autumn) are increasingly popular with cultural tourists and long-stay Europeans.
• Regulation: As elsewhere in Portugal, investors should monitor Alojamento Local (AL) licensing rules and rental regulations. Tavira, in particular, has stricter planning oversight in its historic centre.
• Capital appreciation: Property values in the eastern Algarve have risen steadily and are expected to continue climbing in 2025, driven by limited supply and growing international interest.

Strategy for Investors

For those looking at Eastern Algarve property for sale, investors should:

1. Target authenticity: Properties that highlight local architecture, culture, or views of the Ria Formosa stand out.
2. Diversify rental models: Consider hybrid approaches
   
   
3. Focus on location: Proximity to ferry terminals, old town amenities, or island beach access is a key differentiator.
4. Plan for sustainability: Eco-friendly features such as solar panels, efficient cooling, and good insulation resonate with long-term renters and eco-tourists alike.
   
   

Summary

The eastern Algarve may lack the international name recognition of the west, but that’s part of its appeal. For investors, the east offers a unique mix: lower acquisition costs, rising rental demand, cultural authenticity, and promising capital appreciation.

At Russell & Decoz, we believe that investors should look beyond the traditional hotspots. By exploring opportunities in the eastern Algarve, you can capture the next wave of growth, balancing stable returns with the lifestyle appeal that continues to draw people to Portugal’s southern coast.