With its cube-shaped Moorish-style houses, elegant promenade and bustling fishermen’s quarter, Olhão is a typical Algarve town.

But in recent years, visitors to the lively fishing port have noticed something unusual — the sound of Italian spoken everywhere in the neighbourhood tascas and cafés.

“Even the locals are learning Italian,” says Rosario Fazio, who started Vadovia, a relocation agency. He says he has helped transfer 500 Italians to the small town in the past three years. Two gelaterias and a pizzeria have opened.

Drawn by the cultural proximity, the security — and, of course, the favourable tax incentives — a wave of Italian retirees have settled here, following similar British, Nordic and French invasions.

Portugal is one of a number of countries seeking to attract pensioners. Foreign retirees with a disposable income can inject capital into the local economy, authorities hope, invigorating lacklustre property markets and creating employment opportunities. But how do the incentives stack up? We look at three of the most attractive offers.

Portugal

Portugal made an early play to become a pensioners’ paradise in 2009 by offering no tax for 10 years on overseas income. Take-up of the scheme has been gathering pace. Between January 2017 and August 2018, the number of eligible residents increased by 83 per cent, to 23,767, mostly French, British and Italian.

High-spending foreigners have helped repopulate deserted areas, keeping local services alive and boosting demand for goods, giving rise to “a renaissance”, according to Antonio Rosa of Blacktower Financial Management in Portugal. “Old buildings have been restored and there has been a massive influx of capital. Lisbon has been reborn as a centre of investment.”

Five-bedroom villa in Vale do Lobo, Portugal, €8m © Marcelo Lopes

Nationally, house prices fell on average 4 per cent per year between 2008 and 2013, but transactions surged by about 40 per cent in 2013, according to Confidencial Imobiliário, a property statistics site. Prices began increasing for the first time since 2008 in 2015, and have grown about 4 per cent per year since, according to the Bank of Portugal.

Portugal is good value for money compared with Spain, says Cristina Santos of agency Engel & Völkers. “In the Algarve a penthouse with sea view near the beach sells for around €5,000 per square metre, while in Palma de Mallorca, a similar property costs €7,500-€8,000 per sq m.”

Two years ago, Ingo Lipkau, a consultant to multinationals on mergers and acquisitions, retired to Albufeira in the Algarve from California. The atmosphere is “relaxed”, says Lipkau, who is originally from Brazil. “There is a low risk of terrorism, a stable political system and the economy is doing well.”

The most sought-after areas include Vale do Lobo and Quinta do Lago where a five-bedroom beachfront villa is on the market with E&V for €8m. The Alentejo coast, south of Lisbon, feels more authentically Portuguese. A six-bedroom villa in hippie-chic beach town Comporta is on the market with the same agent for €1.63m.

Albufeira, Portugal © Getty

Italy

Italy passed legislation in December offering a reduced tax rate of 7 per cent for five years to pensioners that choose to relocate from abroad to its depopulated south — communities of less than 20,000 in six southern regions, and the islands of Sicily and Sardinia.

Taormina Old Town © Alamy

The scheme could take market share from Portugal, says Simone Rossi of Italy property portal Gate-Away.com, citing “beautiful landscapes, a good climate, very affordable property prices and quality of life”.

We were the only English speakers in the village but people took our arrival as a compliment

Since 2017, Italy has offered a flat tax of €100,000 on worldwide income for the super-rich, but this new tax incentive is more restrictive. Rome and Tuscany are out, says Diletta Spinola of Sotheby’s International Realty. And while buyers are unlikely to beat a path to unknown regions such as Molise, the measure could boost sales in some of the more popular areas such as Puglia and Sicily, she says.

Prices in much of rural southern Italy have fallen between 50 and 60 per cent since the 2008 crisis. Derelict homes can be offered for as little as €1, although in fashionable coastal areas prices run into the millions. A three-bedroom villa in Taormina is on the market for €1.35m with E&V.

Three-bedroom villa in Taormina, Sicily, €1.35m

Scott Bergstein, a realtor from Pittsburgh, took early retirement in 2012 and bought an olive farm with his wife Jessica near Cisternino in Puglia. “Southern Italy offers a lifestyle that is impossible to find in the US,” says Bergstein. “It is still a place that you go to the market for your vegetables and a fisherman for fresh fish.”

“We were the only English-speakers in the village but people took our arrival as a compliment and it was common to wake up and find a bowl of artichokes or strawberries outside.”

But, he says, the couple grew “frustrated” with Italian bureaucracy and after three years they had to continue applying for residency every year. They now live in Bali.

Dubai

Dubai, which imposes no income tax, is introducing five-year retirement visas. Retirement in Dubai has considerable appeal for expats nearing the end of their working lives. Previously, retiring expats in Dubai had to leave their five-star lifestyles and return home, often to a lower living standard. To be eligible for the visa, pensioners have to own a property worth at least Dh2m (€480,000), or have savings of Dh1m or monthly income of Dh20,000 (€4,800).

Some foreign retirees may choose to relocate to Dubai to be near working offspring and grandchildren, says Steven Morgan of Savills. “It’s a very attractive place for at least six months a year.”

Five-bedroom villa in Emirates Hills, Dh23m

The UAE is trying to diversify its economy and rebrand as a more permanent base. Thanks to oversupply, property prices in Dubai have fallen by 25 per cent since a peak in 2015 according to Jones Lang LaSalle.

While Dubai is traditionally a rental market, the greater visa security could encourage expats to become property owners, says Geraint Davies of global financial planners’ Montfort. “It may strengthen sales in the UAE’s mid-to-high-end property market,” he says, “with trickle down to the general market over five years.” Savills is marketing a Spanish-themed four-bedroom apartment off-plan in the Jumeirah Golf Estate, which has golf, swimming and tennis, for Dh2.42m.

The most expensive homes are in Emirates Hills, where custom-designed villas fetch up to Dh100m. A five-bedroom villa with an outdoor pool is for sale with Gulf Sotheby’s for Dh23m. The same agent is marketing a six-bedroom villa with a cinema room, a games room and views over the Montgomerie golf course to the Dubai skyline beyond. It has a guide price of Dh80m.

The main limitation to Dubai’s retirement visa scheme is the time limit, with no way of knowing if pensioners will be forced to make another international move in five years’ time. For this reason, Davies says: “We can’t foresee a huge number of British nationals swerving from expatriate hotspots such as Spain, Italy, France or Portugal.”

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The property investment requirement also creates “an affordability question”, says Morgan. Investing in a second property could provide a rental income, but the cost of living in Dubai is high and pensioners would need private health insurance.

While an influx of new residents in all these places could provide an immediate stimulus, it could unbalance the demographics. In Portugal, the government has threatened to end the scheme. But many Portuguese see the benefits, says Lipkau. “They can see there is more employment, investment, transport. They get an immediate return.”

The golden era for pensioners therefore may not last forever. Some countries such as Finland have already moved to block their residents from shifting their tax residences to Portugal. Other countries may follow their lead to prevent an exodus of capital and taxes.

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