Madeira’s pretty capital Funchal has long been overlooked, says MARC DA SILVA

Renowned for its cake, wine, flowers and sub- tropical climate, Madeira has long attracted tourists all year round. However, the Portuguese island’s historic capital city Funchal is often ignored as a place to buy a holiday home.
Just under half of Madeira’s population of approximately 250,000 inhabitants live in Funchal. The city offers a calendar of cultural events and festivities for tourists and locals alike, including a carnival plus flower, wine and jazz festivals.
Funchal attracts around one million tourists a year, primarily from Britain, Germany and mainland Portugal. They are drawn by the long stretch of harbour full of fishing boats, the fine selection of botanical gardens, the colourful market and array of old streets filled with stylish boutiques and restaurants offering traditional Portuguese cuisine.
“A lot of people would feel very comfortable owning property in Madeira,” said Robin Stickells, of Madeira Properties in the Sun. “[Funchal] offers an international, cosmopolitan community that has its fair share of local residents, too. Madeira appeals to those who see this as a good thing.”
Mr Stickells added: “The big challenge is to find the purchasers who are in the market to buy a home.”
Although Funchal’s domestic property market is well-established, only a small fraction of overseas nationals own holiday homes there.
Hotel occupancy levels averaged 90 per cent during April’s Flower Festival, according to official government statistics. However, there are signs that Funchal’s holiday home market is starting to take off, buoyed by the introduction of low-cost airlines and direct flights from around Europe, Venezuela and South Africa.
Steven Worboys, of Experience International estate agency, said: “With more than one million tourists visiting this pearl of the Atlantic each year requiring accommodation, opportunity abounds for the buy-to-let market.”
In fact, enquiries for short-term rental properties in the capital increased by 52 per cent during the first three months of 2010, according to searches on holiday rental firm HomeAway’s website.
With protected conservation land making up some 70 per cent of the island, which is reasonably compact at 35 miles in length by 14 miles at its widest point, most property buyers head for Funchal.
Indeed, Funchal is where property prices are highest but the greatest buy-to-let opportunities in Madeira are to be found.
Resales typically start from around £110,000, which buys a modern one-bedroom apartment or an old-fashioned house in need of renovation or reconstruction.
Although Madeira’s property market has not gone unscathed by Portugal’s financial turmoil, the adverse economic effect on the island has been less severe than on the mainland, according to various local experts.
Philippe Moreau, the project manager of Vilagiorgi, a high-end holiday home development under construction in Funchal, said: “Due to the limited residential inventory, the Madeira property market has not suffered as much as mainland Portugal.
“Prices have not necessarily dropped but sales have been at a standstill for more than a year. More sales enquiries are starting to appear again, though.”
Roger Still, of Palheiro Estate, said: “Madeira is a fresh, new entrant into the second home market. Property prices compare well with other markets. Most of the ingredients necessary for a second homes market to establish itself in Madeira have long existed, including good location, climate, natural beauty, living conditions and visitor infrastructure.”
Mr Still was enthusiastic about acknowledging the progress made in Madeira over the past 10 years. The expansion of the international airport and a network of new roads, tunnels, marinas and health facilities have all set the scene for what he described as “the emergence of a viable second homes market”.
Madeira’s hot summers and warm winters, with temperatures averaging 21C, are ideal for avid golfers. This inspired an 18-hole,  par-72 course on the Palheiro Estate, along with a selection of luxurious holiday homes.
Palheiro was arguably the fi rst high-end residential projection conceived, designed and constructed to suit the requirements of the second homes market in Madeira. Inaugurated in late 2008, it rivals some of the best golf-led property developments of the Algarve but at a fraction of the price.

Palheiro Estate:  www.palheiroestate.com

This article authored by Marc da Silva (Daily Express) From Wednesday 1st September, 2010