Guide · 8 min read
Both are excellent choices. But they suit different buyers. Here's the honest comparison.
Summary Verdict
| Factor | Madeira | Algarve |
|---|---|---|
| Average price/m² | €3,351 | €3,400–€4,500 |
| Entry price (budget) | €700/m² (Santana) | ~€1,500/m² (inland) |
| Avg gross yield | 4.9% | 4.2% |
| Year-round climate | 22–23°C (no extremes) | Hot summers, mild winters |
| AL licence availability | ✓ No moratorium | Restricted in many areas |
| Rental seasonality | Year-round | Peak summer, lower winter |
| Expat community | Growing; international | Large, established (British) |
| Airport connections | 1 airport; 2h from London | Faro; wide EU charter network |
| Market liquidity | Good in Funchal; lower elsewhere | Higher; larger market |
| Car needed? | Yes (outside Funchal) | Yes (most areas) |
| Internet speed | Excellent (Ponta do Sol hub) | Good in main towns |
| International schools | Yes (Funchal) | Yes (Faro/Lagos area) |
On headline average, Madeira (€3,351/m²) and the Algarve (€3,400–€4,500/m²) are broadly comparable. But the distributions are very different:
If you have €200,000 to spend, Madeira gives you significantly more for your money — particularly outside Funchal.
Madeira's climate is often described as the "island of eternal spring." The south coast averages 22–23°C year-round, with no extremes — winter evenings can reach 15°C, summer days rarely exceed 28°C. The north coast is wetter and greener.
The Algarve is hotter and drier. Summers hit 30–35°C and can feel oppressive. Winters are pleasantly mild (15–18°C). If you want hot beach summers, the Algarve wins. If you want the same perfect temperature regardless of when you visit, Madeira wins.
For rental income: the Algarve's concentrated summer peak drives very high July–August rates; Madeira's year-round consistency produces more predictable income.
This is perhaps the most important practical distinction for investment buyers.
The Algarve falls under mainland Portugal's SARA legislation, which imposed a moratorium on new Alojamento Local licences in many areas including parts of the Faro district. If you buy an existing AL-licensed property, you keep the licence; but new licences in restricted areas are not available.
Madeira is exempt. As an autonomous region, Madeira has its own legislation. New AL licences can still be obtained for any property that meets the safety requirements, without restriction.
The Algarve's rental demand is highly seasonal: July and August account for a disproportionate share of annual rental income. Shoulder seasons are solid but quieter. Some areas see very low occupancy November–February.
Madeira's demand is more evenly distributed. The combination of year-round mild weather, festival calendar (New Year's Eve is world-famous), digital nomad culture, and wellness tourism produces more consistent occupancy. Average annual occupancy in Funchal short-term rentals is 75–85%.
Madeira edges it on yield (4.9% vs 4.2%), AL licence freedom, year-round demand, and price entry point. Algarve wins on market liquidity and established infrastructure.
Similar on average. Madeira's cheapest areas (€700/m²) are far more affordable than the Algarve's cheapest (€1,500/m²). Algarve's premium end (€6,000+/m²) has no Madeira equivalent.
Madeira for year-round consistency (22°C always). Algarve for hot summers (30–35°C July–August).
Madeira: yes, freely. Algarve: depends on location — moratorium applies in many areas.
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