Madeira vs Algarve: where should you buy?

The Autonomous Region of Madeira is a subtropical Atlantic archipelago far to the south-west of the mainland, centred on Funchal, whose mild year-round climate, direct flight links and English-friendly relocation scene have made it one of Portugal’s most internationally driven markets. The Algarve is the mainland’s southern sun-belt coast — a belt of resort towns, historic centres and golf estates from the western cliffs to the eastern lagoon — and Portugal’s most foreign-buyer-driven market. Both trade above the national median, but for related yet distinct reasons, and the figures below show exactly how each region and the country as a whole compare, each with its own provenance.

The headline masks a similar internal pattern on both sides: Madeira’s demand concentrates on Funchal and the sunnier south coast, pulling the regional median away from the quieter north and interior, while the Algarve’s concentrates on the coastal resort concelhos, opening a gap to its inland municipalities. The comparison surfaces the region-level medians for a like-for-like read, with the Algarve’s district-capital (Faro) figure shown alongside so the intra-region spread is visible rather than hidden.

Short-term letting (Alojamento Local, AL) is central to the investment case in both regions, given year-round tourism on the island and strong seasonal holiday demand on the coast. Both are governed by the national regime (Decreto-Lei 128/2014, as amended), but Madeira additionally has regional rules specific to the Autonomous Region, so registration and operating requirements there can differ from the mainland. On both sides, contention-style limits and local status vary by concelho and change over time.

This is general information, not legal advice — confirm the current AL status and any regional requirements for a specific address with the relevant câmara municipal (and, for Madeira, the regional authorities) before assuming a property can be operated as a short-term rental.

There is no single winner: Madeira offers a subtropical island market with year-round tourism, a fast-growing relocation and remote-work base and direct flight links, at a regional median pulled up by Funchal; the Algarve offers a mainland resort coast with the widest foreign-buyer pool in the country and strong seasonal short-let fundamentals, at a regional median shaped by its coastal hotspots. Which fits depends on budget, whether island life or mainland access matters more, and how central letting income is to the plan.

Read the two full regional guides below for the AL, IMI and neighbourhood detail on each side, then map the resolved figures on this page to your specific purchase with an advisor.