In general the cost of living in Portugal is a little more expensive than in neighbouring Spain, although many items such as alcohol and cigarettes are still considerably cheaper than in the UK. In the peak summer months (July to early Sept) and during school holidays flights and accommodation will be more expensive, so if you can travel outside these periods you will get even better value for your money.
If you are visiting the Algarve from the UK, the Pound to Euro conversion rate will be the major factor in determining how much you need to budget for your holiday.
Eating out offers exceptionally good value in the Algarve - if you shop around and go where the locals eat, you can pay as little as € 10 to € 15 per head for a 2-course meal with a bottle of wine included. Expect to pay around € 1 for a coke or a Portuguese coffee in a bar of café.
Check prices before you eat out, and expect to pay more at restaurants located in marinas, plazas, and on the beach front. There are plenty of excellent fish restaurants throughout the Algarve - there are some excellent value fish restaurants away from the resorts such as "O Rei do Peixe Assado" just outside Vilamoura.
Some Portuguese restaurants offer "Prato do Dia" (Dish of the Day which often includes starters and a drink) for around € 10 per person but can be found for as little as € 5 or 6 if you search around for places where the locals eat.
You can find budget accommodation relatively cheaply in the Algarve outside of the main holiday season (which is mid-July to early September), but during the summer holidays you will struggle to hotels rooms for under €500 a week in the main resorts.
If you are a smoker, tobacco prices are relatively cheap in the Algarve (although cigarettes are cheaper across the border in Spain). A packet of 20 cigarettes costs around € 4.50-5 per packet, some cheaper brands such as Chesterfield are available for around € 4).
Golden Virginia rolling tobacco costs around € 90 for ten 50g packets. 2015 cigarette prices in the Algarve on TripAdvisor.
In Portugal Diesel is about 15-20% cheaper than unleaded petrol. However, don't expect to find cheap unleaded petrol in Portugal, prices are similar to those in the UK.
The wines of Portugal offer excellent value and quality - the Alentejo region of Portugal produces quality red wines such as Adega de Borba for around € 3.50-4 from supermarkets. Most red wines with "Douro" (from the River Douro) on the label are excellent quality for as little as &euro2.50. Green wines (Vinho Verde) are a slightly sparkling white wine which is very refreshing on a hot day and will also cost around € 3-4.
You can expect to pay around € 8-10 for a reasonable quality bottle of house wine in most restaurants, and around € 1.50-2 per glass.
Beer is also exceptionally cheap in the Algarve, with Portuguese beers such as Sagres and Super Bock are available for around € 1-1.50 per bottle in bars. In the local supermarkets prices are around half of those in the bars, so drinking alcohol is an extremely cheap pastime in Portugal!
A loaf of bread will cost around € 1.20 and a pint of milk is around € 0.60. Look out for Lidl which has a growing presence in the Algarve where you can find excellent value for money.
If you are house-hunting in the Algarve prices are rather expensive, especially compared to the popular Costa Blanca in Spain. Below are some typical Algarve property prices:
1 bedroom apartment € 80-130,000
2 bedroom apartment € 130-170,000
1-2 bedroom villa € 160-250,000
For new visitors to the Algarve region of Portugal, here are some useful Portuguese Phrases.
For more information on prices in Portual visit the numbeo.com website.