As Chelsea head to Moscow for the ultimate prize in European football next week, their former manager, José Mourinho has been spotted on a building site in the Algarve. But, being the “Special One”, this is not just any old building site - this is the site of Palacio da Quinta, the first six-star hotel and residential resort in Europe.

The development near Vilamoura has been classified as a project of national interest and has attracted Portugal's most famous son, who admitted that when it comes to investing his own money he does not take risks. “This project is absolutely fantastic. Portugal should be happy and I congratulate myself for being a part of this. I think victory is certain.”

The credentials of the scheme, which is due to be completed next year, are certainly impressive. The residential side of the development will consist of 80 one, two, three and four-bedroom luxurious apartments and penthouses within 17 acres of sub-tropical gardens. Owners will have their every whim catered for, with offers of private chef and butler, chauffeur service, private jet and yacht charters via the central six-star hotel.

The apartments, which range from £996,000 for one bedroom to £2.6 million for a four-bedroom penthouse, will have their own terrace spa bath with views over the garden, lakes and private residents' pools. Interiors will include Italian marble flooring, an integrated intelligent home system and two underground parking spaces. The resort will also provide restaurants, bars, designer shops, swimming pools, a health spa, tennis academy and - being the Algarve - discounts on green fees at some of the finest golf courses in Europe.

The Portugese developer behind the plan, the Imocom Group, believe that the “Palace” will take Algarve living to a whole new level of international opulence.

The currency specialist FCExchange has noticed a distinct shift in the number of people choosing Portugal rather than France for buying property costing more than €750,000 (£594,000), partly because the cost of living there is less expensive.

Sylvia Bauer, of Quinta Views, a property sourcing agency specialising in the Algarve, confirms that the top end of the market is booming. “This is particularly true of properties within the Algarve's exclusive ‘Golden Triangle'. Property here is highly sought-after. On the rare occasion that something comes on the market there is a huge amount of interest,” she admits.

The triangle, in the centre of the Algarve, is only 20 minutes' drive from Faro International Airport, contains several of the most exclusive property developments in Europe, including Quinta do Lago and Vale do Lobo. It is also known for its world-class golf courses, beautiful coastline and excellent cuisine.

The exclusivity of the area is enhanced by strict building regulations in the region to avoid spoiling the area's natural beauty. So there is little, if any, land to buy to build on. It is therefore not unusual for a property to be sold only to be knocked down and a new home built in its place within the Triangle.

Fact file

In 2007, 3.6 per cent of Britons who bought abroad invested in Portugal; in 2006 it was 2.6 per cent (source: AIPP).

Prices of Algarve villas have risen by 5.6 per cent a year since 2003; apartments averaged 3 per cent (source: INE).

Quinta Views: 0800 0856907, palaciodaquinta.com .

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers