But a crash in property and sterling exchange rates has wiped the sheen off this modern-day El Dorado, as expat Robert Wilson finds out.

Expats on the Portuguese Algarve have spent the last few months shivering in their damp apartments and villas wondering what had happened to the advertised 3,000 hours of sunshine a year.

After the wettest winter for 15 years, even the poshest property is falling victim to mildew.

And as the repercussions of the economic crisis spread, it's not just buildings that are feeling the effects of the rot. The very dream - of a better life in the sun - which lured many British expats here in the first place is beginning to tarnish.

It's not the first time Eldorado has lost its sheen

Whilst residents in the Algarve have shared the property crash experienced in the UK, the significant difference here is that expats are having to cope with the weak pound.

"Recently vendors have reduced their prices by up to 30%," according to Soren Hojbjerg, of Manorpark Properties, one of the Algarve's foremost real estate agents. "At first it was mainly the lower end of the market to suffer, ie apartments from 150-250,000 euros, but now the downturn is impacting all price ranges."

"When the Northern Rock debacle happened we felt it immediately," said Peter Dodwell, who has recently merged his Praia da Luz real estate and management company with Houseseekers.

"So far there have been very few desperation sales but March and April will be crucial months as indicators for how 2009 will pan out."

As real estate agencies close down branches, the knock-on effect of the property crash is being felt all along the coast.

Journalist Tony Elwood, former editor of a leading Algarve property and lifestyle magazine, remains sanguine: "We were on the brink of launching two new publications, but had to put them on hold when the property market slumped, in turn affecting our advertising revenue.

Pensions decimated

"I'm now taking on freelance work plus sales and marketing for a local air conditioning business - fortunately there's still a market for the service industry in the Golden Triangle of Almancil, Val de Lobo and Quinta do Lago."

In ancient times people coped with bubonic plague and clouds of locusts. We've got a banking crisis. Sheena Rawcliffe

The strength of the euro has decimated pension income and is now keeping the British tourists at bay as a holiday, let alone golf, is looking like a luxury they cannot afford.

Many Algarve expats who had sold up in the UK in the boom time were able to buy two villas with the proceeds - one to live in, the other to rent out.

Now their capital looks to have been reduced by a third and with post-Christmas tourist bookings close to zero this will have an impact on rental income.

"The economising has already started," says long-term resident Jill Lloyd who recently retired from villa management in Praia da Luz, "with people buying a newspaper every other day now and not going out to eat so often."

These are worrying times for those Brits who cater to the expat community with bars, shops, beauty salons and garden centres.

Others who relied on investment income have seen their capital crash 30% and their dividends slashed when the stock market went into freefall last year.

For those on fixed incomes, like UK pensions, the mathematics of their situation has now become a headache.

Pensions plummet

In early 2007 a UK couple's state pension of £629 pcm bought them 944 euros, now it is 692 euros (a drop of 27%) and bearing in mind that 1,000 euros pcm is what is required for a modest lifestyle in the Algarve, the shortfall is significant.

Author Robert Wilson has lived in Portugal for about 20 years

And there is no prospect for casual employment.

The Portuguese locals are suffering, too. The minimum wage is only 450 euros per calendar month. Bar and restaurant jobs are taken up by immigrants from the ex-Portuguese colonies. Cleaners get three and a half euros an hour and are being laid off by economising expats.

Linda Taylor Gonçalves, who runs the Griffin Bookshop in Almancil, says: "There has been a distinct rise in the number of second hand books customers bring in to sell and we've set up a boutique at the back of the shop so that people can sell their last-season designer label clothes at knock-down prices.

"Normally they would have given them to the maid."

However, all the residents I spoke to claimed that the community spirit in the Algarve is definitely burgeoning as the crisis has cut across all social classes.

A barter economy has come alive as people exchange services for goods.

The Consul, Paul Rodwell, has been "impressed by the resilience and resourcefulness of the British residents".

"I'm taking a relentlessly positive attitude," says Sheena Rawcliffe, publisher of The Algarve Resident newspaper.

Bubonic plague

"In ancient times people coped with bubonic plague and clouds of locusts.

"We've got a banking crisis. I think it will give people the chance to re-evaluate and discover what's important in their lives. The cars are still parked outside the supermarkets so it seems people can afford to eat and at least we're not under two foot of snow."

And despite a downturn in the quality of their lives since the arrival of the credit crunch, things aren't as bad in Portugal as they are for the expats on the Costa del Sol in Spain, where they had a visit from a foreign office minister to conduct advice surgeries.

"We are not aware of any immediate plans for the minister to visit here in Portugal," said Paul Rodwell, the British Consul in Portimão.

Now the sun is out after the long, wet winter and the advertised 3000 hours of sunshine has begun, at least those living on the Algarve can take heart from that.

The Ignorance of Blood by Robert Wilson is published by HarperCollins