British Sellers and the Euro

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This topic contains 34 replies, has 15 voices, and was last updated by Profile photo of Anonymous Anonymous 6 years, 7 months ago.

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  • #55581
    Profile photo of Anonymous
    Anonymous
    Participant

    As we all know, the British were among the most active sellers in the last 2 years.
    One reason was the Euro appreciation by 30% versus £ which allowed them an easy 30% reduction without any decrease in the Pound value for the property.

    Now the £/Euro is only 20% under the 2007 value and it might go even (possibly much) higher.

    Will British sellers increase their prices? Will some of them be able to change their plans and hold easier onto their Spanish properties (due to the decrease in the £ cost of living there)?

  • #98343
    Profile photo of Anonymous
    Anonymous
    Participant

    I was just writing a post about this, but looking at it from the demand side.

    The pound-euro rate today has risen to 1.18 (the strongest pound since August last year).

    What with Greece and the Euro-Med countries heading for stormy waters, some say the Euro is only going to get weaker.

    If this happens, at some point it will translate into more British demand for Spanish property.

    Let’s face it, if we still had the peseta, Spanish property would now be dirt cheap for British buyers, and they would be all over the good stuff. If the price is right, there are plenty of people who still want to buy a nice place in Spain (despite all the scandals and over-build).

    So if the pound keeps on getting stronger, British demand should pick up.

    Of course, as Flosmichael points out, a stronger pound also means British vendors have less room to reduce, and there’s no doubt they’ve been the best vendors in recent times.

    Mark

  • #98344
    Profile photo of katy
    katy
    Spectator

    Active sellers…not been many over the past few years 😉

    Suppose everyone has their bottom line and some may decide they will have to increase the price a little. However, they will then have to compete with Germans and spanish etc. who are not affected by the change in sterling. Not sure if many would decide to stay as there are differing reasons for selling. The cost of living on the CDS is higher than the UK (prices even increased in January!). It would have to be about 1.45 to make a difference.

    When we decided a selling price the exchange rate was around 1.14/5. When we actually cleared the drafts it had dropped to 1.09 so we had a nice bonus. Can go the other way too. If I were selling now I would base the price on about 1.20 just incase.

  • #98346
    Profile photo of katy
    katy
    Spectator

    Mark I am not so sure that a higher pound would see much of a change in spanish property sales. Although we may soon find out 😆 If property owned by the British became “dirt cheap” the majority would just hang on to them. Despite what is said there are many who would like to sell but only at a certain price.

  • #98347
    Profile photo of Anonymous
    Anonymous
    Participant

    @mark wrote:

    Let’s face it, if we still had the peseta, Spanish property would now be dirt cheap for British buyers, and they would be all over the good stuff. If the price is right, there are plenty of people who still want to buy a nice place in Spain (despite all the scandals and over-build).

    So if the pound keeps on getting stronger, British demand should pick up.

    Do not forget that British will also need to make financial sacrifices to straighten the boat (salary cuts,
    tax raises of many types – income tax, VAT, etc).

    The house prices increases in UK were just a mirage due to some demand in South -East, it will take a long time tioll people will be able to MEW their properties again. MOrtgages will be hard to get and the interest rates will go up (in a hurry if necessary).

    Of course, if Euro disintegrates and Pesetas and Drachma reappear, prices wil be attractive for the lucky ones with steady incomes and Sun dreams…

  • #98348
    Profile photo of katy
    katy
    Spectator

    I think we should take a step back and review what happened to the spanish property market. Has everyone forgotten the market was in the doldrums long before the fall in Sterling and long before the recession. 😮 Since then there was even more bad publicity last year. I just don’t think there are lots of British out there waiting for the pound to go up…a trickle yes but not a deluge

  • #98349
    Profile photo of peterhun
    peterhun
    Participant

    The Pound will be the next target after the Euro and it doesn’t have the backing of the stronger European economies behind it.

    Its all deficit and massive public and personal debt.

  • #98350
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @flosmichael wrote:

    As we all know, the British were among the most active sellers in the last 2 years.
    One reason was the Euro appreciation by 30% versus £ which allowed them an easy 30% reduction without any decrease in the Pound value for the property.

    Now the £/Euro is only 20% under the 2007 value and it might go even (possibly much) higher.

    Will British sellers increase their prices? Will some of them be able to change their plans and hold easier onto their Spanish properties (due to the decrease in the £ cost of living there)?

    Whilst there is the oft mentioned “huge” statistic of properties unsold in Spain, it is frankly a myth that there are thousands upon thousands of Brits or indeed other Vendors with their properties for sale certainly on the CDS, where buyer interest was at an all time low, I can tell you that Vendor interest has also been at an all time low, because of the fall in prices, people don’t want to sell or they simply cannot sell, at a price lower than their mortgage for example.

    As others have mentioned many people are simply holding, because a) prices are so low, not everyone selling is English, or b) because buyer interest is at an all time low, why bother putting your property for sale if you know it won’t sell at the price you want to hold for. As Mark pointed out the rates are at their highest for a year, and when they were that high we had an all time record month for the past several years.

    What is great about the rate is that it will create buyer interest, and that brings the market back to life, but… if you wanted to sell and get out, and get the reverse benefit of the rate, then you had to be Katy and sell a little while ago really.

    Anybody putting up their price to secure their Sterling requirment will be sadly left on the shelf, the time to take advantage of that situation was when the pound was at 1.05, Katy has obviously been a smart investor over the years and got out at the right time for sure, and so could and should have many other Vendors have dropped their prices, because you are absolutely right Floshmichael they mostly bought at 1.50 so a significant number who properly dropped did not see so much hurt, they may have dropped by 30-35% to effect a sale but they got a similar value in Sterling terms to their purchase.

    But they can’t have their cake both ways really. We should have a lot more buyer interest now from the UK, and i believe we will, but no… increasing prices won’t work, not this side of 12 months or more in my opinion. We have to see a lot more people buying for that to happen.

    As for people staying or going, I don’t think the rate will change that at all, you are staying or going for other reasons than the rate really.

  • #98351
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @katy wrote:

    I think we should take a step back and review what happened to the spanish property market. Has everyone forgotten the market was in the doldrums long before the fall in Sterling and long before the recession. 😮 Since then there was even more bad publicity last year. I just don’t think there are lots of British out there waiting for the pound to go up…a trickle yes but not a deluge

    It certainly isn’t a deluge no, but it is a good bit more than a trickle, and would be a consistent flow, perhaps 1998 type levels – a normal market – if the rate were to stabalise between 1.25-1.30 and the winners, would not be the developers or the banks I feel, the winners would be the resale vendors who’s time has come.

    They have the real value homes that people want to buy.

    So even Logan might have to wait a few years yet before there is a batch of units to buy and twist to make a profit.

  • #98355
    Profile photo of Anonymous
    Anonymous
    Participant

    @Chris McCarthy wrote:

    because you are absolutely right Floshmichael they mostly bought at 1.50 so a significant number who properly dropped did not see so much hurt, they may have dropped by 30-35% to effect a sale but they got a similar value in Sterling terms to their purchase.

    Not strictly true, it depends on gearing, if someone bought at 1.5 and used principally mortgage debt then a 30-35% drop in price probably just left them with enough money to pay off the euro mortgage, effectively losing their deposit of circa 30%.

  • #98356
    Profile photo of Anonymous
    Anonymous
    Participant

    If you think a return to 1.5 is possible in the near future, heavily mortgage in at todays prices, that way you’ll effectively get a 20% discount in £ terms on todays prices when the 1.5 is hit.

    I can’t see prices increasing significantly regardless of ER hence you might not want to bother, there may be a bit of crawl up with ER, but I can’t see it being significant.

  • #98357
    Profile photo of Anonymous
    Anonymous
    Participant

    “peterhun” states: ‘The Pound will be the next target after the Euro and it doesn’t have the backing of the stronger European economies behind it.

    Its all deficit and massive public and personal debt’.

    You are so right “peterhun”.

    The British Government during the past number of years has not told the general public how serious the public debt is.
    When the new Government – probably a Coalition Tory led one – find out the true financial position expect serious cuts in expenditure and perhaps public service wages. The unions will of course jump up and down as usual. However don’t be surprised if Sterling loses ground to the Euro and USD.
    On a personal note because of the export business my company does in the UK I am hoping Sterling gets stronger. but I doubt it very much.
    More interesting times ahead!

  • #98359
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry, never mind. Broon won’t let go, Pound wont’s shoot up.

  • #98360
    Profile photo of katy
    katy
    Spectator

    Seems we were counting chickens etc…… 😆
    Sterling dropped overnight. The UK is not in the Eurozone but will be dragged down by it. It is an incestuous union. turns out the money has just been shuffling around and it will fall like a pack of Dominos

    Greece owes France $75 billion, Germany $45 billion, Ireland $8.5 billion, Portugal $9.7 billion

    Portugal owes Spain $86 billion

    Spain owe the Irish $30 billion, Italy $31 billion.

    On the other side, British banks are owed

    Greece $15 billion
    Italy $77 billion
    Portugal $24 billion
    Spain $114 billion
    Ireland $188 billion

    Uk is more exposed than any!

  • #98361
    Profile photo of logan
    logan
    Participant

    @Chris McCarthy wrote:

    So even Logan might have to wait a few years yet before there is a batch of units to buy and twist to make a profit.

    I have already posted my decision to give up completely on the Spanish market. There is in my opinion no scope for profit for many years to come and a great deal of potential for loss.
    I am seeking other markets but actually believe property in Europe has had it’s day. AS EU governments seek more and more to claw back their deficits, property investment costs and taxes will only increase. UK Gilts look an ever increasing and attractive alternative.
    Mark – How about expanding your forums towards international business discussions rather than just the narrow confines of Spanish property.

  • #98362
    Profile photo of peterhun
    peterhun
    Participant

    >I am seeking other markets but actually believe property in Europe has had it’s day.

    I agree with that. Your should also consider commodities, soft and hard. The rise of the third world will put increasing pressure on demand which due to shortages of water, for example, will result in big increases in prices in soft commodities.

  • #98363
    Profile photo of logan
    logan
    Participant

    Agree. I have been in the soft commodities market before. However in these times of low inflation it’s not so attractive.

  • #98368
    Profile photo of angie
    angie
    Spectator

    Chris, you are an agent so see things differently to many of us, anyone driving around the Southern Costas of Spain can see 1000’s of ‘For sale by owner’ boards up at windows of concrete urbanisations.

    Disagree with you (as you might gather) regarding your quote of ‘we should have a lot more interest from British buyers now’. The 1.18 euro/stg exchange rate has already gone back to 1.15 today, it’s nowhere near what most here remember of 1.50-1.64. The high completion costs which have been exposed to most Brits now, still remain. The huge uncertainties with Spain, and the other PIGS, do not make for sound investing or purchase in those countries, it’s pure folly. Most Brits are strapped for cash, cannot remortgage their UK homes anymore to raise money for purchase in Spain as they once did.

    If Brits decide to increase their property prices in Spain to recover more stg, people will see through it.

    Katy has quite rightly pointed out the facts regarding debt with these countries including the UK, the huge debts owed to Banks including British Banks, and just today it’s announced that the so called Spanish giant Santander is also in big trouble with Eurozone debt (and S. American)(even their British arm has to pay huge dividends)

    There is still a lot of ‘rosy specs’ attitude by some agents.

  • #98376
    Profile photo of peterhun
    peterhun
    Participant

    However in these times of low inflation it’s not so attractive.

    Inflation is coming, got to inflate all that debt away.

  • #98384
    Profile photo of petej
    petej
    Participant

    The increase in the exchange rate all be it small will imo lead to more buyers from the UK, the problem we have is of course the lack so far of a stable government. If the UK can sort that out in the next week (big if) then the pound will ralley posable to low E1.20s, this will bring more buyers from the UK, you are efectivley giving people more money, no flood but more will buy.

    If the UK can’t sort out a stable government it will all go the other way (my feelings)

    As for the British buyers asking more to cover the difference if the pound goes up they simple won’t be selling but there eurozone partners will

  • #98389
    Profile photo of katy
    katy
    Spectator

    The IVA increase in July will wipe out any small currency gains.

  • #98396
    Profile photo of logan
    logan
    Participant

    @katy wrote:

    The IVA increase in July will wipe out any small currency gains.

    When Spain’s sovereign debt costs start to rise with the inevitable ratings downgrade, IVA will rise again. The government will likely cast around elsewhere, desperate to claw back revenue from the weakened economy. If you want to know the future both for Spain and Portugal have a look at the recent fiscal tightening in Greece.
    Those measures were forced upon the country by the IMF and EU. The same will happen in Spain unless it gets it’s deficit under control.
    Shelling out €10bn for Greece just makes it worse.

  • #98397
    Profile photo of rt21
    rt21
    Participant

    I suspect that in these uncertain times any small changes in currency values will have very little if any affect on people’s decisions on buying property in Spain. And as Katy mentions the changes in IVA would also have to be factored in.

    Richard

  • #98399
    Profile photo of angie
    angie
    Spectator

    Why Spain decides to increase it’s rate of IVA in these difficult times sort of beggars belief, completion costs for property purchase etc are too high as it is.

    It reminds me of their golf course mentality, fewer players and visitors because of the euro/stg exchange rate so let’s increase the cost, or don’t make reductions to try and attract more players. Am I right in thinking that they also reduced the number of cars for rental so forcing costs up there?

    Surely a rational Gov’t would think more before it acts!

    A comparison with the US for example, hotel rates, car rentals, golf, eating out etc all become very negotiable, and I doubt that taxes on property rise.

  • #98401
    Profile photo of Anonymous
    Anonymous
    Participant

    lowering the rate of iva to encourage buyers would of been more benificial in helping to stimulate the market abit

  • #98402
    Profile photo of katy
    katy
    Spectator

    Spanish economics are very strange, they are based on the perception that everyone from Northern Europe have shedloads of money! Even multi-millionaires want “value” for money. There is a chiringuito on Las Chapas beach that charges 125 euro for Moet and some of their mediocre fish can cost around 50 euro per head. They are still using the same plastic chairs that were there 10+ years ago….encrusted in sand and dirt!

  • #98409
    Profile photo of Anonymous
    Anonymous
    Participant

    @angie wrote:

    Am I right in thinking that they also reduced the number of cars for rental so forcing costs up there?

    No they didn’t reduce the amount , they sold off what they could early in the ‘crisis’ & were then unable to buy new as the banks wouldn’t lend them any money. 😆 So leading to a shortage in capacity.The same will be happening this year.

  • #98411
    Profile photo of rt21
    rt21
    Participant

    Unfortunately Spain has had to increase its IVA in response to pressure from the eurozone to reduce its fiscal deficit

    Richard

  • #98418
    Profile photo of Anonymous
    Anonymous
    Participant

    it didn’t have to put up iva it put it up because it was easier for people to swallow easier than say freezing pay and making cutbacks,these will have to come as putting up iva will just put more pressure on the property market and maybe stop a few people from buying

  • #98432
    Profile photo of Anonymous
    Anonymous
    Participant

    I didn’t realise IVA was being increased 😳 What is it going up to?

  • #98435
    Profile photo of peterhun
    peterhun
    Participant

    @dartboy wrote:

    it didn’t have to put up iva it put it up because it was easier for people to swallow easier than say freezing pay and making cutbacks,these will have to come as putting up iva will just put more pressure on the property market and maybe stop a few people from buying

    Its the same reason VAT will being increasing in the UK (probably to 20%), easy to do and superficially painless. But it reduces the money we have for discretionary spending, such as overseas property and other, bad for the UK economy purchases, such as imported goods.

  • #98438
    Profile photo of rt21
    rt21
    Participant

    As I understand it the Spanish Government has promised to implement a range of measures to redress the fiscal deficit, which include a pay freeze, reductions in government spending and increases in IVA. That seems to me a sensible approach. However, whether the Spanish Government actually follows through on those promises is another matter.

    Richard

  • #98447
    Profile photo of angie
    angie
    Spectator

    There’s been a suggestion today of 6oo billion euros being made available to countries that need it by the Eurozone members and the IMF which Germany etc still have to agree to.

    It’s effect has made stock markets rise dramatically today and the Euro has leaped against the Dollar so this looks like positive news.

    The main downside is if the Germans don’t agree or the analysts see the figures as indicating things are worse than 1st thought and state this in the Press and media in the next days.

    Also, the UK will have to pump in 8 billion euros as part of the IMF! 😮

  • #98457
    Profile photo of peterhun
    peterhun
    Participant

    which Germany etc still have to agree to.

    I missed that minor point. Its against German law isn’t it? so they won’t agree to it.

  • #98477
    Profile photo of Anonymous
    Anonymous
    Participant

    @peterhun wrote:

    which Germany etc still have to agree to.

    I missed that minor point. Its against German law isn’t it? so they won’t agree to it.

    Merkel has started the process to change the law already

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