Buying Now, The Maths Still Don’t Add Up IMO

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This topic contains 26 replies, has 5 voices, and was last updated by Profile photo of Anonymous Anonymous 5 years, 10 months ago.

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  • #56077
    Profile photo of angie
    angie
    Spectator

    This is just one example why I don’t think now is the right time to buy in Spain and abroad.

    When we first bought, our exchange rate was 1.64 euros to the pound.

    Currently, we’d get about 1.15/6 from the dealers or banks.

    So, based on a Spanish property of 400k euros inc. costs, we would have spent approx £244k at 1.64.

    If that property had fallen say 30% since then to 280k euros, then we would still be spending approx £244k but at the rate of 1.15.

    Virtually no difference in Sterling terms.

    That’s why I personally don’t think it’s a good time to buy now. However, if property was definitely 40% or more lower, then it might turn out to be a reasonable investment. Or. Sterling moved up considerably against the Euro then that could work.

    With that example, there will always be concerns about Sovereign Debt still around 🙄

    Remember, this is just my opinion 😉

  • #102687
    Profile photo of Anonymous
    Anonymous
    Participant

    IMHO your “IMO” is correct. In addition little or no chance of an equity release from UK properties with interest rates at par to rates that was charged in 2007/2008. never mind the BOE rates of 0.50%.

    The chances of €1.64 are long gone as that was rate that had the inherant risk built into a new currency being floated & without the subsequent treaties to politically unify the EU members states.(I think its the Lisbon treaty !!!!!)

  • #102696
    Profile photo of adiep
    adiep
    Participant

    From my perspective, I agree with all the above, but also the high initial buying costs are somewhat annoying and deposits required for anything other than a repo are high, certainly not worth moving money from good investments and into property that will likely lose more of its value.

  • #102697
    Profile photo of Anonymous
    Anonymous
    Participant

    Buying because the whole market is going up, ie “trading” as opposed to fundamental investing is, and was always, a dangerous game for amateurs. You can make money in any market, especially property, if you apply the fundamental principles of investment.

    For example find a property you can add value to or find a local situation where supply is resticted and demand is about to shoot up. Its a big topic and there are plenty of books on it.

    I suppose the downside is that is requires real effort and thinking on the part of the investors point of view. No bad thing that!

  • #102699
    Profile photo of adiep
    adiep
    Participant

    Good points John. But for some of ordinary buyers, we really want a home that’s suitable for living but obviously dont want to buy if were going to be losing substantial amounts of capital. That’s the problem in this market when you believe the bubble hasnt been pricked yet. We can handle some loss, but who wants to jump in when there’s clearly another 20-30% to come off prices. Buyers will just stall their purchases — which of course feeds more house price deflation.

  • #102700
    Profile photo of angie
    angie
    Spectator

    John, you’re right in a sense that money can be made provided the property can be enhanced, but that would not work on most Spanish properties mainly because of the mass builds of look-alike urbanisations everywhere.

    I’ve always had a problem adiep as well, with the high (if not extortionate) costs of buying in Spain and abroad, shakeel is echoing what’s been said many times, that Brits can’t now release equity for purchase of Spanish property.

    My example was showing how buying now in Spain and Eurozone even if the price has dropped 30%, means there’s no difference in sterling terms to buying in the boom, no-one’s getting a bargain unless the reduction is 40% or more at current exchange rates. 🙄

  • #102703
    Profile photo of Anonymous
    Anonymous
    Participant

    Angie, drop in 30% will only negate the currency difference. It has to be atleast 30% plus the cost of purchase lets see another 10%. This means to stand still it has to be 40% off. I would than build in another 5-10% of the risk factor of potential future reduction in prices. Which will than lead me another risk that the Hacienda may consider that cash had exchanged & as such they want yet another pound of flesh , making it two Pounds of flesh. Eat your heart out Shylock.

  • #102704
    Profile photo of Anonymous
    Anonymous
    Participant

    Angie and Adiep: You’re right of course. You want to avoid overpaying and there’s a paucity of reliable information about the price / value of property in Spain.

    I suppose I think about it like this and I talking about how I personally approach this. My investments pay for my living and my enjoyment. When I make decisions about my investments then I consider things like which way the market is going (trading) or whether the investment is fundamentally good.

    The thing is my home and my holiday home arent investments. They are what the investments pay for. I may have income producing property investments as part of my investment strategy but my home and my holiday home are part of the cost of my living and enjoyment. So I apply a different set of criteria to the decision to buy.

    Personally I find this a useful distinction to make because it removes a whole swathe of objections to buying a home I might enjoy. And of course I still dont want to overpay in exactly the same way that I dont want to overpay for a meal out or a holiday or a car.

  • #102706
    Profile photo of adiep
    adiep
    Participant

    Has to be said, recently I am seeing lots of new properties on the market in my area and they are now starting to look better value to me, However, I suspect they are still not reasonably priced for the people who live and work in the area.

    12 months ago they’d of been trying to get 350k for this

    http://www.fotocasa.es/Building/Building_Detail_3.aspx?link=1134&OrigenVisita=31&opi=90&ai=124706286&ids=124871187|2;17162583|1;121715468|2;122653750|2;124706286|2;123707580|2;124728253|2;124755196|2;&et=2&ui=2581861&gi=279C954E62DE523B&tti=1&redirected=true

  • #102707
    Profile photo of adiep
    adiep
    Participant

    or this

    http://www.fotocasa.es/Building/Building_Detail_3.aspx?link=1134&OrigenVisita=31&opi=73&ai=124755196&ids=124871187|2;124870742|2;123768483|2;17162583|1;17120924|1;122653750|2;124706286|2;121715468|2;123707580|2;124728253|2;124755196|2;&et=2&ui=2581861&gi=279C954E62DE523B&tti=1&redirected=true

    Knowing the market, these have definitely dropped considerably.

    So it appears to me that asking prices are starting to look more realistic. One wonders if this trend will catch on.

  • #102708
    Profile photo of Anonymous
    Anonymous
    Participant

    €5k is hardly a reduction. €5k is a normal reduction in a normal market.

  • #102709
    Profile photo of adiep
    adiep
    Participant

    @shakeel wrote:

    €5k is hardly a reduction. €5k is a normal reduction in a normal market.

    Shakeel, ignore the drop you can see indicated there, im talking about the norm. These properties are priced below the norm.

  • #102713
    Profile photo of Anonymous
    Anonymous
    Participant

    adiep. Yes, I understood what you meant in the context of your posting. What in turn I meant was to advertsie on the site as a reduction. the 5k reduction will hardly have people queing outside.

  • #102718
    Profile photo of adiep
    adiep
    Participant

    @shakeel wrote:

    adiep. Yes, I understood what you meant in the context of your posting. What in turn I meant was to advertsie on the site as a reduction. the 5k reduction will hardly have people queing outside.

    I see what youre saying.

    Back onto those properties, do you think they are expensive for the area? It’s the Campo de Gibraltar area, hardly a hotbed of 50k a year earners. So are 200k houses out of range for most people these days, what with the banks being a little more careful.

  • #102719
    Profile photo of angie
    angie
    Spectator

    Basically shakeel, I think you agree with me, that to make sense for Brits, then a reduction of 40%+ must be achieved now to make the properties cheaper than they were at the height of the boom.

    You’re also right about the authorities thinking there was an under-declaration/cash exchange if you bought with a large reduction in value.

    Interestingly, Viva are emailing regularly their Hot property reductions which vary from 5%-50%, so those of 5-30% don’t seem to be such great bargains for Brits at current exchange rates. 🙄

  • #102722
    Profile photo of adiep
    adiep
    Participant

    Who are “viva”?

  • #102723
    Profile photo of angie
    angie
    Spectator

    adiep, Viva are Chris’ company I think, well he is very involved with them on this site too, but their marketing is pretty full-on at present with reductions etc. 😉

  • #102724
    Profile photo of adiep
    adiep
    Participant

    Chris? Do you have the URL?

  • #102725
    Profile photo of Anonymous
    Anonymous
    Participant

    adiep. I personally will not buy in Campo de Gibralater or in its vicinty. The area as little or nothing to offer, the fall out with the Spanish/English dispute over Gibralter, Gibralter airport cannot be taken seriously, lack of infrastructure & not to mention the air from the refinery.

    The nearest if I have to buy in that area would be Sotogrande & that would be with some reluctance due to lack of life/activity outside July/August, distance from Malaga airport.

  • #102726
    Profile photo of Anonymous
    Anonymous
    Participant

    angie, I have also been receiving emails from VIVA. I do not see any serious discount which stands out. A small % does not get noticed & where the discount is of a higher percentage it would be in areas that I would neither like to buy or rent. I appreciate we all have our own yardsticks to measure with.

  • #102727
    Profile photo of adiep
    adiep
    Participant

    Shakeel, I work in this area…

  • #102729
    Profile photo of Anonymous
    Anonymous
    Participant

    adiep: We all have to pay for our sins in one form or another.

  • #102734
    Profile photo of adiep
    adiep
    Participant

    @shakeel wrote:

    adiep: We all have to pay for our sins in one form or another.

    🙂

    It’s served me well for the last few years. Going back to your comments on campo de gibraltar, the airport will help and of course La Linea now has a marina, and amazingly there’s quite a few boats in it — which was a surprise for me.

    I suspect it the only place from Malaga to Cadiz that has any hope of economic growth in the next 5 years.

  • #102747
    Profile photo of angie
    angie
    Spectator

    The other problem with buying now of course at exchange rate of 1.15/16 ish, whilst not making any saving or very little on sterling equivalent during the ‘boom’ days, is, if the exchange rate flips back to 1.40-1.50 say, then if you want to return to Blighty, you’d lose out badly in sterling terms.

    Example: buy now a 280k prop, which was reduced 30% from 400k, sterling equiv. approx £280k.

    Then having to re-sell, if rate flips to just 1.40, you end up with £200k, a loss of 80k, worse if it returns to 1.50 or more.

    Buyers, do your homework first, it could cost you a fortune not to.

  • #102756
    Profile photo of adiep
    adiep
    Participant

    Very good points Angie. Many wont consider the effect of exchange rates. Its a double wammy for brit buyers when the pound is weak and then rises in the future.

  • #102757
    Profile photo of Anonymous
    Anonymous
    Participant

    That is why I always sugguest to have a local mortgage. This way one’s exposure is limited to the amount that was introduced as equity. Taking our a mortgage is tax effecient also.

  • #102763
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi everyone, this is only my second post here but I couldn’t help but wade in, if you don’t mind.

    I wanted to second what John Wolfendale said, and add to it a bit. My two cents is as goes…

    The way I see it you can basically divide the act of buying a property into two categories: buying, partially or completely, as an investment, or not buying as an investment. If you fall into the first category then I can only say that I think in Spain, now is not the time whatsoever to buy anything with an eye on investing your money, if not perhaps in the very long term. If you fall into the second category then, as John said, a whole lot of complications and factors are rendered irrelevant and essentially it boils down to just a few things – do you really like the property? will you be happy purchasing it? and most importantly, can you comfortably afford to do so?

    Having said all that I’ll throw out another bone to chew on…I’ve always been of the opinion that there are only three situations where it makes financial sense to buy a second property. 1) You’re able to spend a very good chunk of the year at the property 2) Prices are increasing at a rate which offsets the costs incurred by owning (tax, maintenance, community fees etc) 3) You’re filthy rich and normal rules don’t apply. Number 2 is dead and dusted, and number 3 is unusual…

    So basically I’d say that, if you plan or are able to spend a decent amount of time (measured in months, in my opinion) in your second home, and if you’re uninterested in making or losing money, find a place that you very much like, and feel comfortable taking on the expense, then there’s no reason not to buy now, or at any time for that matter. But if this isn’t you, I wouldn’t take the plunge right now.

    Cheers

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