Is the Pound the problem?

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This topic contains 28 replies, has 15 voices, and was last updated by Profile photo of Anonymous Anonymous 6 years, 10 months ago.

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  • #55376
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    Anonymous
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    We all know the Pound is weak at the moment, though we don’t know if it is down at 1.1e to stay or will recover at some point.

    This makes Spanish property more expensive for British buyers with funds in Pounds. If prices are 20% down, and so is the Pound, the British buyer is effectively missing out on the price reduction. There are partial solutions, of course, like taking out a Euro mortgage, but that isn’t as easy as it used to be.

    My question is, are the people out there who want to buy but are prevented from doing so by the weak Pound?

    Mark

  • #95914
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    Anonymous
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    Mark – I know I am talking for Greece now but I expect it is a similiar scenario re. Spain.

    I know a bespoke builder here who had clients last year getting as far as the Architectural drawings stage, then putting everything on hold purely based on the deteriating exchange rate.

    No other reason for delaying the go-ahead.

    They talk of their dilemma – will the exchange improve or will it deteriate further? To build now or to wait.

  • #95915
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    Anonymous
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    @mark wrote:

    We all know the Pound is weak at the moment, though we don’t know if it is down at 1.1e to stay or will recover at some point.

    This makes Spanish property more expensive for British buyers with funds in Pounds. If prices are 20% down, and so is the Pound, the British buyer is effectively missing out on the price reduction. There are partial solutions, of course, like taking out a Euro mortgage, but that isn’t as easy as it used to be.

    My question is, are the people out there who want to buy but are prevented from doing so by the weak Pound?

    Mark

    Pound might be a big problem, but the lack of mortgages, imposibility to MEW the UK properties (due to stationary prices in UK) are also problems.

    Also:

    – the perception that prices still have some way to fall (same as in the boom period many believed that prices only go up…)
    – job insecurity

  • #95916
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    Anonymous
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    In addition to what flosmichael has posted and ignoring the investors. Yes some buyers will be deterred.

    Where people wanting to buy and are willing to absorb the exchange difference. The biggest issue in my book is the illegal builds and there is no system in place from Junta down to the lawyer, notary etc who can give me a water tight titles to the property that I may wish to purchase.

    In so far prices go apart from forced sale and properties in undesirable locations. I have not seen any price drop in CDS.

  • #95920
    Profile photo of logan
    logan
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    It is not just the weakness of Sterling but a general lack of confidence in global markets. In addition Spanish property became grossly over priced in the property boom. Far to much property of a certain shoddy type was built on illusions of never ending demand.
    There is also huge disillusionment in the Spanish system due to corruption and a lack of concerted action by the government to help people when things go wrong. In addition the costs to buy, sell and maintain a holiday home make no sense.
    Few people now believe Spain is a desirable destination for retirement or even a holiday. There are more attractive destinations within financial reach around the world.
    In short Spain is clapped out, over developed and had it’s day.

  • #95921
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    Anonymous
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    @logan wrote:

    Few people now believe Spain is a desirable destination for retirement or even a holiday. There are more attractive destinations within financial reach around the world..

    Sorry, I disagree with this.

    Spain has become the most cost effective destination from UK. One can easily find £50 return tickets (£200 for a a family of 4), around £250/week good accomodation
    (say £500 for 2 weeks in high season) and £200 for rental car for 2 weeks.

    Now, which other place can offer this for less than £1000 for 2 weeks (for 4 persons) in July-August?
    Definitely not in Italy, Greece, Cyprus, Malta or Turkey.

    Spain is an extraordinary destination for a holiday.

  • #95924
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    Anonymous
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    Perhaps most of the contributers here are not in the UK but here the feeling is that Spain and the whole Euro “zone” has lost much of its appeal to holiday makers and potential buyers now simply because of the exchange rate.
    It doesn’t seem to matter to many people what kind of deals Spain may still have to offer because, for a large majority of those people, what your pound gets you on your holiday is a major deciding factor in your choices.

    We’re still going to Spain this year for our holiday but we’ve given up planning to buy now, mainly because our income will be much, much lower now because of the combination of the exchange rate and pension values, which have dropped through the floor and look extremely unlikely to pick up within our original timescale.
    This year however may well be our last holiday in Spain too unless the exchange rate does recover considerably in the next few years.

    To be honest, the corruption element is well down the list now because of the excellent information anyone with a little common sense can obtain – free – on websites like this and from contacts or friends in Spain, which we have in abundance.

  • #95925
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    Anonymous
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    “To be honest, the corruption element is well down the list now because of the excellent information anyone with a little common sense can obtain – free “

    Yes, the information is available for free. Where is the practise and enforcement of this information. A simple example the buyers are suppose to look at the first licence for occupation. So I see a copy of this or God forbid if I have a lawyer he sees it. Than the Junta decides to declare the building illegal !!!!!!!!!! . What good is the free information.

  • #95926
    Profile photo of logan
    logan
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    @flosmichael wrote:

    Spain is an extraordinary destination for a holiday.

    It depends if your sole consideration is cost then perhaps. You get what you pay for and cheap and cheerful is not my taste. I would not describe Spain as extraordinary but then travel is a subjective thing.
    Low cost airlines fly to many other destinations and travel web sites can offer great deals on many extraordinary places. In the land of choice for me Spain lies low on the list.
    My concern is investment or of you like speculation. Spain has had it’s time.

  • #95927
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    @logan wrote:

    @flosmichael wrote:
    Spain is an extraordinary destination for a holiday.

    It depends if your sole consideration is cost then perhaps. You get what you pay for and cheap and cheerful is not my taste. I would not describe Spain as extraordinary but then travel is a subjective thing.
    Low cost airlines fly to many other destinations and travel web sites can offer great deals on many extraordinary places. In the land of choice for me Spain lies low on the list.
    My concern is investment or of you like speculation. Spain has had it’s time.

    Every country related to “A Place in The Sun” has had its time, everywhere prices are falling.

  • #95928
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    Anonymous
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    Going back to the topic the pound is actually worth 10% more than this time last year.

    Glass half empty/full, like everything else in Spain.

    s

  • #95929
    Profile photo of logan
    logan
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    @Stevev6 wrote:

    Going back to the topic the pound is actually worth 10% more than this time last year.

    Glass half empty/full, like everything else in Spain.

    s

    2009-01-12 January 12, Monday 1.11657 EUR
    2009-01-13 January 13, Tuesday 1.09745 EUR
    2009-01-14 January 14, Wednesday 1.10096 EUR
    2009-01-15 January 15, Thursday 1.11532 EUR
    2009-01-16 January 16, Friday 1.12448 EUR

  • #95930
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    Anonymous
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    The pound is certainly a factor holding back our purchase. We can now afford to buy in Spain, but as some of our funding is in UK pounds, it does make us reluctant to “jump”. My perception is that Spanish property is not good value yet, and the low purchasing power of our UK funds, just hardens our view of the market.

    But the real big issue is that suitable property, at a sensible price is still in short supply here (Alicante). If the pound went back to 1.45 or better, we’d be keener to buy, and haggle a little less hard.

    Having said all that, I guess we are atypical buyers, so probably not significant as UK buyers go.

  • #95931
    Profile photo of Anonymous
    Anonymous
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    Ok smartarse

    A year and two weeks

    01/01/09 1.037

    Today 1.135

    9.5%

  • #95932
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    Anonymous
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    I do appreciate what you are saying Shakeel and I realise that there are still a great deal of people who will continue to fall into the traps but this is true in other countries too. The LFO trap is probably the most despicable to date.

    What I was trying to say is that this website and others have gone a long way to try to inform people about the process, the pitfalls and the corruption but the choices are still theirs to make whether it be in Spain or anywhere else.

    I personally am grateful for the wealth of information I now have and that has been a major factor in my decisions for my future plans.
    Hopefully many others are now better informed too.

  • #95934
    Profile photo of logan
    logan
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    Stevev6 wrote:
    Ok smartarse
    /quote]

    Actually the point I was attempting to make was the fact that Sterling is fairly stable and trades in a band between 1.10 and 1.14 against the Euro.
    There are spikes such as last Christmas/New Year when it almost reached parity and the summer of 09 when it rose to around 1.18.

  • #95937
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    Anonymous
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    While the weak pound definetly plays a major part in peoples decisions to buy, I think the bad press Spain has had is also a major factor.

    I do see trouble ahead for the euro though.

  • #96008
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    Anonymous
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    You can also see it the other way round 😆

    No british owner who wants to sell has a big problem with price reductions to get back his initial invested GBP´s .

    Practical example (I´m looking to by) from december 2009:

    Villa price shown on nota simple 435.000 Euro (2004)
    Asking price 340.000 Euro (2010)
    Thus a big price reduction ❓

    This means in GBP
    435 k euros in 2004 equals to 305k GBP that had to be invested.
    340 k euros in 2010 equals to 301k GBP today.

    So the british seller is more or less getting his investment back and the buyer from a euro country thinks he got a fair price reduction.

    So everyone should be happy – 8)

    But of course there is no real price reduction on the property taking place
    so where are the 20-30 percent reductions ?

    Regards
    Sunwind

  • #96010
    Profile photo of logan
    logan
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    Well I for one would not buy said villa at 350K. The real value is more like 240K or less.
    Agents use this tactic to market properties that are overpriced. Sellers do it to try and recover their investment.
    Both are pissing in the wind.

  • #96027
    Profile photo of zoro
    zoro
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    @mark wrote:

    My question is, are the people out there who want to buy but are prevented from doing so by the weak Pound?
    Mark

    As a “want to buy” and nearly ready to buy for cash buyer I am finding the exchange rate is putting me off. Not because it puts what I want out of reach but because my starting point is GBP and if the pound were to recover after purchasing and my circumstances unexpectedly changed, forcing me to sell back into GBP, I could be looking at a big loss and whilst I’m not looking at buying for an investment I don’t want to be looking at a likely loss either. I suppose this is really another way of saying that I think the price of property in Euros is still too high thus removing the cushion against a recovering GBP. The large price increases in Spanish house prices seen during the nineties and early noughties were largely fuelled by Brits with a strong currency and lots of equity in their UK homes, I still don’t think that this has been fully factored out in Euro prices yet and it makes me nervous. It might still not stop me but I am very, very nervous.

  • #96030
    Profile photo of Chris McCarthy
    Chris McCarthy
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    @Stevev6 wrote:

    Ok smartarse
    A year and two weeks
    01/01/09 1.037
    Today 1.135
    9.5%

    Very funny! That made me laugh out loud you are absolutely right well done… touche might have been more appropriate than smartarse but not nearly so funny, but El Anciano made me laugh out louder by saying:

    If the pound went back to 1.45 or better, we’d be keener to buy, and haggle a little less hard.

    People were still arguing all the of same points about not buying when it was 1.45 and not buying then either for 100 other reasons.

    The exchange rate is what it is, and yes almost 10% higher than its lowest last year, but if people think there are better places to buy than Spain, well I don’t know why they are on this Insightful forum in the first place.

    We don’t want to know continually why you don’t want to buy here, we want to know who is buying here and why?

  • #96031
    Profile photo of Chris McCarthy
    Chris McCarthy
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    @sunwind wrote:

    Villa price shown on nota simple 435.000 Euro (2004)
    Asking price 340.000 Euro (2010)
    Thus a big price reduction ❓

    But of course there is no real price reduction on the property taking place
    so where are the 20-30 percent reductions ?

    Didn´t you answer your own question here?

    The price paid may also have been 10% higher than the nota simple in many cases, therefore a 30% reduction.

    You made an excellent point on the GBP equation, but the price reductions are in Euro purchased prices to Euro selling prices. Can’t be anything else.

    But yep if you are a Brit who bought back in the day, your losses are far less severe, so where are all these folk that have been so hardly done by and battered in the market.

    Jeeze, wouldn’t like to have bought a new build in central Dublin from what two years ago, they are fully down 45% today, and in some cases even more and completely unsaleable today.

  • #96032
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    @Chris McCarthy wrote:

    El Anciano made me laugh out louder by saying:

    If the pound went back to 1.45 or better, we’d be keener to buy, and haggle a little less hard.

    People were still arguing all the of same points about not buying when it was 1.45 and not buying then either for 100 other reasons.

    The exchange rate is what it is, and yes almost 10% higher than its lowest last year, but if people think there are better places to buy than Spain, well I don’t know why they are on this Insightful forum in the first place.

    Good to know that I amused you 🙂

    However, that is my position and a simple response to the OP’s question. Your sweeping statements about “people were still arguing all the of same points” hardly seem to justify your response. After all the market has changed quite a lot since we were at 1.45

    As for “better places”, that is simply irrelevant to me, as we all live in Spain permanently. We are not looking for holiday homes, or investment vehicles.

  • #96033
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    @Chris McCarthy wrote:

    We don’t want to know continually why you don’t want to buy here, we want to know who is buying here and why?

    I guess you could tell us who is buying in Spain and why, you are the agent…

    Can you give us some examples of good deals? No, not the ones in your website, those we can consult by ourselves.

  • #96035
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    Well, Mark’s determination to get some forward looking dialogue going here, plus this thread tempt me to have another go, having posted this in August, just before visiting the Costa Brava

    http://www.spanishpropertyinsight.com/forums/viewtopic.php?t=4517

    got 547 views and not a single response and concluded nobody was interested in the impact of the exchange rate. I gave up posting and indeed have only just looked at the site again.

    Can I just add before going on that I have huge personal sympathy for everyone who has got caught up in the various dreadful abuses, scams etc which are now common knowledge. However I do think if Mark creates his proposed “Bad Spain” forum that’s a great solution. I would certainly visit it from time to time to check on developments.

    So, the exchange rate then. Doesn’t much depend on the “home currency” of the potential purchasers and vendors in any given area? Certainly, as I expected when I wrote in August, I found no vendors in Catalonia interested in negotiating very much because there are plenty of Euroland people on both sides of the market. For all those people, on both sides of the equation, there have been real falls of about 20% in asking prices since August 2007. That may not be quite enough to shift the market (one house I was watching has sold, one is still stuck despite the reduction), but it’s clearly getting there.

    But it seems to me that in areas where there are lots of English vendors, many of the potential purchasers are English too. It would be interesting to hear from one of the agents (alleged or otherwise!) how strong an effect this is – but to the extent it’s true it means there’s a “phoney war” going on.

    Now, please don’t mistake this for more Spain bashing, it’s just a macro-economic observation – Germany will probably have to stand behind Greece, whatever they currently say. Ireland has adopted austerity measures which are probably politically impossible in Spain, Greece or Portugal. If Germany therefore also has to stand behind Spain (you can’t run youth unemployment at 40%+ for long and avoid crime and riots) and maybe Portugal, something will have to give.

    Now I may be totally wrong about this, (often am!) but I reckon there’s a lot of people like me with significant amounts of sterling cash who are holding off. The Euro mortgage route is only a partial solution if you have to stump up 35-40% of your own money because of maximum LTV limits.

    I thought in August and still think something around 1.25 is the tipping point. If vendors hold their Euro prices at that rate the market for Brit to Brit sales will free up. Effectively the losses since 2007 would be split about equally between vendors and purchasers. However, if vendors try to push prices back up so that they have no Sterling loss, the market could be very slow indeed for a very long time.

    Carosfella

  • #96039
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    Mark,

    I have been holding off commencing building works in renovating my property for what seems to be almost 2 years now; hoping that the exchange rate will strengthen in favour of Sterling.

    The ammount req’d for renovation is around 400,000 Euros, so even a 10% swing can make a BIG dent in the budget.

    Similarly to Carosfella, I too beleive the tipping point to be arround 1.23 to 1.25 but when we’ll get there ……… who knows.

    Having said all this, the wife and I are getting to the point where we may well just ‘grit our teeth’ and ‘go for it’ as we’re not getting any younger.

    The house is the equivalent of ‘listed’ and given that it can take up to 2 years for our Ayuntamiento to give permission on listed buildings, and we can stage our payments, maybe the exchange rate will improve over this period.

  • #96051
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @flosmichael wrote:

    @Chris McCarthy wrote:

    We don’t want to know continually why you don’t want to buy here, we want to know who is buying here and why?

    I guess you could tell us who is buying in Spain and why, you are the agent…

    Can you give us some examples of good deals? No, not the ones in your website, those we can consult by ourselves.

    I gave an example of one last week on this or one of the other threads around yesterday. I have also responded to a question from Katy about being an agent.

  • #96057
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    Chris McCarthy
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    @El anciano wrote:

    @Chris McCarthy wrote:
    El Anciano made me laugh out louder by saying:

    Good to know that I amused you 🙂

    After all the market has changed quite a lot since we were at 1.45.

    I didn’t mean that offensively in being amused, it is just that everyone who doesn’t buy at any given time has their reasons not do so, and if the exchange rate where at 1.45 many who said they would buy, would have another valid reason not to do so.

    Yet you are entirely correct that market has changed a good deal since 1.45 certainly prices are in some cases as low as they were 10 years ago.

    Swings and roundabouts really.

  • #96065
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    Anonymous
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    Lots of comments already chime with my views but a couple of other points that I don’t think have been raised:

    – The pound’s demise has certainly put off one class of buyer in particular: pensioners retiring on fixed sterling incomes who might also be more likely to be influenced by bad press and horror stories

    – Non currency factor: The big slide in rents (certainly on the CDS and I guess elsewhere) has made renting versus buying more popular. I know lots of people who love Spain and have the cash but are taking advantage of the rental market weakness to live cheaply and risk-free in lovely villas

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