The Tide is Turning Claim the Experts

The Tide is Turning Claim the Experts

WATCH OUT! THERE’S A BUYER ABOUT

Mike Walsh

The steadily rising pound against the euro has got more than Spain’s ex-pat community licking their lips in anticipation. The UK’s property speculators are finally getting their wallets out.

If the pound’s value continues to rise; and the consensus of informed opinion believes it will, sellers on the Costas will find more viewers. The downside is that they will not get as many pounds sterling … if they are converting.

Estate agents and foreign exchange providers are experiencing a revival of interest from those interested in buying properties abroad. The most popular locations are Spain, France, Italy and Portugal. Conti Financial Services say enquiries have jumped by 20 per-cent in recent weeks.

THE PERFECT STORM

Michael McLaughlin of Southern Comfit International says the reversal was quite predictable. “When the pound was falling to near parity reluctance to buy was perfectly understandable. The situation is now reversed and the ‘tanking’ of property prices have combined to create the perfect storm.”

The UK pound’s seemingly inexorable rise has also reversed the trend in which European property buyers preferred buying into the UK market. The tide has turned in favour of those selling and buying along Spain’s Mediterranean coastlines.

Currencies Direct, Mark O’Sullivan, the group’s director of dealing says, “We have seen a dramatic increase in the amount of money entering the international property market.”

SPAIN OFFERS MORE FOR LESS

Is the value difference between the UK improving? Michael McLaughlin thinks so. “In truth Spain has always offered more for less than has the UK. It isn’t back of the envelope accountancy to say you get twice as much for your money in Spain as you do in England; with other advantages added.”

The more pragmatic buyers appreciate that whilst the value of the pound isn’t as potent as it was several years ago, the drop in property prices on the Costas has compensated. A buyer in 2009 is actually getting as good a deal than those who bought prior to 2005, because artificial values have been replaced by reality.

Astute property buyers realise that whilst the pound is 15 per-cent weaker against the euro than it was last year, the 30 per-cent drop in asking prices is now equal to a pound set at €1.40 to €1.45.

Speculators, rather than the domestic buyer, also realise that taking out a euro-mortgage, whether they need it or not, will put them at an advantage as the rate continues to improve.

Buy Smart in 2009 - you have the power!

there are still good ways to buy abroad | Primelocation

As if the credit crunch and the impending recession weren't enough, the downside for Brits wanting to buy overseas has been compounded by the plummeting value of the pound.

In just 12 months, sterling's value has slipped from €1.45 to under €1.20 - a fall of almost 20%. Against the dollar, the decline has been even more dramatic. As recently as July you could get $2 for every pound; by late November that had fallen to under $1.50.

Psychologically, it's a serious deterrent for buyers, as it means you could be paying significantly more for the same property than you would have a year ago. What's more, the cost of living in most overseas countries has also gone up accordingly - so that pint of beer, restaurant meal and weekly grocery shop will all be more expensive.

There are a few countries outside the dollar and the euro where the exchange rate pain has not been quite so profound - TURKEY springs to mind - but by and large, overseas homes are less of a bargain than they used to be.

So what can you do about it? One option - if you believe that the pound will make a recovery - is to take out a mortgage in the local currency. Say you want to buy an apartment in France or Spain that costs €200,000, and you take out a Euro-denominated loan for €150,000. Then only the €50,000 deposit will suffer from the conversion at a poor exchange rate, and if sterling recovers in a year's time you could potentially refinance the property at a more attractive conversion rate. This works especially well if you will be earning rental income in the local currency to pay the mortgage interest; but it is a high risk strategy - after all, sterling could decline still further.

Another option is to look in markets where property prices have fallen significantly. Spain is the obvious example; in spite of official figures which purport to show that property prices are still rising, evidence on the ground is that prices have already fallen by around 20% on average, and with many developers on the Costa del Sol or Costa Blanca in financial trouble you could get an even bigger discount, wiping out the effect of sterling's falling value. But don't buy just on the discount - after all, too many properties in Spain were over-priced in the first place.

Ask us how to save money on your new mortgage and buy smart in 2009.

Nigel Salmon - Girasol Homes 44 1974 299055

www.girasolhomes.co.uk * www.girasolhomes.com * www.girasol-bespoke.com

Why sterling might recover - Investors Chronicle

It's easy for an economist to look stupid - he only has to make a forecast. In this spirit, then, here's a prediction - sterling will recover against the euro in the next 12 months.

There are four reasons for this.

First, despite recent lectures on fiscal policy from the Germans, the euro zone economy is in a horrible mess. Latest figures from Germany show that manufacturers' sales fell by 4.2 per cent in November alone, with sales to euro area economies dropping 6.3 per cent to stand 12 per cent below last November's levels. And, in France, industrial production has slumped 7.4 per cent in the last two months alone (that's not annualised, just the raw drop). What has a benefit to the euro zone in the upswing - a larger manufacturing sector more exposed to world trade - has become a curve in the downturn.

Insofar as the pound's weakness reflects a view that the UK economy is the sick man of Europe, it is therefore unjustified.

Secondly, any recovery in global stock markets this year would probably benefit the pound. There's been a close correlation for years (0.45 since January 1991) between annual changes in the €/£ rate and in the All-Share index; when global share prices rise, so does sterling.

So, if investors sense this year that an economic recovery is coming - even if it doesn't actually materialise until 2010 - or if they rediscover their appetite for risk, sterling should rise.

Such a prospect might seem remote now. But remember, 12 months is a long time in financial markets.

It's in this context that the UK's current account deficit matters. When investors are nervous, they traditionally avoid currencies whose countries are running deficits. And when they recover their nerves, such currencies often bounce back. In itself, the UK's deficit is no reason to expect the pound to stay low. After all, we've had it for years, even when sterling was strong.

Thirdly, there's some evidence that the €/£ rate mean reverts. Since January 1990, there's been a significant negative correlation (minus 0.37) between the level of the €/£ rate and subsequent annual changes in it. A strong pound leads to a falling pound, and a weak pound to a rising one.

In other words, foreign exchange markets can be just like stock markets - they over-react, causing prices to rise or fall too much. The very fact that the pound is weak, therefore, might be telling us that it is too weak.

Fourthly, sterling is under-valued. Our chart shows one measure of this, based upon relative productivity in the UK and the euro zone. This measure has some predictive value; in the past, when sterling's been below it, it has risen in the following 12 months. It is now more under-valued than at any time since at least 1990.

We shouldn't make too much of this particular measure. But thinking in vaguer (and, therefore, truer) terms brings us to the same conclusion. It's hard to see a shock to UK inflation, output or productivity in recent months that the euro zone hasn't similarly experienced. So it's hard to see how any measure of sterling's 'fair value' should have collapsed, which, in turn, suggests that the currency is under-valued.

Now of course, exchange rate forecasting is a mug's game, and economists shouldn't set themselves up as futurologists. The message I'd take from this is that it's easy to tell plausible-ish stories about the future. The trouble is, there's an almighty gap between plausible and true.

Spain's PM sees economic recovery in late 2009 - Expatica

Spain's PM sees economic recovery in late 2009 - Expatica

Zapatero predicts the economy will begin to recover in the second half of 2009

MADRID – Spanish Prime Minister Jose Luis Rodriguez Zapatero Thursday predicted the country's slumping economy would begin to recover in the second half of 2009 after suffering a difficult period.

"We are going to go through some bad months, but there is a certain and solid recovery on the horizon," he said in an interview with the television channel Cuatro.

"In the second half (of 2009) we are going to have some data that points to a recovery.... We are going to emerge to strong from this crisis."

He also predicted inflation would drop to under 2.0 percent this year and to 1.0 percent "at the most" in 2009.

Spanish 12-month inflation plummeted to 2.4 percent in November from 3.6 percent in October, hitting its lowest rate since August 2007.

Spain's economy was until very recently one of the most dynamic in the eurozone but it began to cool in 2007 as the international credit crunch hit an already weakened real estate sector, putting an end to a decade-long property boom.

It is now on the brink of recession after gross domestic product contracted 0.2 percent in the third quarter and the slowdown has led to the loss of tens of thousands of jobs in recent months, mostly in construction and the services sector.

Zapatero earlier Thursday predicted that his government's recent 11-billion-euro stimulus package would lead to a sharp rise in job creation during the first half of 2009.

"It will be at that moment, in March or April, when we will have an intense rhythm of public works under way that will without a doubt create jobs at a considerable rate," he told parliament in a debate on the 2009 budget.

Spain's lower house passed the budget, overturning a veto in the Senate where legislators had slammed the proposal as outdated given the country's fast deteriorating economy.

[AFP / Expatica]

Cheaper mortgages as the Euribor continues to fall.

Spain Business Brief - Monday December 29 2008

Cheaper mortgages as the Euribor continues to fall.

Mortgages in Spain will see their largest fall in seven years, as the Euribor rate falls to 3.4%, its greatest fall since 2001. The change means the average mortgage will be 115 € cheaper a month. Experts say that the tendency for next year will continue to be downwards.

Girasol Homes mortgage website is still expected to be ready early January - this will not only cover Spain but worldwide including Portugal, the USA and destinations which will include the UK, Turkey and even Australian mortgages. Register now or email us for a mortgage illustration at mortgages@girasolhomes.co.uk

Full article

Cheaper mortgages as the Euribor continues to fall.

Mortgages in Spain will see their largest fall in seven years, as the Euribor rate falls to 3.4%, its greatest fall since 2001. The change means the average mortgage will be 115 € cheaper a month. Experts say that the tendency for next year will continue to be downwards.

The Prime Minister, José Luis Rodríguez Zapatero, is preparing another meeting with the Spanish banks for January, with the intention that the citizens of the country benefit from the state help being given to the financial institutions. Zapatero wants to see the funds have an effect on the real economy.

The Minimum Wage in Spain will increase by 4% in 2009 to take it to 624 € a month, compared to the 600 € now. Minimum pensions are up 6% next year.

RENFE train unions have called off the strike which was planned for today after a meeting with management.
Both sides have agreed to extend the current wage deal for another year and apply a wage increase equal to that awarded to civil servants next year.

The latest victim of the Madoff broker fraud is the Spanish film director, Pedro Almodóvar and his production company El Deseo. They invested some 5% of their assets in Lux Invest, one of the affected funds. Stephen Spielberg also lost in the fraud.

Savings Bank La Caixa has announced that it is no longer in talks to sell its shares in Repsol YPF. It was thought the bank would be selling the 14% shares it has to the Russian company Lukoil, but they announced the change of mind in a statement to the National Council for Market Values.

General Motors workers are demonstrating in Zaragoza this afternoon as they have failed to reach an agreement on redundancies with management. The motor manufacturer wants to temporarily lay off 7,500 workers for a period of 17 days.

And finally, It seems the economic crisis is affecting wine sales in Spain, with sales of crianzas and reservas in bars and restaurants down 20%. However the sales of Don Simón and other cheaper table wines, often sold in cartons, are soaring up 29%.

Full article from http://www.typicallyspanish.com/news/publish/article_19433.shtml

USA Rate cut to record lows makes Istanbul investment a top pick

US Fed chief Ben Bernanke last night cut interest rates more than expected to between 0% - 0.25%. The dollar fell back on the news against most majors. Bernanke is recognized as an expert on the 1930’s depression and has unleashed all his armour in the fight against the recession.

The much talked about “quantitative easing” a monetary policy tool used by the Japanese in the 90’s during their fight against deflation is now centre stage as interest rate setting policy at almost 0% gives the Fed no further scope to cut. The Fed are likely to flood the US with money in order to keep the economy moving. I would imagine that US government debt by way of T Bonds will be purchased by the Fed in order to print more money.


This morning see’s the release of the Bank of England MPC minutes. They are likely to show a unanimous vote in favour of the rate cut at the beginning of the month and further easing of monetary policy.

The Euro has been one the major beneficiaries overnight and dragged Sterling to a new record low as traders buy back the euro on widening interest rate yield differentials. This is profit taking for Christmas bonuses in my opinion.



For property investors or for investors generally the pick of the crop are the Istanbul 5 year rental properties available from £62,950 with a 5 year rent guarantee at 9.5% see http://istanbulinvestmentproperty.blogspot.com/

Current interbank prices area as follows:


GBPEUR: 1.1060

GBPUSD: 1.5623

GBPDKK: 8.2130

GBPSEK: 12.2450

GBPCHF: 1.7375

GBPZAR: 15.5485

GBPJPY: 138.14

USDEUR: 0.7069

GBPAUD: 2.2434

GBPNZD: 2.6739

GBPCAD:
1. 8703

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Exchange Rate Update for Overseas Property Buyers

Here is my new regular blog site on the vagaries of foreign exchange - it's a confusing picture with all of those city traders trying to scrape their huge bonuses, however we do have a panel of experts to help us with all of the Foreign currency markets.

We also announced yesterday we have new Foreign Currency Exchange Mortgages via our Mortgage Department in Spain. For more details go to http://spanishpropertybargains.blogspot.com/

With thanks to Bruce Borrie from Baydonhill Foreign Exchange

Sterling dipped yesterday against the US Dollar and Yen as worries over the health of the global economy prompted investors to dump riskier assets. Both the FTSE100 and Dow Jones headed south as they shifted their proceeds into the US dollar.

Official data released yesterday confirmed the UK economy shrank by 0.5% in the 3^rd QTR, and household spending fell by the largest amount in a decade. The Nationwide reported this morning that UK house prices fell by 0.4% on the month and that the rate in which they were falling had decelerated slightly. All eyes will now look towards the meetings of the European Central Bank and Bank of England next week as the outlook for interest rates will once again hold centre stage. I would imagine that the Bank of England will cut again in response to the continued downturn in the economy.

Current Interbank Prices as follows:

GBPEUR: 1.1924

GBPUSD: 1.5387

GBPDKK: 8.8750

GBPSEK: 12.2924

GBPCHF: 1.8465

GBPZAR: 15.1944

GBPJPY: 146.39

USDEUR: 0.7750

GBPAUD: 2.3630

GBPNZD: 2.8077

GBPCAD: 1.8894

Please let us know if you require any further explanations on any or all of the above.

The New Girasol Homes Overseas Mortgage site should be up next week.