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Exchange Rates Impact on Property Budgets

Survey Spain - Bank Lending Upside DownThe current market value of a property is just that: it’s what someone will pay for the property at that particular moment. In addition to the normal vagaries market, of increasing and decreasing supply and demand and changes locally, we are increasingly finding that there can be radical changes ‘overnight’, as exchange rates fluctuate significantly.

Looking at the UK market, the loss in value of the pound and the parallel apparent increase in euro economies, have combined to reduce the exchange rate significantly, with it being above 1.40 euros to one pound within the last two years, whilst now it’s down at 1.09 Euro to one pound, a loss of almost a quarter. Despite previous concerns about the long-term survival of the euro, forecasts are that there should be parity soon with the pound, perhaps going even more and the euro becoming the strongest currency. Looking at currencies of other buyers in Spain, the fluctuations of the Nordic countries have been smaller, whilst of course, others such as Russians have seen the value of their home currency half compared with the euro. All this uncertainty will be having a profound effect upon the property market.

British expats who depend upon sterling income from pensions or the like will be finding that life is becoming increasingly expensive here and may well be considering that they have to go back to the UK to survive financially. However, to balance that, the value of their property here in the Eurozone is increasing relative to sterling. With property values appearing to have peaked in the UK, the sale of their euro property will move them up to a higher price bracket back in the UK where they will be able to live in the same currency as their income. Perhaps they will consider renting in the UK and keeping and renting out their property in Spain in the hope of value is continuing to rise here. Continue reading

Are you Ready? – First Rain of the Autumn

How to protect your house from the rain in SpainThe forecast is that summer is to end early and the Costa del Sol is to see rain and lightning storms on Monday to Wednesday this week (28th to 30th August). Normally, it has the decency to wait until all are back at school and the office, but this year it’s different.

Damp is the most common fault we see in our building surveys and much of it can be avoided with a little preparation.

Start at the top. Are all the terrace drains clear of weeds and debris and water able to flow down them and away easily? Remember that when it rains here, it can really come down in large amounts so every millimetre of pipe width is important. Otherwise the rainwater ponds and finds its way under the tiles and through into the areas below, or around the patio doors and into the house that way. It’s too late to install new gutters and downpipes, but make sure if you have them that they too are clear and the end of the downpipe directs water away from the building, ideally into a drainage system. Where is the water going from the terrace? We see spouts pouring onto terraces below, with a fierceness to wash away the grout from around the tiles there. Once water gets under tiling, it can flow to the walls and cause damp internally for many years. So, ensure that any water falling from above is caught, even in an empty flowerpot and allowed to overflow from there, which will avoid the damage to the surrounds of the tiles. Continue reading

How to inspect an off-plan property overseas

The Sunday Times

Q My off-plan property in Malaga is due to be completed in the next few months, and I will be inspecting the property soon. What should I look out for, and what are my rights if I find any defects? J Harrison, by email

A Before making the final payment to a developer or builder — usually the remaining 70% at this stage — you need to ensure your home is finished to the required specification. When the builder contacts you to arrange an inspection, commission a chartered surveyor’s report to UK standards, which starts at about €400 (£350). Try the Rics-governed Survey Spain (surveyspain.com).

Your snagging list should include any damp patches or mould growths; the state of the plasterwork and paintwork, which should be well finished, with no cracking; whether all the appliances you have paid for have been installed; and whether doors and windows open and close properly. Check that the taps and loos run and flush, that electric, phone and internet points are as specified, and that amenities are as promised.

Off-plan buyers are covered by various construction-defect guarantees under Spanish law, but negotiations on flaws must take place before completion, so you have leverage.

Raymundo L Nesbitt, director of Larrain Nesbitt Lawyers; http://www.es.larrainnesbittabogados.com

View original article here: https://www.thetimes.co.uk/edition/home/how-to-inspect-an-off-plan-property-overseas-qdmccglft

Quarterly Market Report – Spring 2017

q-reportThis is our 14th Quarterly Report. As part of our research we have identified a number of wider and national property comments.

The Overall Market – Concern as to amount of new construction.

  • As reported last quarter, building activity is undoubtedly continuing and increasing, and the concern is that we may be heading for another ‘bubble’. Yes, there is demand, but there is also a substantial amount of existing property on the market. As always, developers have the selling advantage of larger marketing budgets to bring in the buyers, but we are seeing signs of some discovering that all is not as fast as they expected, with ‘free’ cars being offered to buyers and 10+% commission offered to agents. See the article “Are we heading for another Bubble” in https://www.surveyspain.com/blog/are-we-heading-for-another-bubble
  • As before, Brexit, and its effects upon the UK buyer and existing British residents, is still an unsettling force, with other EU nationalities becoming increasingly frustrated at the disruption it is causing. However, there are still many UK buyers.
  • The EU and UK have now put forward their proposals for the other’s residents in their countries. Whilst there is a general agreement in principle, there are many details still to be clarified, especially for what happens with expatriates who arrive after the as yet unspecified ‘Specified Date’. See the article “Is the future becoming a little clearer”. https://www.surveyspain.com/blog/is-the-future-becoming-a-little-clearer
    • In that I state that it is my opinion that those residents here before the Specified Date, assumed to be March 2019, will have special rights of residence, but others arriving after that date will be treated in the same way as all those of other non-EU nationality.
  • The reduction in UK buyers is adequately being replaced by those of other countries, with Nordic, German, French and others being active in the market.
  • As stated before, the market dependent upon Gibraltar, both due to proximity and business, is undoubtedly the most nervous of all. We are seeing prices and values dropping in this area, counter to most of the Costa del Sol.
  • Tourism is still very strong, with record numbers being expected over the summer. Hopefully, there will be enough water freshwater for them all!
  • The requirement for licences to legitimately offer individual properties to let, is likely to reduce the number of buyers who are depending upon rental income to afford the running and finance costs of their purchase. This will especially be the case should there be publicity of draconian fines to people discovered to be acting illegally.
  • In the background, there is the thought that if interest rates should rise, many owners may find that they cannot afford their second property in the sun and that there could be a significant increase in properties being offered for sale.

Continue reading

Are we heading for another bubble?

Construction on the Costa del SolA recent article in Spanish Property Insight stated, “Building land market comes back to life, but recovery is patchy and town planning an obstacle”. Yes, only by looking round the skyline it’s good to see cranes moving to create buildings where people want to live and holiday. Yes, it is patchy, because the builders want to build in the ‘safest’ locations, where people want to live and holiday. There are still shells of developments in poorer locations, far from beaches and social and retail facilities, which were never going to be popular. Developments started there because builders were lent money to build, they were the only sites available and speculative buyers were lent money to reserve them. However, when the crash came, these buyers couldn’t sell on at a vast profit, especially considering the costs of purchase and sale. Too late they found they couldn’t rent the houses as nobody wanted to live there. Also, the costs and taxes on income made it impossible to cover all the running costs. So, they pulled out of the purchase and the whole deal collapsed leaving banks with empty shell apartments in a failed development.

The failure wasn’t of the building; it was of the location. Now we are seeing a rush to buy building land again, in poorer locations because the price is low. Then marketing starts, convincing naive buyers that they should be paying high prices for new, unsnagged properties. People buy new when, with internet research, they’ll find better existing properties, in better locations, as that developer had the pick of those.  Continue reading

Is the Future becoming a Little Clearer?

Brexit2-300x250With Brexit, we are all in the same boat. Writers based in Spain have the same concerns as readers, but with a slight advantage in that we focus on its effect upon our specialities. Mine are pre-acquisition building surveys and valuations, the latter being principally as an expert witness for UK and other countries’ courts regarding divorce, tax, inheritance, and other disputes relating to the value of properties in Spain.

When the Brexit result was announced, everyone, including many Leave supporters, were in shock. “What have we done?” and “How will it affect me?” For a year, we haven’t had an answer to either of those questions. Now, the UK government has put forward how they will treat EU nationals within the UK, assuming that similar arrangements will be made for UK nationals in Europe.  Continue reading

Ready to Sell?

Houses for sale in SpainWhen Survey Spain are asked to carry out a pre-acquisition survey of a property, it’s usually after it’s been marketed for some time and been inspected by the potential buyer at least twice. There will have been others looking round the property, reading the agents details, driving round the neighbourhood and selecting lawyers and estate agents.

The house will have been cleaned and tidied again and again, and there may even have been a Home Stager employed to bring the property to a decorative state where it is attractive to most. There will have been agents spending hours describing all the properties features in ‘breathless’ prose and they and friends advising on the price. The sellers, in between cleaning and tidying the house once again, will spend sleepless nights swithering, “will we, won’t we”, over a hundred minor and major decisions.

So, all should be perfect when we come along. I don’t mean the condition of the house as, except for the minor points, that’s usually on the basis of, “What you see is what you get”, and hopefully the surveyor won’t see too much wrong. No, I’m thinking of essential paperwork items.  Continue reading

Building confidence in Spain

Despite the recovery of the market, there are still some huge differences between what was loaned in the good times and the market value of the property now.

220px-nordiske-flagBuilding activity is increasing. Many new individual villas, though the financial rationale of those is uncertain as there are still so many available for sale, with those having had the choice of the best sites in the past.

New flatted developments are also being created with the developers presumably been reassured by the appropriate percentage of reservations off plan.

Older ‘skeleton’ developments that were not completed during the last boom are being acquired and completed by new developers.

‘No sign of housing market overheating’, says Bank of Spain. Generally, that is probably the case. However, in certain popular areas there must be a risk that everything is proceeding along a very similar course to before the last crisis. Continue reading

Quarterly Report April 2017

q-reportThis is our 13th Quarterly Report. It is originally prepared on behalf of a Bank for which we carry out many Revision Valuations, which are now required very 2 to 3 years as Banks must update the value of the assets that they hold as security for loans. So, if you have a mortgage, don’t be too surprised to see a valuer photographing your house from the street as he/she is only carrying out a ‘walk by’ inspection and valuation. Despite the recovery of the market, there are still some huge differences between what was loaned in the good times and the market value of the property now.

As part of the research we have identified a number of wider and national property matters.

The Overall Market – Increasing divergence of markets.

  • Building activity is undoubtedly continuing and increasing.
    • Many new individual villas, though the financial rational of those is uncertain as there are still so many available for sale, with those having had the choice of the best sites in the past.
    • New flatted developments are also being created with the developers presumably been reassured by the appropriate percentage of reservations off plan.
    • Older ‘skeleton’ developments that were not completed during the last boom are being acquired and completed by new developers.
  • ‘No sign of housing market overheating’, says Bank of Spain. Generally, that is probably the case. However, in certain popular areas there must be a risk that everything is proceeding along a very similar course to before the last crisis. There is increasing demand from many nationalities, with the Nordic buyers still prominent. However, the statistics show that there has been a significant drop in acquisitions by UK buyers, presumably linked to Brexit.
  • A useful source of current statistical analysis of the source of buyers can be found at https://www.spanishpropertyinsight.com/2017/04/07/swedish-demand-property-spain/
  • Having said that, we have noticed no reduction in the number of building surveys that we are being requested to carry out by UK potential buyers. These are almost exclusively of existing properties, some of which are in good locations. Buyers report that they are still able to negotiate reductions from asking prices and we refer you to the statistics below.
  • The uncertainty caused by Brexit is principally to the UK market, but this is spilling over to other nationalities, equally uncertain as to what its effects are likely to be on the EU as a whole and Spain in particular.
  • The market dependent upon Gibraltar, both due to proximity and business, is undoubtedly the most nervous of all. The effects of Brexit will be a radical and far-reaching, but everyone has to wait until the UK/EU negotiators finally agree their deals. The attitude of Spain with regard to sovereignty will be significant.
  • Comments by Ryanair and other airlines that the ‘Open Skies’ agreement will no longer apply to UK flights to the EU and thus they will be reducing substantially, is also causing concern. Ease of communications has been one of the major factors for UK buyers in choosing Spain as a place to purchase property.
  • With Easter marking the start of the main tourist season, it is to be expected that the authorities will be working strongly to enforce their rental licence requirements, which exist now in the majority of Spain. Properties that have a rental licence should have an increased value, but yet we are not seeing many being marketed with that as an asset.

Continue reading

Brexit Divorce – What does it mean for us?

Brexit2-300x250Divorce has featured much in the last few days. No, it’s OK, my wife and I are still ‘two halves of the orange’ as the Spanish say, but we’ve had an increase in the number of Expert Witness instructions, where we provide current market valuations of disputed Spanish assets for the UK and other Courts. As RICS Registered Valuers, trained in UK and with many years of Spanish living and working experience, our expertise is appreciated. Especially so, as our reports are all by English language native speakers and we value to the current market without regulated variations. Our Court work also includes valuing for inheritance and tax disputes and even for the National Crime Agency where they seize the ‘ill-gotten gains’ of convicted criminals.  But the big ‘divorce’ that’s occupied our minds most this week, is Brexit. Continue reading