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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

Do exchange rates really affect demand?

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Since that indescribably foolish day in June, agents, property pundits and others, including myself, have been blaming any apparent drop in demand by British buyers, at least partially, on the variation in the exchange rate of Pound to Euro.  Yes, there has been a drop in the pound’s value, which makes property buying in the euro zone more expensive for sterling buyers.

But hold on a sec, haven’t we been at these levels before and the demand has continued? And has demand really fallen. Dealing with the latter, undoubtedly, Survey Spain has seen a drop in the number of pre-acquisition building surveys since the beginning of the year. I feel that this can be a guide to the number of buyers who are considering purchasing a property. It slowed over the couple of months before June, dropped to almost nothing during the week after the vote, but then picked up and has continued at a lower level over the last few months. Not everyone gets their property inspected, on which they can be spending millions, but then ‘easy come, easy go’! The prudent person knows that armed with a comprehensive report on the condition of the property they can get a substantial and justifiable discount in the price. It’s a no brainer in two ways. ‘No brainer’ not to do it and a buyer shouldn’t really have to use his/her brain to see the benefits of a survey. We have so many clients who have saved many times our fee in price reduction. You’ve only to look at our testimonials page on our website to see the truth of that.  Continue reading