The coming worldwide credit crunch

I'm sorry but get real!!

US interest rates are now down to 3% and the world follows and for good economic reasons they will get lower

The last time the US 'thought' they were facing problems they went to 1%......if nothing else they know how to look after their economy!

From my experience [which I have said in my last post on this issue goes back a long time ] this credit crunch, as they are now calling it , is not as bad as the 70's property crash which was caused for the same reason...banks over extending themselves....and a big clearer bank was saved by the Bank of England!   

Wish I had bought in Spain in the 70's!!

70's was a high inflation economy, now it is a low inflation economy in EU and also for the majority of property owners in EU ,loan to value ratio is low and for holiday /part- full time homes ,even lower than average

So whilst the market in EU is static, very few have to sell but for those wanting to buy ,now is a good time

Sensible developers in Spain are setting prices at today's level....eg .2 bed maisonette in the popular Orihuela Costa from 104.000 € [ and yes when finished in Sept 08 you will get your HC before you complete].............even probably pay 10% deposit on contracts as per UK and balance on completion in Sept

No mad hurry to reserve property and fix price as in last few years...so take your time

Serious good re sales at sensible prices

The odd  depressed sale...if you can find one !....the best go to the Spanish dealers....like in UK 

The doom guys do not reflect reality for the 'life style buyer'

PS; I am not only an agent but a buyer!

Atlast some comment - I was beginning to get lonely lol.

Perhaps I need to state my position here again:

I 100% agree with comments about Spain being a great place to live, lifestyle etc etc - I am afterall here and loving it too, the weather has been superb since I have been here last Autumn, and my family of little girls are loveing it too.

Let me be clear what I'm saying.

Firstly I'm trying to open people's eyes to what is happening in the wider world with banks and the money system, because its interesting and the real situation is not often written about, the gov. has a very real reason for hideing the truth from us all. However as well as being interesting to some people, not everyone I know, it actually does affect everyone, wether they like it or not. What happens in the US will affect all of us here, mostly in terms of inflation and our standard of living.

Secondly what is going on at the moment is not a standard thing in history. Yes recessions have come and gone, but this one coming is going to turn to a depression and the collapse of the dollar. Many currencies have collapsed in history, but never one that is the reserve currency of the world. There is going to be a lot of suffering as the world adjust to cleansing from decades of debt fueled consumption. The worst hit are going to be those people who are up to their eyeballs in debt, includeing those people who have leveraged themselves on property.

Eventually interest rates are going to be set by the free market, rather than by meddeling governments, as it should always have been. When this happens, rates are going to return to historic norms, but before they do they will have to go much much higher to cleanse the system. Don't expect them to return to 4% tho, historicasl norms are around 7-8%.

This adjustment is going to wipe out millions of people, and folks with property at home and a home abroad are going to be particularly vulnerable, btl is going to be toast.

The developed world has to get back to productive work, rather than just consumption. The US and UK economies are around 2/3rds consumption based and this is not sustainable as evidenced by their growing deficits - Spain having the worst in the world relative to GDP. Imagine if someone asked you what you did for a living and you said I mainly consume things, like tvs and household goods etc. Its ludicrous and history will have this period down as a time of madness.

The fact that it has been going on for years is because up til now the US for example as been able to borrow from the rest of the world, mainly Asia. However the rest of the world is now coming to realise that they are not going to get their money back, cos the Yanks have been depreciating their currency to try and inflate out of their mess.

China has a store of dollars = to around 1 trillion, thats a thousand billion dollars in return for all their productive exports which we all enjoy. Thanks to the Yanks devalueing their dollars, the Chinese have lost around 1/3 trillion dollars just in the last year.

Imagine if you lent somone money and they did that to you? How long are the world going to finance the US and UK at that rate? The answer is not long.

Anyway I digress, I have been trying to warn people about over inflated prices in Spain and the risks associated with borrowing money against such property.

The truth is that there are thousands of people trying to do the opposite. Fooling innocent punters ( who should know better, but don't) into purchaseing property here at prices that will ruin them. Just look across this very board at all the people that have been ripped off, with crappy deals, late construction etc etc the sad story continues. This very board contains a database of hundreds of 2 bed apartments, overpriced by about 50%, owned by desperate decent people just trying to get their money back. And yet at the same time there are people trying to sell more over priced rubbish to innocent people. As if enough damage has not already been done.

The simple fact is that property here is in a bubble of enormous proportions. Its in a bubble because naieve and greedy people came here in their droves, and bid property up to speculative highs based on interest  rates unsustainably low and much too easy credit. Most people now accept this and that credit was too easy to obtain, but if you accept this then you must also accept the fact that this produced false prices which must return to more sensible levels, based on normal credit conditions and more realistic interest rates.

The real demand was not based on people coming here to live and enjoy Spain, as you and I do, but by speculation to make a quick buck. If you don't believe this tthen why are all these people now trying to sell, rather then live in their homes. Also why do property developers and shows always plug relentlessly the investment angle, promising X% returns a year, all financed by year round rentals lol. And if it was not investment, why have all the punters suddenly dissapeared as the market started to look weak?

I plan to buy a house some day, but why would I want to buy now. I can rent the same house for half as much, which just goes to show how overpriced stuff is. People keep saying but ist the quality of life etc thats important. But I say sure, what kind of quality of life are you going to have if you buy something that then falls in price by 50% and you need to sell say for illness or 100 other reasons you don't currently know. What quality of life will you have if you pay too much for a house and then have to work all hours just to pay for it, cos the payments are so high. People hunt around shops to save a few euros on the price of a kilo of tomatoes, but suddenly when it comes to the price of property they don't care that they overpaid 100k euros lol. get real if you over pay for veg your life is not going to suffer, if you overpay for a house it really will.

I can enjoy all the aspects of life here, sun, sangria etc without getting mugged buying an apartment of which there are millions without buyers. A very few billionaire property developers have got rich beyound beleif, at the expense of thousands of honest naive folks. Fortunately many of these developers are now going bust themselves, since their greed knew no end and they didn;t know when to quit.

To summarise I am actually trying to protect people and to get them to think very hard before buying here, not something many people did a lot of. To think that many people bought "their dream apartment" on the back of a weekend inspection trip makes me shudder.

To all those people who live here happily, please continue enjoying your lives and read this thread for interest only, and perhaps think about your own debt levels, because decades of consumer debt is about to bite alot of people. To be fair to me look back to the start of this thread and the date. It was long before the stockmarket crash, Northern Rock, crisis talks by government etc  Trust me its going to get a lot worse.

I think far too many people don't like the UK for many reasons & think it's a better life in Spain, or wherever else they read about. It will only work if you read up, especially on the many forums about these days, EOS being the best, of course.  Don't rush into things, there are many pitfalls but, for example, if you need to work, ensure you have some to go to before moving (some just seem to up & go without due care & consideration, then are in the s**t) Sort your kids out with schooling or know how to get them enrolled before going on your escape route to the sun. Sort out a place to live, etc, etc.

This forum is chokka with advice but I rarely feel that newcomers spend enough time reading about things that are so relevant to them. Justin has a whole section dedicated to Living in and moving to Spain, not to mention all the thousands of other great reads.  Then we are all here to help if we can.

TTFN

thanks candyfloss,i am still keen on a move after all the alternatives are stay in england and i am not happy here anymore.

it does seem like a minefield though,who to use,who not to!

this seems to be the place to get advice so i will stay tuned.

Hi Happy Larry, welcome to our forum.

"There's a better life" says Eric Burdon "we gotta get outta this place" as in your signature.

Hi Happy Larry (great name)

Welcome to the madhouse, I mean forum  .

It's not as bad as the press make out!! All the scaremongering drives me up the wall and the sheep that follow it and take it as gospel really should be asking the professionals. As i said in my last post, the market is picking up, sure it's not a booming market as it was, but the confidence has definately returned and people are buying. Good luck with your move, can't wait to get there permanently myself

been watching on here for a little while now.

There seems to be so much bad press at the moment so i am hoping that someone will tell me its not all bad

i am hoping to relocate to spain with my young family,the video georgia put on here sums up my life in england so do you think its worth a try

Well said!

And that view applies to the majority who have bought or who are wanting to buy in Spain....for holiday home, full or part time living ,it is quite simply, 'life style'

It is 46 years since I started to study property economics so you could say I have seen it all!........and the evidence is that long term in Spain, EU or UK ,your purchase now  will turn out to be a good investment 

Always best to buy is a slow or static market!!!

if its of any interest,this is my take on the situation.

The market will rise and the market will fall,we have such a short time on this planet that we should choose where to live based on the QUALITY it gives us.

I could cut and paste a million things and at the end of it we would all be suicidal.

I bought a house in Spain,I love spain,my family loves Spain and i am certainly not moving because any overpaid analyst says its a bad idea to have a house here!!!!!!

This is why i moved here and this is why i will stay here(see below,the language is a little strong but a humorous take on what i base my decision on rather than some of the twaddle on here)

I wrote this about the UK but sadly it applies even more so to Spain. House prices in the UK maybe very inflated, but atleast there are some fundamental factors to support them like high relative wages, lack of building etc.

Spain has none of these supportive factors, wages in Southern Spain are third world, and there is more land than you can poke a stick at. The spainish boom is a direct result of the boom in prices in Northern europe and as a result of massive credit expansion.

The following will perhaps explain why the UK and euroland have had such an apparent strong economy for the last decade:

The labour government has created the worst credit boom this country has seen, something that seem very ironic when you consider that Brown came to power based on his prudence theories.

The public it seems is only just catching on to the truth, probably most are still unaware of the laws of economics. Brown continually harps on about 10yrs of uniterruped growth etc, without telling people that this is what happens every time when you have 10yrs of uniterupted credit expansion.

The simple way to think about is to imagine what would happen if you personally went on a credit binge. For a minute imagine loading up on all the debt you could and then going on a spending spree, buying a new BMW X5, going on a luxury cruise, having an extension built, getting the kids the latest xbox, psp etc. You get the picture its happening in a place near you.

Friends and family would likely marvel at your good fortune and new found wealth. Rumours would abound about promotions perhaps, or investment skill. You would likely find yourself the object of admiration and certain envy and you might indeed appear quite clever.

Unfortunately it would all likely end in tears, and for a few years of the high life you would have a decade of poverty. How long the illusion of prosperity would last would depend on a few things like your skill at juggeling debt and finding new sources of debt, and the extent of your extravagence. Also what you squandered your cash on. Holidays are gone, but atleast a few things could be sold, ie property and cars, altho most things probably pennies in the pound.

With countries the boom can last a lot longer, as they are bigger than any individual, but the effects and the result are the same.

What we are observing now is the peak of the slope of the positive effects of debt expansion. Once you get over the top (mid2008) you start on the negative slope, where everything works in reverse. All that was positive on the way up, becomes negative on the way down.

What is really interesting is that if a governement wants to turn an ordinary recession into a depression, all it needs to do is get out its usual arsenal of recession avoidance tricks. Intervening to prop up houseing mkts, banks, anything to boost consumer spending, increasing unemployment benefit, propping up wages, minimum wage etc.

It seems bizare that a governement would not want to try and help in these situations, but history has shown that not only does it not work, but that it makes things much much worse. The reason is always that the whole system is prevented from cleansing itself.

We all laughed out loud when Bernanke was nicked named helicopter Ben, but how many actually though that anyone would be stupid enough to do it. It just happened ffs. The tax rebate is a disguised and modern version of the helicopter drop. The governement does not have a wad of tax money to give away, its in deficit too.

Imho history will not judge Brown kindly, but of course by then the damage will have been done and it will be too late, perhaps the best that we can hope for is that he is still in the hot seat as it all becomes apparent. Small compensation I fear.

Unfortunately the decline in moral standards and behaviour, rise in crime and drugs etc is all part and parcel of a consumer debt driven society. The two are inextricably linked.

flyingcat

The euro is indeed very strong against the pound, but unfortunately this strength does not reflect the strength of the eurozone, rather the dramatic weakness of the dollar. As people flee the dollar they go to the euro, not because the euro is healthy, but because after the US dollar its the next most liquid currency.

Sadly for the eurozone a strong euro is rather bad news. It means the eurozone becomes more and more expensive to the rest of the world, so exports from euroland become very uncompetitive. Infact so much that Sarkozy has said that euroland;s largest business is almost unviable (airbus).

A strong euro is pushing down growth in the eurozone and threatening recession. Unfortunately the ECB is reluctant to lower rates as inflation is rampant and above their target, (check out the increases in energy food etc).

A strong euro against the pound has also in six months made Spainish property around 10% more expensive to Brits, at a time when demand is falling off a cliff.

You ask why worry about the Spainish economy and their banks:

The answer is that if there is a big failure in the banking system, credit/mortgages will dry up completely. I don't need to tell you how much property will be worth if you can't get a loan on it!!!

Also governments in time of trouble will look to tax the relatively wealthy. Do not be surprised to see draconian measures taken against Brits to give to the local population. I have noticed that Spain is very nationalistic and highly protective.