developers starting selling property in Sterling..

Hi All,

Some time ago when the exchange rate was dropping we started to do transactions for house purchases in sterling,this eradicated the poor exchange and helped people get a better deal.

Today one of the biggest builders in the area has told me that they are now doing the same,although they are Spanish they realise that a good percentage of their property is sold to Brits,by selling in Pounds this will in essence lower the price by 10% and give people the rate that they were getting last year.

At Last a builder that listens.....

Hi Acapulco,

What they are saying is that if people are putting off a purchase because of the rate bobbing around at 1.26,they will agree a sterling price at a higher rate for example 1.40.

What this will do is give you an extra 14,000€ for every £100,000 you spend,this gives you £10,000 more spending power,the list price on the property hasn't risen in 6 months but the price in pounds has because of the weak pound.

if that makes sense........

Sounds sensible to me

Mark

and as you are phisically paying in pounds there are no exchange or transfer costs as the builders place the money into a sterling account here in Spain.

and you get a better rate than anyone else buying through a developer that doesn't do this.

The other bonus is that they have about 12 projects to look at,sometimes the catch would be,yes we can do this but we only have 3 properties to choose from.

At least it shows that someone has recognised a problem and is using forward thinking,,,sadly unlike the Spanish Government who recently announced that maybe that shoulod be looking at more industries that construction to boost the economy,....really!!!! i wonder how many advisors it took to come up with that gem..........

Just looks as a way of giving a discount.....nothing wrong with that....most UK buyers at any time, high rate or low rate, eventually are only really interested in the cost to them in £#

I am already only quoting prices in £ in UK

Nearly everyone quotes before IVA...but not all Spanish builders [or agents for that matter.]

Quoting a price in £ inc IVA has always seemed a sensible approach to me but unless everyone does it.... .... up to now if you include the IVA you appear to be quoting a higher price than other agents!!

I'm sure that if VAT applied to houses in UK builders would quote the inclusive price......perhaps this may yet be another change which will come from the current down turn  !!!   

Over the weekend it was circa 1.2804 so perhaps it is crawling it's way back!!!

Hi Rowlandsb,

i think you missed the point i was making which i suppose is understandable as you are in the UK and maybe dont understand quite how it works over here.

They are SELLING in pounds,not just advertising the price in pounds,they will except pounds at notary with a set rate before hand allowing people to have a higher rate of exchange without actually exchanging.

By law when operating as a licenced estate agent in Spain you must advertise the price firstly in € and then you can advertise in a currency that you are marketting at,ie £....

the difference is that the whole transaction takes place in a foreign currency.

As it being just a discount,well actually you can ask for discount on top and generally you get it...........

I am unbeatable at discount haggling(if i do say so myself) my best so far from a developer is 50% off list price........

anyway,back to the point,i thought it was quite a good idea(as i mentioned it to them) and for once it isn't a hidden promotion it's there to help both buyer and seller alike....

sorry,just to add,you should always quote prices plus 7% whether it is new build IVA or Resale Transmission tax.

This keeps a happy medium and allows buyers of new or resale property to have the mindset that they must add at least 12% to the figure they are shown for the property,if you dont then you can be conned on the actual price of the house as it can be hidden.

The rate dropped down to 1.26 again this morning and i think will probably hover around that for the forseeable.

The other downside to advertising prices in £ is that the rate changes every second and you could be charged with mis selling if you work in the UK,unless your advertising boards are digital you will never keep up......

So the developer is selling in £ sterling and taking the risk on the exchange rate when he eventually needs to convert to €

But to sell in £ a product bult in € there still has to be an exchange rate used to convert

Eg 100,000 € Spanish product sold in £ ......is the £ price  £78,125 @ 1.28 or £80,000 at 1.25...or £75,757 @ 1.32

If the rate at time of purchase is better than the market rate , then that is just a discount

Developers gives me 1.32 [ want £75,757 from me]  when the rate is 1.28 then for his 100.000 € product when he converts at 1.28 he only gets 96.968 € 

As regards now quoting in £ in UK you can also add ' prices from circa £........ [ @ 1.28 € tp £] bit long winded perhaps ! 

the exchange rate is the risk the developer is willing to take,there is no difference that the normal situation when the buyer is taking the risk that the rate drops,if you agree a figure in sterling there is nothing to drop or rise as a pound is a pound.

Also some sterling accounts in Spain will give you up to 10% interest so if he can afford to keep the money in here then the risk is minimal,he can then make an educated decision on when to exchange if needed.

The difference being if you advertise a property at x amount of pounds based on an exchange rate in the UK your price will be changing daily,if the developer fixes the price in pounds nothing changes.hence the advantage........

So I guess the rate will be fixed at the time of signing the purchase contract - it sounds like a good idea and certainly should help by way of an incentive for people not to lose faith in investing in Spain!   however as the purchaser will be paying sterling at the notary they would still need to get the funds to Spain, (I know there a couple of banks where you can hold a sterling account)  I don't think there are too many people wanting to bring a suitcase full of cash over on a plane! also where there is a  mortgage involved this will still need to be paid in euros, again, there are a few lenders offering sterling mortgages on Spanish properties but not all clients will meet their particular criteria!

Hi Sharon,yes that's exactly right,

i thought there would be more problems when i first did this with a client,basically it is so easy its untrue...

If you are buying with cash you bring with you a bankers draft from your UK bank.

If you are using a mortgage then its the amount owed minus the mortgage.

You will need a few Euros for taxes and legal fees etc but the majority can be done in sterling,no transfer fees or poor exchange rates just beofre you complete a trip to your UK bank to get a draft and then bring that to notary.

The last clients got an agreedd rate of 1.40!! which was 3 weeks ago when the rate was 1.24.

You can of course transfer sterling to a sterling account in Spain,i know at least 5 banks that do these and offer great rates if you want to leave some in there.

Then this sounds like a very good solution, certainly for the purchaser, in these current difficult times! And if a purchaser was in a position to take a sterling mortgage on a spanish property, all the better!

Hi Sharon,

I always try to stay away from the mortgage side of things,i prefer to let the experts handle that,i would be interested to know if the UK banks will lend on Spanish property or is it a form of equity release or simply increasing the existing loan.

Regards

Georgia

Hi Georgia,

These are actual mortgage products granted on the Spanish property - not a form of equity release and not a case of increasing existing loan!

Hi Sharon,sounds like a great product,are the interest rates comparable and competitive with the Spanish banks?

Hi Kabri-sounds like it is catching on,although a lot of the properties i mentione earlier are key ready or not too distant completions,where abouts is the development,i think the guys that are doing their bit to attract clients deserve a mention..

Hi Georgia,

Actually there are a couple! and yes, I would certainly say they are competative, rate wise!