Currency dilemma

Hi Norman

That was the point I was trying to get across, I just thought that we should keep on top of the advice to people thinking of buying in the future, as this hasn't been brought up in a while, that they should not rely on rental income to subsidise their mortgage payments, no matter what the agent says, not going to happen. I am probably stating the obvious, but thought it was time to say it again. I have heard stories that some agents are still using that ploy. Buyer beware.

The valuation of vacant residential property is in most countries carried out by ' the comparison method'

Simply comparing the subject property with comparables which have been sold recently [ not asking prices]

In Spain this is done by reference to the 'price per sq m build and this is why you read about regional average prices per sq m....in UK we use statistics of the average overall price, broken down into different types of houses [ although valuers do use the price per sq m for analysis]

As you would expect the reason for the valuation makes a difference eg forced sale valuation reflects that a sale has to take place very quickly and hence is lower

For residential mortgage valuations the underlying asumption is the value a property would realise allowing a reasonable time to sell

Looking at values of vacant residential property on a rental return basis may well be an intersting exercise but has no bearing on ' the market place' because buyers in general do not take this into account

Now for investment fully let properties [ commercial, retail, and certain residential properties] then it is applicable but for fully let residential investments in general the potential vacant possesion value also does have an influence

A simplication ......as the RICS in UK has a very large book setting out valuation assumptions and methods and I suspect similar rules are laid down by the professional bodies in Spain

Now  you should take guaranteed rentals and any projections from Estate Agents with a pinch of salt!.....in general there is no such thing as a ' guaranteed rental' ......it is a marketing tool and built into the price [ same in UK]  

But when people buy a holiday home they often want to let it to help pay their mortgage or running costs and overall it is not easy but not impossible

Many do but it entails hard work, having the right property in the right location and providing a good competitive  service to your customers so that they become regulars

And when looking at  how you perform you should allow the opportunity cost of your own use [ eg the savings and benefits you and your family get by owning your own holiday home]   

In UK if you want to make a good return from 'buy to let' you have to work at it...same in Spain

But in general no one buys on a yield basis a holiday home or I suppose I should say they should not 

Glad to see everyone has their own opinion of the way things are going for the financial and housing markets.  However, a trawl through todays papers and  so-called experts give the following opinions:
The pound will soon lose parity with the euro and it is probable that a pound will on buy 95 cents by the end of January. The extra countries joining the euro as from today means that 330 million people, more than the population of the USA, now use the euro which means that it can only go from strength to strength.

On the other hand;

European countries will soon have to face up to the fact that the euro cannot be sustained at its present level.  You will probably see the pound rise to 1.10 by the end of January with a rise to 1.30 or even higher by Spring.  There is even the likelihood that several of the current eurozone countries will withdraw from the euro due to unsustainable debt levels.

Hmmmm.   Glad to see the experts getting it together.

House prices are now at a lower level than 2004.  This dropping of levels cannot continue and the bottom may be reached within the next week or two and prices will start to rise so now is a really good time to buy.

But, then again:

The worst is yet to come.  House prices have fallen over 16% in the last year with the worst period being in the last 3 months.  The difficulty of getting mortgages and the fact that people are hanging on to see if house prices drop could see a further drop to pre-2000 levels in the housing market.

That last one was from the head of a big ex-building society.

So, how right did they get it last year?  Here are some predictions 2008 (Ain't hindsight a wonderful thing?)

Confidence has been knocked recently but the Bank of England has been cutting interest rates and will continue to do so. That will ease people's tensions. The first few months of the year will be a bit difficult but as the rate cuts kick in the consumer will be feeling slightly happier towards the end of the year.'

That's the end of 2008, by the way.  Anyone feeling happier?

Martin Ellis, chief economist, HBOS: 'We predict that house-price growth in 2008 will be flat. There has been a steady easing in house-price growth in the second half of 2007. Underpinning the market are strong fundamentals - record employment, low interest rates and a shortage of properties - which will ensure the housing slowdown will be gradual.'

ELLIS: 'House-price growth in 2008 will be flat.'

Ray Boulger, senior technical manager, John Charcol: 'House prices will fall in the first half of the year by up to 5%, but by June the fall in the bank rate and an easing of the liquidity squeeze will stabilise the market.'

Well, it certainly "stabilised" didn't it?  Trouble is, it's stabilising down, down, down.

How about:

The lowering of interest rates, to possibly as low as 5 or even 4.5%, will stimulate the economy.  House prices may not show the meteoric rise they have shown in the last five years but it is possible that the average UK house price will rise to over £200,000 by the end of the year.

Whoooo.  Loved that one from the boss of HSBC.  Found that on the day that the average house price in UK dropped below £160,000.

To be fair, one or two financial "experts" did predict a slowing down or even drop in the price of houses.  One even said that banks would curtail their lending due to the Northern Rock problems.  Although the same "guru" did say that the dollar would show a greater weakness and would average out at 2 dollars to the pound throughout the year.

So. come on all you financial experts.  Give us your predictions for 2009 ------------------------- Then I can do the opposite and hopefully make some money out of this.

Brilliant post bobaol..........................

have a read this, may cheer you up:

http://www.dailymail.co.uk/debate/article-1104018/PETER-OBORNE-The-pound-trouble-dont-fooled-euro-gloaters-Their-bogus-currency-20th-birthday.html

For those with equity in property in the UK it might be worth doing the maths to see if it is worth taking some of the equity at ratres of around 3-3.5% attaining circa 1.05 euro -£1 and paying a chunk off the spanish mortgage.

Yes have to agree great post Bob.

       That is what we did 3 years ago took the equity out of the house we have in  UK everyone said we was mad, what  a stupid thing to do.  I must admit we was apprehensive about it.   But now we are in a great position the rate has gone down and we are much better off.  So I am trying to think positive if things go from bad to worse then the family will not get as much  inheritance, when we depart this world.   But at the moment things look quite good.

           So at the moment we are very happy will it last who knows, I will leave that to these people that are more in the know than I am, but I do wonder at the end of the day, does anyone really know, what the future holds

          Pat.  

Thanks Bob, just goes to show how little these so called experts really know, and they are payed fortunes to get it wrong !!

I recall one of the arguments for the UK NOT adopting the Euro was avoiding the impact of their pension timebomb which is far worse than the UK.

WILL THE PENSION TIME BOMB SINK
THE EURO?
http://www.cato.org/pubs/journal/cj24n1-2/cj24n1-2-6.pdf

and it's aging population

http://www.strategie.gouv.fr/IMG/ppt/Van_Riet.ppt

But it seems to me that the flow of sovereign funds is far more significant to short term rates - isn't that the reason why the dollar overcomes gravity.

Hence as Bobaol illustrates prediction is difficult/impossible because there are so many seemingly illogical influences. 

When I retire I've  decided to put half my funds in Euro's and leave half in the Sterling.  Then I 'll have got it half right !!  (well  maybe).

or ............half wrong!

Constant misunderstandings seem to arrive over having all one,s eggs in the same basket and what a lot of people seem to miss is that Europe-UK or UK-Europe offers no difference in corraltion re investment, if one is affected the other will follow suite, now if one invested half in europe/uk the other half in say asia there will be little IMMEDIATE knock on effect form one to the other.

As for predictions-well a prediction could be described as

an informed guess

an educated guess

hindsight however is a wonderful thing!

In regard to property statistically if you hold onto a property long enough you will not lose out financially overall.

Dear All,

In regard to property statistically if you hold onto a property long enough you will not lose out financially overall.

This is of course excellent advice, is it not???

Yes of course it is, in fact it is the only reason that a lifetime slogger at job satisfaction, like me, had any life-savings for the crooks to steal.

It is the very reason that I always wanted to borrow a million to invest in property, but no one would lend it to me because job satisfaction sloggers do not get high wages to justify such risky/toxic or speculative debt.

Certainly not,  I should leave it to the financial lords who understand derivatives and hedge funds etc.

So to follow the dream I had to save up a 50% deposit and buy with a short term high interest bank loan.

On analysis, inflation helped a lot with the savers losing out and Maggie came along to improve things for landlords and reduce the letting risks.

The current position in Spain is quite different however, there is little letting income, many overheads, expensive mortgages, generally poor construction giving maintenance costs etc.

When one considers long term lets with rentals far below 70% mortgage costs then the cash flow situation is a total disaster and of course no Maggie.

Resales are nil or extremely rare, making property almost worthless.

The currency situation has exacerbated matters and there is no prospect of recovery in the foreseeable future. None at all perhaps.

Given this scenario, just how exactly does the unfortunate property investor "hang on" as advised.

Best advice please.

Regards

Norman

Norman!

Maggie (the last prime minister with a pair of bs**S) has been gone for a long time ,,, now we have Brown and Carling ....

Why are you still whining on? Whatever it is - it sounds a bit too late now ... Perhaps if you let everyone know your point we could agree or disagree (on whatever it is you are trying to say?)

If you've been conned tell us all about it?!

In regard to property statistically if you hold onto a property long enough you will not lose out financially overall.

Yes you will..............hold onto to it long enough and you will die and have nothing...............

So to follow the dream I had to save up a 50% deposit and buy with a short term high interest bank loan.

So did we all in the UK to get our first homes, but with a sensible 25 year mortgage.............

The current position in Spain is quite different however, there is little letting income, many overheads, expensive mortgages, generally poor construction giving maintenance costs etc.

Same as in the UK me thinks......................

When one considers long term lets with rentals far below 70% mortgage costs then the cash flow situation is a total disaster and of course no Maggie

Same as the UK again, but thank god - no Maggie - else it would be worse!

Resales are nil or extremely rare, making property almost worthless.

So? If you are not in it for profit, why complain? The property you own is worth how much you love it............only paper money....

Sorry EOS peeps, been reading this for ages and just HAD to respond...............

My kindest regards, as always................

Given this scenario, just how exactly does the unfortunate property investor "hang on" as advised.

Best advice please.

Tough mate! You invested, you took the risk, obviously you were not as clever as you thought at the time. I think the wording is "speculate to accumulate" you obviously did  NOT do the speculating bit!

Yes Fibby totally agree.

I was bought up to speculate only  on what you could afford to lose and not put all your eggs in one basket. To many people jumped into the property market on the strength of rich pickings to be had. They let prudence fly out of the window without considering what if the rentals didn't happen, what if the exchange rates changed, what if the interest rates changed, what if property values fell. Those for whom it didn't work out shouldn't winge.

We like many people went for the safe options, sensible mortgage borowing, sensible terms and as the oportunities arose were able to make lump sum payments to reduce the mortgage to nil.

So now the house price values are to us as you say paper values. If we die so what ,we can't take it with us. Yes investments in the stock market have gone to pot but they'll come back albeit slowly, yes they exchange rates have gone bad, yes bank interest on savings  are down, but on a one for one basis Spain still wins hands down.

So those who think they've lost out don't moan pick yourselves up and show some of the Brit spirit and start again. 

Bob

 Loved your response Fibby & your's Bob. 

Each of us chose Spain for our own reasons, at the time they were sound. Now, with hindsight, some seem to have made the wrong decision. Whatever category you are in it is important not to panic but try to think logically and assess your expectations for the next 2/3 years; these problems are going to take time to sort out so make your decisions based on your specific situation. Good luck to everyone, try to stay strong & as Bob says "show some British spirit", we are not alone in this.

Me, well I am going to try to enjoy our Spanish home & support the locals where I can by shopping locally & eating out when we can manage it. Same as at home really, buy British & support the local economy.

Happy New Year everyone, try to stay positive.

Eileen

Normansands, at the risk of repeating myself, answers to any questions you may have are all over this website and, indeed, the internet.  But the big point is, maybe you should have sought out this information before you "invested" in your Spanish property.

Guys, this thread really isn't going anywhere at all and is just fodder for the Troll.

It's true Pitby.................the situation is what it is and carping on about it is not going to change one thing!!

It's time to SHUT UP now and get on with it......................we ALL know we are ALL feeling the pinch..................so what?   We just have to get on with it.

We bought over here ( and live ) because we wanted to, we do not have another home in UK..................and so what if the amount our Spanish home is worth is less than it was............it is still our HOME and we love it. Perhaps the amount our children will recieve on our demise will be less, BUT.............I hope we have brought our children up to depend on themselves and they can enjoy us and our Spanish home right now.

Nuff said now....................................

With you all the way Karen

We spend the winter in Spain and the Summer  in the UK..........( ,....... there must be one this year surely!!)

In the present financial climate we need to 'jiggle and juggle' like most folks . However we have cut out all non-essential spending and we have no  room for luxuries. ( In the Saturday Telegraph, Vaseline was voted the woman's best beauty aid!.......I have always sworn by it - trouble is it keeps finding its way into OH's tool box!!)

As for the kids and their inheritance.......I have told mine that if they NEED to inherit then they do not deserve it. 

Inheritance should be  an unexpected  sweetner not a life-saver.

JO

Hopefully, the Troll has realised there are no responses left here!  Thread now, at least as far as the Troll's questions are concerned, hopefully redundant!!  Let's  not feed  him!!

Now, if anyone wants to discuss the currency dilemma ........

Yay,

We all know it's tough out there but we'll get through it.

Yes, we've told the kids we are going to be SKI - iers. (Spend the Kids Inheritance)