UK in recession, buy in Spain instead?

Mercadona and Maxi Dia for the cheap beer!

Shh! Don't tell anyone else on the forum, it's our secret!

DOH!

I don't have any control over my chimp either, but then again that's another story!

Looks like Spain has joined us now then!!

Spain's economy is in recession for the first time since 1993, according to figures from the Spanish central bank.

The Bank of Spain said gross domestic product (GDP) fell 1.1% in the final quarter of 2008, following a 0.2% decline in the third quarter.

See the full article here (if you haven't already).

Mark

That's what I've been saying about long term property investment.

In answer to the question posed in the thread title, I tried making the point (see my posts from 3 days ago and before) that this "recession" is NOT unique to the UK. I'm pleased to see others are finally catching up!

Techno, I think your definition of  "long term" may be a bit different from most commentators - I don't think 6 months is usually considered long term in investment terms. But whatever, let's be optomistic anyway, eh?!

BTW, your chimp (ape?) appears to be on cruise control to me, whereas mine keeps changing tempo. WHY?

Quote Roberto:

BTW, your chimp (ape?) appears to be on cruise control to me, whereas mine keeps changing tempo. WHY?

I feed him loads of bananas, but the bananas have been soaked in Cerveza for 24 hrs!

And:

I don't think 6 months is usually considered long term in investment terms

6 months??? Where did you get that from buddy! Me is confused!?!?!?!

I have been saying that property prices may continue to go down over the next 6 months or so, ok it may be a bit longer than that, however that you would need to look at a long term investment of at least 5 to 10 years, and that is what this guy is saying, long term investment.

Oh....ah......er..........OK, forget my previous, I'm probably getting things confused too. To be honest, I'm a little preoccupied over my stalling chimp - he's stopped again, you know. Meanwhile, yours just keeps on keepin' on. Banana flavoured beer, eh? Mmmm....

Bloody hell... 5 to 10 years for a good investment !!!  i hope so otherwise alot of peoples' pensions will prove to be worthless and we will have to rethink all economic theory.. I think even my collection of this year's match programmes from the Theatre of Dreams will prove to be a wise investment over that time period.

Hi John,

Quote: "and we will have to rethink all economic theory."

This is what World Governments, Senior Economists and Business and Industry leaders have been saying since the effects of the 'credit crunch' were realised to be much harsher than previously thought, that a 'new' World Economy that will emerge as a result of this disaster and it will be much more different to what has been in the past, and that 'new' economic theories and strategies will be produced as a result.

What a lot of people are saying, including me, is that gone are the days of the 'fast buck' property investment.

In the 'bad ole days' one could buy a property and within 18 months to 2 years sell the property for a large profit, and this helped artificially inflate property prices.

So now that the profiteers are gone, when property prices do start to rise again, it will be a more natural curve over a longer period of time. In others words back to the days of shrewd investors, not sharks.

The future looks much better for the Spain in the long term, as we are now starting to see a 'cleaner' property market, as gone already are the 'hear today, gone this afternoon' ruthless property agents, the corrupt lawyers that they had in their back pockets, and most of the cowboy builders have already gone bust.

Due to the oversupply of property in some areas, thanks to the recession, the internet and forums such as EOS for weeding out the corrupt, along with the Spanish Governments 'crack down' on corruption over the last few years, people will now be able to make a more informed purchase and will be able to snap up the bargains that are around that are of good build quality and be satisfied in the knowledge that over a longer period of time, they will see a good return on their investment whilst having enjoyed the use of their property.

I am obviously also referring to properties that have been purchased in the past that have now lost some of the net gain over the last 2 years due to the lowering of property prices..

Dear All,

our fine Spring day was followed by a night of heavy rain, roads and fields ponded, a morning of non-stop drizzle and a dull afternoon without a glimmer of a sunbeam. Today is sunny, bright, cold and frosty.

Almost everyone is coughing and sneezing.

However our friends in Estepona tell us that the winters there are getting progressively worse and other parts are buying heaters for the first time.

Global warming seems to be with us, cold species are moving North and being replaced by warmer ones.

Blind tasting shows our fizz to be the best in the world and production is being expanded.

French growers are buying great tracts of our chalky agricultural land in the South-East.

So the weather is changing.

Roberto please be good enough not to attribute your misunderstanding of investment and weather posts to me, they are not my views and never were.

Whilst I crib at spin and exaggeration my views empathise with the two in the current newsletter.

I note from this thread that you are still getting things wrong.

I cannot argue with Techno's or Gravitat's lifestyle choice but the investment advice is questionable.

The IMF seems to be supporting the oppositions view that Britain is in most trouble which of course is not good news for the £ and since the Spanish property market seems heavily/mostly dependent on the Brits any investment in Spain must perforce take that into account.

For example I suspect that in the short to medium term Techno's investment is in fact in negative equity. That of course is only a suspicion and does not need a long analysis or debate.

Regards

Norman

Norman

You should have chosen 'NormanWisdom' as your name on EOS..you seem to be taking on the mantle of a  wise old sage on here !!

However you say  ..

Whilst I crib at spin and exaggeration my views empathise with the two in the current newsletter.

you begin with a piece about global warming ...you have obviously swallowed that spin ...hook line and sinker!!!

Also if Techno is in negative equity as you say...so what...he isn't selling ..he is staying and the value will rise. I am sure the intangible and ,tangible for that matter ,benefits of waking up in the morning with a very good chance of sunshine outweigh everything else. Plus ..no Gordon Brown to frighten the kids...

Thanks John.

I must admit that GB in GB is a frightful thought for all, and you are correct with what you say.

Norman,

Quote: "For example I suspect that in the short to medium term Techno's investment is in fact in negative equity. That of course is only a suspicion and does not need a long analysis or debate."

You and I will undoubtedly continue to disagree on some things and agree on others, and that's what forums and debate are all about, but....

I do keep saying "Long Term".

And without going into a long analysis or debate, No! Neither property is in negative equity now and never will be, for the reasons I have posted before on this forum about property purchase here in Spain.

By the way, off-topic I know, however the weather today and over the last four days has been lovely and sunny and warm, although today is a little windy. Yesterday afternoon is was 16.5 degrees and today it is already 17 degrees as I speak. In fact today there isn't a cloud in sight, and I am going to go and sit in the garden, with the glorious sun shining down, in my shorts and t-shirt and undoubtedly get a lovely tan whilst I eat lunch. I wonder what the weather is like in the UK right now!!!
 

As the say "Greetings from SUNNY Spain"

This message was last edited by TechNoApe on 1/29/2009.

General comment this..

Good reply Colin, hope your still enjoying the sunshine, hope it stays like this when we get over on Wednesday, will try and catch up at Itzabar with you.

Maureen and Dennis

Enjoy your holiday, Maureen & Dennis.

We're going March 1st for almost another month. Good this retirement lark.

When talking about prices of any asset, one needs to be careful to distinguish between real and nominal prices. So for example UK house prices are down around 20% from their August highs, but the pound has lost 30% plus against the euro and more against the dollar. So if you measured prices in euro terms, houses have lost atleast 50%. So the nominal loss as economists call it is 20% and the real loss 50% plus.

To help explain this in Zimbabwe the country is beyound broke, but the price of houses or even a loaf of bread has gone up millions of percent in just the last year. When I was a  teenager the price of a packet of 10 B&H was 27 p. I understand it is now around 3quid. Does that mean that my packet of cigs has gone up in value?

No is the obvious answer, what you are measuring in both cases is inflation. To actually make money you need to beat inflation or otherwise the money you make in nominal terms simply makes up for the cost of living elsewhere.

The Uk is about to start quantatative easing, which is a fancy word for printing money. This is the reason that the pound has sunk in the forex markets. To get an idea what happens when you print money, imagine what would happen if suddenly we were all allowed to go and buy some software to print our own pounds at home. Great idea we would all then have enough money to pay our mortgages and keep our homes and say goodbye to the end of the financial crisis.

Sadly of course the end result would be poverty not prosperity. The number of pounds in circulation would go up exponentially, and overnight the price of anything you wanted to buy would skyrocket. The price of your house might quickly go back to what you paid for it, but it would not help you as your weekly shopping bill and everything else would go up just as fast.

So if GB recklessly prints enough money, the price of UK houses will stop falling in nominal terms, but in real terms they will still fall. UK citizens will go bankrupt as the cost of everything that is imported goes thru the roof.

Sadly the situation in euroland is not much better. Altho the GBP is weak against the euro, the euro is still falling in value as well. It looks like its riseing, but thats the same illusion as when you watch a parachuteist suddenly rocket up when he pulls the cord. What actually happens is that the guy suddenly falls a lot slower than the person filming him.

All currencies are devalueing as governments around the world try desperatly to stop the carnage of the credit crunch. However history shows that what they are doing is going o make things worse not better. You can't print your way out of trouble, if this was possible Zimbabwe would be the rishest country on earth along with numerous other countries that ahve tried this fatal error.

People seem to be obsessed with the number of pounds they have or the price of their homes. Trust me this is not what counts, what matters is the purchaseing power of those pounds or euros. For instance if you lost half your money overnight, but prices dropped by 90%, you would suddenly be a very rich person, like travelling back in time you could buy centra London property for tens of thousnads of pounds.

To get back to real life property is now a terrible investment and likely to be so for the next ecade atleast. Not only is it falling in nominal terms its faling in real terms as well, a double loss. The current rents in Spain and the glut of unsellable property suggests prices couyld fall another 50% min in nominal terms, in real terms I think they will do much much worse as Zapatero is forced to rack up government debt to try and keep the unemployment pool from swelling past 20%.

Prices may bottom out in 2012 2013 by historic meausres of the houseing cycle, and then may get back to previous highs by say the end of the next decade. However like my 27p box of fags this will be nothing to celebrate and certainly no investment.

21 C in Torremolinos today - but just down the coast in freezing Estepona.....

"friends in Estepona tell us that the winters there are getting progressively worse"

Just a thought, but could this be the same syndrome that finds Brits on a two week package walking around in shorts, singlets and flip-flops, whilst Brits who've lived here for years are wrapped up in jackets and scarves like the Spaniards? Every year we hear people say "ooh, it wasn't this cold last year", or "phew, it wasn't this hot last year", or the old favourite, "it was much busier last summer...." OK, that last one is probably true for once!

"....since the Spanish property market seems heavily/mostly dependent on the Brits any investment in Spain must perforce take that into account".

Just a thought....since the population of Spain is something over 40 million, and the number of Brits living in Spain is estimated to be something like 750,000 perhaps..........just a thought.

Dear All,

Sounds good to me not a bit like "crap".

Here we are threatened with another "freeze up".

Locally the three repossessions have all been sold fairly readily.

Property is of course a great investment if you can borrow other peoples money dirt cheap and then let it for full market value.

No doubt tobacco would be too if you could keep some of the tax.

I did suggest the acclimatised thing when looking at Justin's arctic kit.

Probably advancing age should also be taken into account.

Regards

Norman

With all due respect, TJ222, I recall just less than a year ago you extolling the virtue of investing in gold, silver, palladium - and if alot of people, not experienced in trading, had taken your advice then they may well have lost a great deal of money!  As I've mentioned before, I remember in the mid-eighties when the Pound and Dollar were just  about parity and the pound recovered!  Obviously, the markets are in turmoil at the moment, but what's different to the recession now  to what it was a couple of decades ago?  I'm really  just asking, as I have no idea!

Pitby

The difference between the 80s and now is that both the UK and the US have debt both at a personal and governmental level that makes its debt in the 80s look like a child's lunch bill. Importantly this meant that the government could and did raise interest rates dramatically to purge debt and inflation from the system and enable a recovery and a return to sound money of a sort.

The US now has debt so large (10trillion odd) that here is not enough money in the whole world as measured by M0 to pay it back even if it wanted to. We can't return interest rates to a proper level nd restore sound money, bacuase if we did, the market would collapse. So like a bad drug addict the only thing we can do is keep offering up more and cheaper drugs.

Also in the 80's both the UK and the US were nett oil exporters and still had a manufacturing base. Today everyone has a social science degree and we sell each other double glazing and houses or atleast we di til the merrygo round stopped.

Gold was one of the few investments that was up last year and if you check the facts has risen each and every of the last 8 years. Silver and palladium having an industrial use have not done so well, but silver is up some 20% this year already and is as cheap as it has ever been in history. Gold in GBP is at an all time high, so you maybe getting confused by the dollar gold. Gold in pounds is up something like 50% since last year and is at an all time high against almost all currencies apart from the dollar.

This is all in a year, to be fair give it a bit more time. Things are rapidly getting out of control, the UK is close to bankrupt now and that does not include future liabilities in the trillions for the million odd extra civil servants who are all due guarateed pensions for shuffleing paper. As more jobsgo and the unemloyment sends benefits bills thru the roof just at a time when tax receipts are dropping off a cliff, the printing of money will accelerate, til paper money becomes almost worthless.

If you think this is all a little far fetched then keep your money in a bank and watch what happens. You might also want to keep and eye on gold in GBP and the price of gold coins such as kruggerands and sovereigns on ebay. A one ounce coin of gold such as a Krug now goesfor nearly 700quid. Last year you could buy it for 400. They are in very short supply as people are cottoning on to what is happening.

Not being an expert, you understand Pitby, but there is a difference to this recession than the one in the early 80s when we had to leave the ERM.  Then, we could devalue the pound (or let it find its own level, as the politicians like to say) which made it cheaper for other people to buy our goods.  The UK would then earn lots of money by selling its stuff (things like steel etc) to the other countries and that would stimulate the UK economy thereby making the pound strong again.  Unfortunately, this recession is far more widespread and is affecting many countries worldwide so they don't buy our stuff.  Steel, for example, has come down from 900 pounds a tonne to 230 pounds a tonne in the last year.  China was the biggest buyer for this but their economy and building trade has also come to a standstill so they are no longer buying this type of product.  Everyone feels bad and we are looking for ways to hold on to our money so we stop buying the expensive things we can do without.  Cars are top of this list, we just hang to the ones we have for a bit longer so the steel doesn't get bought.  This works with many other items, as well.  On the other hand, the UK itself has stopped producing a great deal of items (the shoe industry, for example, which is virtually defunct in the UK) so we have to continue importing goods at a vastly higher cost as the pound is not worth as much as it used to be.

Another one of our big exports that brought money into the country was our so-called invisible exports, like insurance, banking, financial services.  These have been largely discredited so other countries are now using their own services (well, they feel they can't do any worse than our lot have done) and the amount of money transferred to UK becomes less.

The loss of money by the banks has caused billions of pounds (and other currencies, our "reserves") to be spent on trying to prop it up and restore confidence.  Unfortunately, it doesn't appear to be working.  The government has said it would consider simply printing more money to pay its debts.  This, to my mind, is the craziest thing that has been suggested in the whole sorry fiasco.  Printing more money, without the products and services to back it up, makes it worth less and it will continue to lose ground against other currencies and then perpetuating the devaluation crisis yet again.  As an extreme example, that's what the Zimbabweans have done lately and the Germans did in the Thirties.  Zimbabwe has just issued a 50 billion Zimbabwean dollar note (that's 50,000,000,000) which will just about buy you a loaf of bread if you can get to the shops before 5 o'clock because that's when the price will go up.  The Germans had the same problem and pictures of them pushing wheelbarrow loads of money to buy basic goods were all over the papers.  We might not have to push wheelbarrows but, if we take it to the extreme and devalue the currency by printing more money, there might not be enough digits on your chip and pin machine when you use your debit cards for the weekly Tesco shop.  Let's hope the government comes to its senses and doesn't go down that route.

Yes ,the pound did crash against the dollar in the eighties.  But that was a weak currency (the pound) competing against a strong currency (the dollar).  The worrying thing now is that the pound is losing ground against a very weak dollar.  If their credit crunch is worse than ours (and their housing market certainly is) then why isn't the pound gaining ground against it?

Of course ,the doom and gloom in the press and TV can't be doing it any good, either,  Every time you turn on the TV or radio, or pick up a paper, some politician or financier or bank boss is telling us just how bad it is going to be in UK which, IMHO, creates a lack of confidence in the pound.  Spain is worse but they don't harp on about it so much so it doesn't appear to affect them as much even though their percentage level of employment is almost double that of UK going on an age for age comparison. 

I am sure we will come out of it.  Last time it took 9 months to a year of belt tightening.  I have the uncomfortable feeling that, this time, it will be a couple of years before we get back to late 1990 levels.