David Bates Financial Adviser

According to many pundits the Euro is due for a bad year, which should mean better news for ex-pats who receive pensions later on. It might mean interest rate rises too, which will be good for savers, less so for people with mortgages, although the seriously depressed housing market in Spain will lessen the affect , as no-one wants mortgages in Spain right now.  The adverse UK winter MAY make people think about that home in the sun…..we shall see.

Today the Daily Express is highlighting that some Burueau de Change are offering 98 cents per pound, which is bad news for travellers to Eurozone countries, such as Spain. CCommercial rates are now in danger of heading back towards parity, after months of positive gains. This can only be bad news for the eceonomy on the Costa Blanca.

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Bad , gloomy financial forecasts in the UK have seen the exchange rate plummet back to 1.10 from its heady height of 1.18 a few weeks ago. With inflation under control at 1.80% , well below the government target for convergence, I think that this is the time, when the UK should take the plunge and get in the Eurozone. There maybe some upward price adjustments initially, however the UK would benefit from the early exit from recession that France and Germany are seeing. It would also make life much easier from a budgeting point of view for pensioners in Spain.

The current level of the euro/£ will reduce the upward pressure on property prices in Spain, and still presents a great opportunity for people seeking investment or retirement homes.

Just when the many pensioners in Spain, who receive UK pensions, were thinking that things were on the up, as the Euro exchange rate hit 1.18 to the pound, it has slipped back to 1.14, based on commercial rates. Anyone on holiday, who needs to get hold of Euros, will now get less for their money. While the FTSE 100 is hovering around the 4,900 mark (slightly down today) there is still hope that the economy is starting to move in the right direction. Unemployment in the UK is at 3.3 million (estimated) or if you believe one English newspaper it is nearer 6 million.

Some people suggest Spain may take another 5 years befoe seeeing serious recovery in the property market, which will mean plenty of bargains for some time for would be investors in property.

Back in January 2009, the pound fell to virtually parity with the Euro, suddenly visits to Spain and other Eurozone countries was more expensive. Bad news for Spain, and bad news for those trying to sell their properties, bad news for people planning their summer holidays. Today the rate is back at 1.18, hovering close to the psychological barrier of 1.20, which I expect will be broken very soon, as the signs of a UK recovery grow stronger.

There are winners and losers in this situation, people who did manage to complete the sale of their property in January, and who , for example had received €100,000 net would have bought roughly £100,000 sterling. Today in the same situation they would go back to the UK with only £84,746. Likewise anyone who offered €100,000 for a property but have not yet completed at the notary, they will save £15,254 on the deal.

Pressure on prices to go up is going to get greater, here in Spain. So the window of opportunity for bargain hunters, looking for a good investment is diminishing. The increase in the value of sterling has come at an opportune moment for the travel industry, as many disillusioned Brits, who were promised a “scorcher” of a summer by the Met Office, have discovered that it is the same old tale of a couple of weeks in June followed by plenty of rain.

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