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APRIL 2008

The falling strength of the pound against the euro has meant that there is increasing pressure on the price of Spanish property to fall from the UK purchaser's point of view. On 27th March Spanish mainstream television reported that property transactions nationally were down by approximately 27%.

It could be argued that the exchange rate issue between the UK and Spain will eventually be equalised by the free market price movement in property. The unknown part is how long this will take. It is likely that the future purchaser of propery in Spain will begin to see some better value as price adjustments are enforced.

 

Recent evidence indicates that Spanish property owners are already willing to drop the asking price by as much as 10% - 15% and there may well be further to go.

The European Central Bank (ECB) are at the moment reluctant to reduce base rates as they see inflation as a potential threat. This, along with the current rising trend of the Euribor, seems to point to a "steady as she goes" attitude by the ECB as far as base rates are concerned.

 

In order to simplify the ever changing financial situation perhaps the following will help:-

The pound has reduced in value against the euro by approximately 15% since the previously steady days of a 1.45 rate held for several years.

The property market in the north of Spain has an underlying trend to a decrease in value of about 15%.

Therefore the indication is that a natural adjustment is taking place and that the northern Spanish property market remains accessible to the UK purchaser.

The assumption is however that spanish property is bought from savings and not by re-mortgaging the UK property! Unlike the traditional Spanish costas the buyer on the Costa Verde has often been more discerning by seeking a lifestyle in their house in Asturias or Galicia, and not a "quick buck".

Clive Robbins

Managing Director, Blakemore Walker