Brits Buy As Pound Gains Against Euro
The number of Brits buying euros for property purchases has increased in the last few days after sterling reached a rate of €1.15 for the first time since August 2008.
Foreign currency brokers have seen a 40% increase in clients buying euros, while new enquiries have shot up by 24%.
“A number of our clients in the market for euros are taking advantage of the improved exchange rate and buying their euros for overseas mortgage payments, property purchases etc now,” World First’s head of private clients, Elisabeth Dobson, told OPP.
“They are delighted to be getting a rate that is up to 12% better than the lows we have seen over the last 17 months. There are a number of clients who will have been holding off on property purchases and overseas investments due to sterling’s weakness against the euro. This rate move will certainly spur people on.”
A run of economic good news from the UK, including a fall in unemployment, rising inflation and an anticipation that the country is out of recession, has helped increase the pound’s strength. Meanwhile, economic problems in Spain and Greece have weakened consumer confidence in the euro.
Not all currency brokers have seen a substantial increase in business. “€1.15 is a bit of psychological barrier but most clients are still waiting for the magic €1.20 number,” Marc Morley-Freer, commercial director at Moneycorp, told OPP. “After the UK election we could see improvements that could push people to make lifestyle purchases – things are too uncertain before then.”
World First’s chief economist Jeremy Cook remains bullish following sterling’s 9% growth over the last year. “I don’t think this run in particular will last because it has happened so quickly, but the pound could be up to around €1.22 by the end of the year,” he told OPP.
Story from OPP
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Tags: buying property in Spain, European economy, Recovery, Spanish economy
For those who care about booms and busts, and whether they are inevitable or preventable — which should be all of us — I suggest reading Mason Gaffney’s “The Great Crash of 2008″ and “How to Thaw Credit, Now and Forever.” He points out that Homer Hoyt’s “100 Years of Land Values in Chicago,” published in 1933, tracked the five cycles that had occurred during that interval, and found 20 elements which virtually always appeared; Gaffney has added a few more. He shows the algebra, which brings in expected land rent (a), the interest rate (i), the expected growth in land rent (g), and derives the value of land, (V). If investors expect “g” to rise, they’ll pay high prices for land. For V to level off, “g” must fall to zero, which causes V to fall. “There cannot be a ‘permanent high plateau’ of land or stock prices, if “high” means based on high values of “g”. ” Buildings do not appreciate. Let me repeat that. Buildings do not appreciate. They depreciate, no matter what nonsense we permit our tax assessors to put online. What rises in value is land. (And the assessors typically undervalue it by large margins. Buyers do not, and neither do sellers.) Speculators do not speculate on buildings. They speculate on locations.
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