April 18th, 2010

According to Contithe overseas mortgage specialis, an increasing number of British investors buying second homes in Europe are taking out euro-denominated mortgages in order to beat the poor exchange rate. This not only allows them to take advantage of cheap interest rates, but could potentially save them significant sums of money if, as experts predict, sterling appreciates against the euro over the next few years, as this will reduce the sterling cost of the property purchase.

Clare Nessling, Conti’s Operations Director, says: “A euro mortgage could be a good idea, even if you thought you didn’t need one. As you’ll only need to transfer money for your deposit and fees for now, it minimises the amount of sterling you have to exchange for the property purchase. Even if you’re lucky enough to be a cash buyer, it may be worth taking out a mortgage until the exchange rate improves, at which point you can pay it back, and ultimately reduce the price you pay for the property.”

There are a number of other benefits associated with euro mortgages. If, for example, an investor is going to rent out their property, having a euro mortgage means that their rental income and mortgage repayments are in the same currency, and they can therefore avoid exchange rate fluctuations.

A euro mortgage also allows them to benefit from European interest rates, which are often lower than sterling rates. Even a small difference could potentially save them a lot over the lifetime of the mortgage. The fees on some euro loans can also be substantially lower than on some sterling mortgages.

Tags: ,
Posted in Financial & Mortgages | Comments Off

April 17th, 2010

There’s a growing feeling of confidence amongst prospective overseas property buyers, according to Conti, the overseas mortgage specialist. It’s just had its busiest month for almost a year in terms of mortgage ‘go aheads’, the point where prospective buyers take their mortgage quotes through to the application stage. These increased by 48 per cent during March, compared with the previous monthly average. The proportion of prospective buyers progressing from the quote stage to the go ahead stage has also increased, suggesting that buyers are becoming more serious about their intended investment.

Despite the turbulence unleashed on the UK mortgage market by the global banking crisis, Conti says that overseas mortgage providers have a healthy appetite for lending to foreign investors. But a combination of factors, not just mortgage availability, are contributing to the attractiveness of this market. Falling property prices, in some cases by up to 50 per cent, and historically low interest rates are making it much more affordable, despite the current strength of the euro.

Clare Nessling, Conti’s Operations Director, says: “Falling property prices across many European destinations mean that the chance of owning a place in the sun may never be better, and historically low interest rates mean it’s become even more affordable for British buyers. The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities. Confidence is definitely growing, but there’s also an element of buyers snapping up bargains in traditional hotspots while they have the chance.”

Tags: , , , ,
Posted in Financial & Mortgages, Property market | Comments Off

April 16th, 2010

The latest figures from the National Institute of Statistics (INE) show that the Spanish property market grew by 16% in February compared to the same month last year, building on the trend started in January. This suggest the market has touched bottom and is starting to recovery after 2 years of declines, at least in some areas. Not including social housing, there were 35,720 home sales in February, 21,368 of them newly built and 19,665 resales.

Story by Mark Stucklin

Tags: , ,
Posted in Property market | Comments Off

April 5th, 2010

Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 0.8% in March compared to the previous month, finishing at 1.215%. Once again, Euribor is at the lowest level on record, down 36% in 12 months, and 77% down from its all time high of 5.393% in July 2008. Thanks to the latest reduction in Euribor, repayments on a typical annually resetting mortgage (120,000 Euros, 25 years, Euribor +0.8%) will fall by around 41 Euros a month, or 500 Euros a year.

When Euribor rose a fraction in December I suggested that, after 14 consecutive months of falls, a change of trend might be in the offing. Despite a return to declines in January, February, and March, that still probably holds true. Flipping around is often consistent with a period of change.

Most of the savings from the fall in Euribor have already been had, and Euribor is unlikely to go much lower. Next month borrowers on annually resetting mortgages will hardly notice any savings, even if Euribor goes a bit lower. Euribor is based on interest rates set by the European Central Bank. Base rates are expected to remain at 1% for the first quarter of 2010, rising gradually after that.

New mortgage approvals rose 2.3% to 53,747 in January compared to the same month last year, after an annualised fall of 1.3% in December, showing there is not yet a clear trend towards improvement. On a monthly basis, new mortgage lending was up 12.3% in January. The average mortgage value was 112,839 in January, 7.6% lower than January 2009. Overall new lending was down 5.5% to 6.064 billion Euros.

Story by Mark Stucklin

Tags: ,
Posted in Financial & Mortgages | Comments Off

March 17th, 2010

The report from Savills International Research revealed how far the overseas property market in the UK had fallen over the last year. Just 2% of the 430,000 foreign-home owners in the UK bought their property in 2009, compared to 70% who bought between 2003 and 2008.

“By spring 2009 Savills International noted that interest in international holiday homes had returned, albeit at far lower levels than previous years,” said the report. “The market has now reverted back to traditional, end-user buyers (as opposed to investors), and mostly in traditional, established hotspots.”

The high number of distressed sales that have contributed to oversupply and falling prices has helped keep pure investors out of the market, it added. “In contrast to previous years, investors solely seeking to capitalise on upward price movement are no longer active in the market place.”

Savills’ head of international, Charles Weston-Baker, told OPP that mid-market buyers had also started to return to the market. “We have started to see more grassroots sales coming through,” he said. “The very top of the market has largely been unaffected, but now end-users who are looking for lower-priced but quality property are buying to enjoy the product.

“We’ve also noticed how important sport has become to buyers, especially for baby boomers and those retiring. There’s a new enthusiasm for experiential holidays and buyers need a reason to be somewhere, such as golf or horseriding. We seem to have jumped 20 years in aging, where people are slowing down at 80 rather than 60.”

The report predicts another quiet year for the UK holiday home market, with most sales taking place to high-income lifestyle buyers in traditional locations, with little activity in the speculative or off-plan markets.

The proportion of people buying in major cities and in villages grew substantially at the expense of smaller towns and isolated rural locations. The popularity of purpose-built resorts also increased.

“This reflects not only the growth in preference for such developments but also the rise in quality and quantity of such communities,” said the report. Interest in buying property to renovate or improve also fell, mirroring the rise in resorts where ready-to-go homes maximise letting potential.

Savills’ market has become skewed towards mid-to-top end buyers, and properties worth more than £200,000 now form the majority of purchases, with a particular fall in popularity of homes worth less than £100,000.

Story from OPP (registration)

Tags: , , ,
Posted in Property market | Comments Off

March 16th, 2010

David Beckham has the looks, the talent and – perhaps most importantly – the bank balance to make many green with envy. But it seems David Beckham’s good fortune where money is concerned improved when he signed for Real Madrid.

His transfer to the Spanish giants Real Madrid was not just a great move as far as his footballing career was concerned. In fact he left Manchester United just as the Spanish tax system was changed to benefit foreigners in an effort to draw more highly-paid professionals to these shores.

Designed to be part of the government’s budget for the 2004 financial year it came into operation on 1 January 2004 and basically allowed foreign employees to be treated as “non-resident” for tax purposes even though they were living and working in Spain. In simple terms a foreigner since then is entitled to cut his rate of income tax from a punishing top rate of 45 percent of his earnings to just 24 percent overall.

Former prime minister Jose Maria Aznar’s conservative government altered the tax laws to make it more attractive for foreigners to live here and to help companies that employ many workers from abroad — who are often paid high wages.

This law has helped the highly-influential and affluent bosses of most of Spain’s biggest football clubs as it leaves them with substantially lower wage bills and hence even bigger spending power to bring more stars to their domestic game.

Without a doubt, the law change was engineered to help football clubs to reduce their wage bills as it was reckoned if the players were paying much less tax, the cost to the clubs would be lower.

And though it might seem like these pampered prima donnas on the football pitch are having it all their way, it is not just a perk for the rich and famous. Sources from the Spanish Treasury Department emphasised that even though the new tax rules were principally brought in to help footballers, the tax change applies to anyone who is working here as a professional.

This tax provision is therefore available to all foreign professionals, from the executives with multinationals to researchers or any other salaried expat who works for a national company.

There are a few qualifications to which foreigners have to submit however:

  1. They cannot have worked in Spain for 10 years before – a measure to stop tax cheats
  2. They must work on the payroll of a Spanish company, though this can be a subsidiary of another multinational
  3. The application is be taxed as non-resident must be filed with the Spanish tax authority within 6 months of taking up the position

Finally, don’t think that it always beneficial to claim for this special tax treatment. Though the overall rate of 24 percent is very attractive and significantly lower than the highest rate currently applicable, it’s only of interest to high-income employees.

The downside of this non-resident regime is that the tax payer cannot claim the normal tax allowances and deductions applicable to resident tax payers so, as a general rule, it will only be of interest when the individual expects to earn in excess of EUR 70,000 -75,000 in a full tax year.

To make the correct decision about claiming the tax status or not, it’s best to speak to a tax advisor.

Story from Expatica

Tags: ,
Posted in Financial & Mortgages | Comments Off

March 15th, 2010

The bust is dead, the Spanish property market’s recovery has begun! That’s how some leading daily papers like El Pais are interpreting the latest figures from the National Institute of Statistics (INE) showing the market grew ever so slightly in January. Well, I wouldn’t try to claim a vigorous recovery is underway, but there’s no denying the market appears to have found a floor, which is an improvement on the 2 years plus of monthly declines we had before.

So what happened? Well, figures for January from the INE show that, excluding social housing, there were exactly 34,000 sales in January, up 1.4% over 12 months. A year-on-year increase of 1.4% is no big deal, but it’s a much needed respite when it is the first time in 3 years that the market has actually grown. And it’s difficult to dismiss it as a one off, because it is clear that the market has now found a floor around 30,000 transactions per month.

But, of course, we have to keep in mind that the market in January was 56% smaller than it was in January 2007, when it stood at 77,400 sales per month. So a year-on-year improvement is good news, but peak-to-trough the market is still just a shadow of its former self. Until that situation changes, there’s not much to cheer about.

If you dig into the figures you find that most of the improvement is now coming from resales, not new builds, as the chart shows. New build sales kept the market from total annihilation last year, but I’ve been warning for months that, sooner or later, they might fall off a cliff.

Story by Mark Stucklin

Tags: , , ,
Posted in Property market | Comments Off

March 10th, 2010

Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 0.6% in February compared to the previous month. Euribor now stands at 1.225%, the lowest level on record. Euribor is 43% down over 12 months, and 77% down from its all time high of 5.393% in July 2008.

As a consequence of the latest reduction in Euribor, repayments on a typical annually resetting mortgage (150,000 euros, 25 years, Euribor +0.75%) will fall by around 65 Euros a month, or 780 euros a year.

When Euribor rose a fraction in December I suggested that, after 14 consecutive months of falls, a change of trend might be in the offing. Despite a return to declines in January and February, that still probably holds true. Flipping around is often consistent with a period of change.

Most of the savings from the fall in Euribor have already been had, and Euribor is unlikely to go much lower. By March borrowers on annually resetting mortgages will hardly notice any savings, even if Euribor goes a bit lower.

Euribor is based on interest rates set by the European Central Bank. Base rates are expected to remain at 1% for the first quarter of 2010, rising gradually after that.

Story by Mark Stucklin

Tags: ,
Posted in Financial & Mortgages | Comments Off

March 9th, 2010

The Spanish house price index figures for February 2010 have just been released. See the graph and the table below for an up to date overview of the real estate market trend in Spain.

Spanish House Price Index - February 2010

Spanish property prices fell by 5.5% over 12 months to the end of February, according to the property price index published monthly by Tinsa, one of Spain’s leading appraisal companies. However, prices inland fell by only 3.8%, which is similar to last month’s 3.6%, and confirms a general trend towards smaller price declines. At this rate prices of inland property will be stable or rising again sometime in the next few months.

The graph and table data represent the year-on-year evolution of Spanish property values. For example, if the value for August 2009 would be -3.9, then this means that average property prices in August 2009 are 3.9% lower than they were a year earlier, in August 2008.

The graph and table on this page contain up to date information for the past 13 months. For more information, please look at earlier monthly reports, or the historical overview since January 2001.

The graph and table data are based on actual property valuations, as established by one of Spain’s larget independent property valuation companies, Tinsa S.A. They are not based on asking prices or (under)declared selling prices, nor on the statistics as provided by the Spanish Ministry of Housing, and are therefore considered to be the most acurate and reliable source for this kind of information.

Tags: ,
Posted in Property market | Comments Off

March 9th, 2010

There was a small uptick in Spanish housing sales during the fourth quarter of last year, according to data released yesterday by the Ministry of Housing. Small, maybe, but enough for the Government to get excited about.

Beatriz Corredor, Minister for Housing

Beatriz Corredor, Minister for Housing

“The transactions in the fourth quarter represent a rise of 4.1% with respect to the same period last year, this being the first year-on-year rise since the fourth quarter of 2006,” goes the first sentence, in bold, of the Ministry’s press release.

In fact, if you just look at the ordinary housing market, the uptick was even better. Excluding social housing there were 116,664 house sales in Q4, a rise of 5.5%. Sales in the province of Malaga went up 3.6%. Regrettably, that’s where the good news ends.

Take the year as a whole, there 413,112 transactions last year, a fall of 19% compared to the previous year, and a whopping 46% down on 2007. Even the Q4 was down 33% compared to 2 years ago.

Some regions did better than others. Looking at a selection of regions popular with holiday home buyers, the inland province of Teruel suffered the most in 2009, down 36%, followed by Las Palmas in The Canaries, down 32%. At the other end of the scale, Spain’s two big cities did the best, down just 1.7% in Madrid and 3.9% in Barcelona.

Story by Mark Stucklin

Tags: , , ,
Posted in Property market | Comments Off