Sterling makes the most of its I’m-not-a-euro credentials. Euro has no such defence to Greece’s problems. The pound drifted down from €1.14 to €1.13 before jumping nearly two cents higher on Thursday. It peaked at €1.1550 on Friday and opened in London this morning at €1.15. Sterling has been doing its best to develop a career in not-being-a-euro. With the problems in Greece holding investors’ attention, the pound wore a badge of non-involvement on its sleeve and managed to avoid the banana skins which usually litter its path. UK economic data were fairly well balanced between the helpful and the hurtful. Retail sales suffered in January because, according to the industry body BRC, arctic conditions kept shoppers at home. Britain’s trade deficit widened again in December, suggesting that exporters are not using the weak pound to price their goods more competitively in foreign markets. There was better news from industry. Manufacturing production grew by a decent +0.5% in December and the broader industrial production (which includes mining and suchlike) was up by +0.9%. The Bank of England’s Quarterly Inflation Report (it does what it says on the tin) raised the spectre of a further round of quantitative easing. It was a possibility that sterling’s supporters would have preferred not to see. There is still the impression - warranted or otherwise - that the Bank is happy to see the pound weaken and that it chooses its language to help that cause. nd if the statements out of Paris, Berlin and Luxembourg over the last few month are anything to go by, the majority of Euroland finance ministers would like to see a more competitive (i.e. weaker) euro. This might explain why they have put so little effort into reassuring investors about their plans to help Greece out of its budget bind. An ‘agreement’ in that direction masterminded by the EU last week was worth less than the very small piece of paper it was printed on. In order to gain the approval of France and Germany it had to be pruned so severely that all it said was ‘Don’t worry’. Its exact wording was ‘Euro area member states will take determined and coordinated action if needed to safeguard stability in the euro area as a whole.’ As reassuring statements go it was useless. It did not help matters for the euro when revised figures for the fourth quarter of 2009 showed slower economic growth than previously thought. Until EU leaders can formulate a coherent and credible plan to make Greek government bonds saleable the euro will remain weighed down by fears about the fiscal viability of Club Med. After three months spent between €1.09 and €1.13 the pound has attached itself to a slightly higher range between €1.13 and €1.16. For the moment, the euro’s Greek albatross is a significant burden, balancing investors’ slightly different worries about Britain’s political and financial situation. Buyers of the euro should take advantage of any spikes to hedge 50% of their exposure. Get the best foreign exchange rates with no bank fees or commission charges using your Moneycorp Privilege Card

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A Panic-Free Week for Sterling

Spain’s Cabinet will discuss spending cuts of as much as 50 billion euros ($70 billion) by 2013 as it aims to slash the budget deficit by two-thirds to meet a European Union target. The government will discuss the so-called austerity plan that aims to cut current spending in the central and regional administrations, said an official at the prime minister’s office in Madrid today who declined to be named in line with policy. Spain, mired in recession with the highest jobless rate in the euro region, has come under scrutiny amid concerns that smaller European countries like Greece may struggle to finance their growing debt. Even as Spain’s public-debt burden is about half the size of Greece’s, the risk premium on Spanish bonds has surged to the highest in nine months. Spain’s public-sector deficit probably amounted to 11.2 percent of gross domestic product last year, according to forecasts from the European Commission, which has set a 2013 deadline to cut the shortfall to the 3 percent EU limit. The country’s debt burden is set to double from before the crisis to 74 percent in 2011. Spain’s economy has been contracting since the second quarter of 2008, pushing the unemployment rate to 19.4 percent as the collapse of a construction boom destroyed more than a million jobs. In response, the government created one of the biggest stimulus programs in Europe, putting builders back to work, and extended jobless pay for the long-term unemployed. To shore up state finances and convince investors about its deficit-cutting plans, the government raised taxes on income from savings in 2010 and will increase value-added tax in July. Bank of Spain Governor Miguel Angel Fernandez Ordonez said more needs to be done as reining in the deficit is the most “urgent” priority, along with overhauling labor rules. “It will be necessary to implement, in each component of spending, deep structural reforms,” he said in a speech in Vigo, Spain. Story from Bloomberg

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Spain Targets €50Bn Spending Cuts

Spanish property developers’ debts with banks at the end of September were worth around a third of the country’s gross domestic product, the Spanish Mortgage Association said on Monday. A spokeswoman said data up to the end of the third quarter showed hard hit property developers owed 324 billion euros ($458 billion) as a property crisis continued to worsen. Property promoters have faced a torrid time since a property bubble burst in 2007. The mortgage association said many property developers could not pay back their debts and that, in turn, was affecting the credit rating of Spanish banks which have largely emerged unscathed from a severe recession and credit crisis. Spanish property prices fell just over six percent last year but many analysts still say the market has further to fall and data may underestimate the true scale of the slide so far. Story from XE.com

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Spanish Property Developer Debt Totals €324B

Risk measurement agency Moody’s said Spanish recession will continue until the second quarter of 2010. These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will “depress” the residential Spanish property market, which estimates that prices have fallen 9, 5% from their highs in 2008. Risk measurement agency Moody’s said the Spanish recession will continue until the second quarter of 2010. Spain as a country will take the longest to shed the shackles of the economic recession in the euro area. Furthermore, it believes that in this whole year, GDP will grow only 0.2 per cent while unemployment will exceed 19 percent of the workforce. These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will “depress” the residential property market, which estimates that prices have fallen 9, 5% from their highs in 2008. Oversupply of housing in Spain, with about 1.5 million vacant homes will lead to a “long process of adjustment” for the housing market, warns Moody’s. The agency also said that low interest rates have helped many of those with mortgages to cope with the economic “turbulence”, but warns that the faster recovery in the rest of the euro zone can make the price of housing rise later this year, which “may be premature” to Spain. Despite this outlook, the agency believes that the market for mortgage-backed securitizations (RMBS) has stabilized in November, although the outlook remains negative. Story from Barcelona Reporter

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Spanish Recession to Persist in 2010

Two more regional Spanish savings banks, Caja Duero and Caja Espana, agreed to merge on Monday, Spanish news reports said, as the pace of consolidation in the sector gathers pace amid the country’s recession. The two banks, both based in the northern region of Castilla y Leon, reached the deal late on Monday after months of negotiations. Spanish newspapers said the merger would be ratified by the boards of directors on Tuesday morning. Last month, two regional Spanish savings banks, Unicaja and Cajasur, based in the southwestern region of Andalusia, also agreed to merge, And in November two savings banks based in the northeastern region of Catalonia, Caixa Penedes and Caixa Laietana, announced that they had decided to join forces. Spanish banks got off relatively lightly from the subprime mortgage crisis in 2008, as the country’s strict rules meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere. But many, especially smaller unlisted saving banks usually controlled by regional politicians, were badly hit by the collapse of the once-booming Spanish property market, both through loans to developers and mortgages. The Spanish economy, Europe’s fifth-largest, entered into recession at the end of 2008 as the international credit crunch hastened a correction which was already under way in the property sector. Spain’s GDP contracted 0.3 percent in the third quarter, its fifth straight quarterly decline. Story from Inquirer

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More Savings Bank Mergers in Spain

Last week I mentioned that 2010 had started briskly for Kyero.com. Comparing the first week of 2010 with that of 2009, we’ve seen substantial increases across all metrics. Overall page views up by 46% Unique visitors up by 63% Property page views up by 47% Property enquiries up by 34% Clicks to estate agent web sites up by 41% What is going on? We would normally expect to see some growth each year - because, for six years now, the vast majority of the advertising revenue we generate goes straight back into developing Kyero.com. However, no amount of software development can compensate for a tricky world economy and a suppressed property market in Spain. I suspect that property-related search has boomed in general, and I suspect that this is particularly true in Spain and other ‘laggard countries’ in Europe. I believe that two of this week’s news article explain the surge in interest in Spanish property . Spain: One of the Best Real Estate Investments in 2010 explains why investors are re-assessing the region, and The Real McCoy on Spanish House Prices explains the rationale behind them expecting substantial discounts. (Incidentally, for these same reasons I see key-ready Spanish property as offering the best combination of price, risk and value at the moment.) Currently, the strength of the Euro against the British pound means that Spanish property is of most appeal to buyers in the stronger Eurozone countries: France, Germany and Holland. However, as detailed in: Worst Not Over Yet For Europe , the Euro’s foundations are shaky due to the uncertainty surrounding the finances of Greece. Accordingly, foreign-exchange traders are forecasting a sinking Euro, a rising US dollar - and a rise in Sterling. It might not be long before Spanish property becomes even better value to UK buyers too. Whatever kind of property you are looking for in Spain, you will no doubt have been rattled by the news of yet more property demolitions in Almeria. It amazes me that this is still happening in Spain but Nick Snelling’s article: Another Nail in the Coffin for Spanish Property puts things into perspective. A related article from the Telegraph can be found here - worth a read for the comments alone. If you’re as disgusted as I am that this is still happening anywhere in ‘civilised’ Europe, please take 2 minutes to add your signature to this petition. Just before Christmas, I wrote about Spanish banks and their charges . Now, there’s some good news from Santander as reported by This is Money and Which . It looks as though Abbey current account customers can now get withdrawals from Santander’s 4,300 ATM’s in Spain - without any charges at all. From a personal perspective, I’ve found Barclays in Spain to be the best (in terms of charges) for personal and business banking. Martin Dell, Kyero.com

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Spanish Property Popularity Rising - Why?

Any hint that Spain’s horror stories would fade into the past were ruined last week, when three British expats in Almeria were served with demolition orders for their homes. In total, eight homes in the town of Albox may be facing the wrecking ball, according to media reports. Throughout Spain, municipalities are wrestling with how to deal with homes built illegally in the boom years, usually at the direction of corrupt local officials. Two weeks ago, 10 homes were demolished in Chiclana, after the developer ignored orders to stop construction. Homeowners climbed on their roofs to try to stop the demolitions and 28 people were arrested in protests, typicallyspanish reports. The mayor of Albox says he is simply implementing a court order to destroy the eight homes, according to Abusos Urbanísticos Almanzora NO, a local group representing 250 homeowners with “precarious legal status” in the area. “Despite international media outrage at the incident, the authorities still fail to recognize the enormous damage that this scandal has caused to Spain´s reputation both at home and abroad,” AUAN wrote in a press release. Local municipality’s insistence on tearing down the homes of owners who purchased their property in good faith is “economic suicide,” the organization argues. Negative publicity alone should make the authorities rethink the threats, they say. “Happy New Year… we’re going to bulldoze your home,” read the headline in one U.K. newspaper. “If town halls have granted licenses they were not authorized to issue it hardly serves the cause of either justice or good relations to destroy the homes of those who purchased in good faith,” AUAN argues. “Given that over half of house sales in the province were, until recently, made to U.K. nationals, further publicity over illegality and demolition tragedies will be extremely difficult to counteract.” British expats Len and Helen Prior, who became the poster couple for the demolitions when their home in Vera was torn down two years ago, are now reportedly living in the remains of the garage, without water or electricity. AUAN is planning a candlelight vigil for Jan. 9 at the site of the Prior’s demolished home. “This is an act of solidarity and support for all victims of urban abuse in Spain,” the group says. “We will not stand silently by as more unfortunate families are broken apart and financially ruined through no fault of their own.” Story from International Property Journal

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2010: Pain in Spain Continues

I really wish I could close 2009 on a brighter note regarding Spanish property - but no amount of positive thinking can make the current situation look bright. Spanish Banks Prefer ‘No Sale’ Above Paper Loss gives us a first-hand account of why repossessed properties via Spanish banks are almost always such poor deals. We also found this out the hard way - and I’m now hopeful that key-ready Spanish properties are currently the best route to finding realistically priced properties. The difference is that these properties are available direct from the developer - who need sales to prevent the banks from taking possession. Unlike the banks, developers can act more quickly and negotiate from a more realistic property valuation. Remember I told you about a Spanish property auction organised by A Place In The Sun? Unfortunately, that met with little interest. A report in Overseas Property Professional magazine concluded: .. Bidders were only interested in the two ‘no-reserve’ properties, which received offers of around €100,000, said auctioneer Jonathan Ross of Barnet Ross. It suggests that to offer Spanish property to a UK audience they need to be ‘no-reserve’ or at a substantially lower price than the market perceives it to be worth. Thankfully, Peter Christian has something a little more cheery in Drink To A Happy Holiday . Finally, I was recently asked by the International Property Journal for my 2010 predictions for the overseas property market. Here’s what I said: The differing pace of economic recovery between nations will create activity between buyers and sellers. In Europe, the stronger German, French and Dutch economies will allow buyers from those nations to seek and aggressively negotiate property deals in the slower-to-recover European countries - Portugal, Italy, Ireland, Greece and Spain. Even though there is no currency exchange advantage for these buyers, one Euro is worth a lot more property in these PIIGS countries in 2010 compared to 2009. If the US economy continues to improve and the US dollar increases in strength against the Euro, we could also see opportunistic US buyers sniffing out deals in those slower-to-recover countries. This buyer activity is already happening at the top end of the market in the UK where foreign buyers are taking advantage of the devalued pound, a slow moving property market (tipped to get slower in 2010) and a stalled economy. Expect more of the same for the UK and the phenomenon to extend to more countries in 2010. I hope you have a great holiday break and that you’ll join me again in January to see how the Spanish property market starts shaping up in 2010. Martin Dell, Kyero.com

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Optimism for Spanish Property in 2010?

Recently an influential annual report was published by Acuna & Asociados who are highly regarded Madrid real estate analysts. Their report makes depressing reading given that they do not think the Spanish property market will recover for several years. Indeed, at current rates of demand (around 200,000 properties per year) it may take some six to seven years to clear just the existing housing stock for sale. Certainly, there is an inordinate amount of property for sale on the Spanish marketplace. According to Acuna & Asociados there are some 1.67 million properties for sale in Spain. These comprise some 500,000 new builds, some 470,000 new builds yet to be completed and around 500,000 re-sales. It is quite likely that the estimated number of resales is very conservative given the amount of properties privately for sale that will not be registered formally anywhere. Meanwhile the Spanish economy is in meltdown. Unemployment is currently somewhere around 19% with Citibank predicting that it will rise to 22% and Acuna & Asociados to 25%. The collapse of the Spanish construction industry has impacted not just on its associated industries but on the population at large who have been caught in a lethal vortex. As more people lose their jobs so more properties come onto the market - often with distress sale prices. Unfortunately, there are no apparent ‘quick fixes’ for the Spanish economy which is also being hurt by the world credit crunch. Socialist Prime Minister Zapatero has tried to stimulate the economy with his much publicised Plan E. However, this is due to cease soon due to lack of further funds and has done little other than reduce the very short term unemployment figures. These will, obviously, rise once Plan E stops and as Spain goes into the winter period when any tourist related employment reduces radically. So, what does all this mean for Spanish property buyers and sellers? Well, as a seller of Spanish property, it is obviously bad news – particularly if you bought within two years or so of the boom. In this case, it is unlikely that you will recover your money for some considerable time to come. Worse still, the sheer quantity of other properties for sale (including many genuine distress sales) means that you will be entering a savagely unforgiving market place. Indeed, the only consolation (for British sellers) will be the strength of the Euro over Sterling which may mitigate any drop in their Euro sale price. As a buyer, of course, matters are very different. Virtually everything is for sale and you can now pick up bargains throughout Spain almost everywhere you look. However, this does not mean that you can be careless. Far from it. Indeed, uppermost in your mind, at all times, should be the adage that ‘not everything that is cheap is a good buy’. In fact, you should not even think of buying unless you know intimately how to tell whether a property is fully legal or not. Furthermore, you must be able to assess objectively what will make a long term sound investment. As always, the key to a sound investment is its ease of resaleability. However, establishing resaleability is often less easy than it sounds when you are in a foreign country with a particularly complex marketplace involving not just native buyers but also a very significant proportion of foreigners from an array of different countries. Without doubt, the Spanish property crash has produced some excellent bargain buys. These exist now and are well worth exploiting. However, the question is whether property prices in Spain have now reached their bottom? My own feeling is that prices still have around 10% further to drop. This will be an unpopular ‘call’ but the sheer numbers of property currently for sale together with an economy in freefall means that any optimism at the moment is hard to justify objectively. At the end of the day property, like any other commodity, is subject to supply and demand and at the moment, there is far more supply than demand. Until this readjusts, prices will continue to drop and the Spanish property market will remain very weak for the forseeable future. Of course, if you are thinking of buying a Spanish property then your next question may be ‘when will it be a good time to buy?’ Well, I cannot help feeling that the desire to make untold money on property is somewhat distasteful. Surely, the primary aim of moving (particularly to a foreign country) and buying a property is about obtaining a better quality of life than you have currently - preferably as soon as possible? To place life ‘on hold’ whilst waiting for a market to guarantee a ‘profitable’ investment seems somewhat short sighted given life’s brevity and uncertainty. This is not say that you should not be very careful. However, now I think the emphasis should be on buying a property that will retain its value long term – as opposed to being purely focussed on the profit that it will, or could, make. Those days, in Spain, are, for the time being, largely over. That does not, in any way, diminish the valid reasons for coming to Spain which should be about delighting in the genuinely superb quality of life still on offer. Little has changed in that regard – it is just that combining this with a guaranteed short term profitable property investment is less valid. In short, I suspect, that the prices of Spanish property will hit their low point probably in the spring of 2010. However, that is not to say that you cannot now pick up a heavily discounted property - and one that will prove to be a good purchase for the future. If you are planning to move to Spain then, give or take, this is about as good a time as any. However, be prepared to drive a hard bargain - as I believe that the market has some time to go before it stabalises… From Nick Snelling’s latest book: How to Move Safely to Spain

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Spanish Property: What Now?

News this week of new laws to help Spanish companies reduce employment costs may seem like a backward step for full employment, but it’s a necessary one if Spain is ever again to be competitive in Europe. At last, Zapatero’s government has conceded that they need to reform Spanish labour laws . I doubt these changes will be implemented quickly, or that they’ll be universally welcomed, but I’m glad to see Spain taking these first tentative steps towards being competitive within Europe. The main reason I look out for this kind of news article is that employment and the economy are inextricably linked. Full employment drives the economy upward while unemployment drives it down. Right now, with close to 20% unemployment in Spain, its economy and the Spanish property market are suffering - because people without jobs don’t buy houses. Personally, I believe that encouraging employers to hire again by revising the labour laws is the smartest thing Spain can do to revitalise its economy. Spain is also planning to increase its VAT rate from 16% to 18% in summer next year. The bill has not yet been passed and, again, this will be met with some resistance. In relation to ECB Will Exit Cautiously , I was surprised to read elsewhere that Spain has been given until 2013 to get its public deficit under the maximum allowable of 3%, while the UK has been given a year longer. That says quite a lot about the state of the UK’s finances and, Edward Harrison makes a good case for how ineffective Quantative Easing really is. Nick Snelling has some good advice in Spanish Property: How to Negotiate the Price . Nick writes with great authority and clarity about the Spanish property market because he lives and works in Spain, and he’s a published author. His new book, How to Move Safely to Spain is worth ten times its €12.75 cover price - and would make a great Christmas gift for anyone even remotely interested in moving here. Finally, despite the expectation that repossessed or otherwise distressed properties in Spain would offer the public the best deals, the reality has proved to somewhat different. We hinted at this last week in Spanish Banks Should be Better Estate Agents , but the truth is that they are not very good at it at all. We’ve just closed an advertising campaign for CAM Bank for this very reason, but we believe that key-ready properties might offer a viable alternative. These are mostly brand-new, fully legal properties that the developer is motivated to sell before the banks get their hands on them. You can find out more here . Martin Dell, Kyero.com

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Full Employment is Key to Spanish Economy