When it gets to the end of any year, there are inevitably people who look back over the preceding 12 months and describe them as a ‘rollercoaster of a year’. But few years have seen as much volatility and shifts in sentiment than 2012.
Richard Way, editor at Overseas Guides Company takes a look back and forward
The currency markets have been a prime example of this. At the beginning of the year, weakness in Sterling meant that £1 bought just €1.19 in January. However by mid-year, with concerns about the Eurozone mounting further, the Euro weakened to a four-year low of €1.28 against Sterling.
Clearly Brits looking to emigrate abroad aren’t completely lost on the opportunities available when currency movements swing in their favour. In August, we at the Overseas Guides Company saw a dramatic upsurge in the number of enquiries from would-be property buyers looking at southern Europe.
Spain and Portugal
This influx of enquiries has clearly filtered through to estate agents on the ground since that time. One of our partners, HomeEspaña, reported they are busier now at the end of 2012 than they have been at any other point in the past 10 years. Another, Ideal Homes Portugal, said the number of foreign buyers in the Algarve has risen rapidly in the second half of the year to levels well above those seen in 2011.
Scandinavians taking advantage of weak euro
While Brits have traditionally been the dominant buying force in places such as Spain and southern Portugal, 2012 has seen the emergence of a more culturally diverse group of foreign buyers casting their eye over Mediterranean property. Among those seeking to take advantage of a weak Euro and heavily subdued property prices are Scandinavians – especially Norwegians – whose economies are in much better shape than those of their southern neighbours.
New laws on residency
Another appeal driving this new trend is the introduction of new laws promoting residency for non-EU citizens who purchase property over a certain value. Russians, in particular, have played an increasingly important role in the real estate markets of popular expat destinations, while wealthy Chinese individuals are also being actively targeted.
Such initiatives have been introduced or proposed, for instance, in Portugal at a €500,000 threshold, Cyprus at €300,000 and Spain at a considerably lower €160,000.
Euro Debt Crisis
It is hard to see anything but more of the same continuing into 2013. The European debt crisis will not be magically solved overnight, and so these countries will continue to resort to austerity measures – including property taxes – to raise much-needed cash, in turn keeping property prices subdued and domestic purchasers on the sidelines. Simultaneously, wealthy foreign buyers are expected to continue their buying spree while such generous incentives remain available.
Currency volatility is also unlikely to change any time soon, as markets to and fro nervously in response to every piece news from Europe – especially regarding Greece, which could still exit the Eurozone at some point in 2013.
George Osborne’s Autumn Statement – the UK’s mini-Budget – and the news that the UK will miss its deficit reduction targets will likely put pressure on the UK’s AAA credit rating. If the UK is, in fact, stripped of this top rating, fluctuations in Sterling’s value will be the likely outcome.
Managing your currency transfers
With so much market instability, it serves as a good reminder of the importance in managing your currency transfers effectively when purchasing a property in a different country, so that you don’t pay more than you need to. Currency fluctuations directly impact on the purchase price of a property abroad – which, depending on the size and direction of these movements could easily cost you a small fortune.
You may have agreed to buy your dream property for €160,000, but because of the exchange rate volatility, the amount you actually pay in pounds could vary anywhere between £125,000 and £134,000 – a range of £9,000. And that’s just at this year’s aforementioned peaks and troughs – last year featured even more pronounced extremes.
For anyone purchasing a property, £9,000 or more goes a long way to covering removal costs, renovations or new furniture – so it is not something that should be quickly dismissed!
Richard Way, Editor, Overseas Guides Company (OGC)
+44 207 898 0549