Savvy Buyers Profit from Property Turmoil in Spain
September 29th, 2009
The big surprise this week was Sterling’s decline against the Euro. At one point, 1 Euro was actually worth MORE than 1 Pound.
Those heady days of 1.4 Euros to the pound seem a long way off now. However, Spanish Property: Profiting from Weak Sterling provides a handful of ways to compensate for the dent in Sterling’s purchasing power in Spain.
Aside from those suggestions, remember that it’s entirely possible to complete Spanish property transactions using Sterling, Euros or Dollars – whatever you and the vendor agree on.
If you can find a vendor willing to transact in Sterling, and you can agree a Sterling price, both parties can completely negate the currency fluctuation risk.
Local taxes will still need to be paid in Euros, of course, but at least you can minimise the currency risk on 90% of the transaction.
Aside from the articles included this week, there were three others which deserve a mention.
They’re a little bit off the wall but I think they deserve a mention.
In It’s the debt, Edward Harrison argues that GDP is a very poor measure of the health of any economy. What matters more is how much debt a country needs to service with their GDP.
In Developer Funding Replacing Banks, OPP Magazine reports on the growing trend of investors turning to property. What’s interesting is that where banks are normally concerned with capital value and appreciation, investors are more preoccupied with yield. This also tells me that they’re not unduly worried about further capital depreciation.
In Should You Avoid Investing in Danish, Irish and Spanish Banks?, David Hunkar references a couple of FT articles which highlight the indebtedness of the Spanish banking system – food for thought, and some interesting comments at the end of the article too.
Finally, my article of the week would have to be Three Million Unsold Spanish Properties?.
For quite a while now, everyone silently agreed on there being about a million unsold properties in Spain. Edward Hugh articulates the case for there being closer to three million – although some comments at the end suggest it should be a maximum of two million.
Either way, that’s a lot of Spanish property to shift before the market can return to normal operations – whatever normal means.
All in all, I believe that Spain still offers a large chunk of potential – but only for savvy buyers.
The element of currency risk, the oversupply of properties, and banks and developers very keen to dispose of assets – at any price – all combine to create the perfect environment for opportunistic investors.
A word of caution though. The market conditions now do not favour the faint-hearted, nor the inexperienced. As the OPP article concludes:
“The property industry’s mantra has been ‘location, location, location’; now it should be ‘research, research, research‘.”
Martin Dell, Kyero.com
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