Thursday, April 30, 2009

Sorting the Spanish property market

There is one main way to rescue the Spanish property market and stimulate the whole economy as a result ;

Reform the expensive taxes and ridiculous purchase process

7% transfer tax, stamp duty, 1% here, 1% there, etc etc

Before you know it, purchasing with a mortgage is costing about 14% on top of the purchase price

Banks won't finance the purchase costs because they don't form part of the purchase price and aren't inherent in the value of the property

The Hacienda is collecting no taxes at the moment because the market is dead

So knock 6% off the transfer tax. Reduce stamp duty and notary fees and all the other shite

In fact, reform the notarial process, which is a complete waste of time, as all the dodgy fraudulent business that has gone on in Spain has all passed under the nose of a notary at some point in time. Who are they protecting ?

Without all the stupid costs there will be a much more fluid market when it comes to buying and selling in Spain


Here's a number for you :-


4 million

that's unemployed people in Spain, a country with a population of only 40 million, compared to the UK's 61 million

10% of the population

17% of the working population

Take out the little kids and the old ladies in black, and the old boys drinking in the ventas, and you have roughly one in six Spaniards without a job

So the working population is now supporting the kids, oldies, and a growing unemployed population

The government is collecting bugger all from property taxes, after creaming it for years

Income tax paid by workers will be declining

VAT on goods and services will decline as people have less to spend

Oh, and tourist numbers are expected to be down

I'm not sure how and when they are going to get out of this situation......

Tuesday, April 28, 2009

Daylight robbery

Landing at Malaga airport on Saturday I was due to pick up a second hand TV to give to our tenant in Calahonda, but I didn't have any euros on me in cash. So I went to the foreign exchange booth in the arrivals hall, and had a look at the prices. What happened next beggars belief;

The guy in the booth told us that the rate was 1.12, which souded pretty good as it has been around 1.10 over the past week.

I wanted to exchange 50 pounds, so the guy printed off the deal confirmation and started counting out euros.

I saw the deal sheet, and saw that he was going to give us 44 euros for my 50 quid

"Hang-on" I said, "this must be wrong"

"No, that's correct"

But the rate is 1.12, so for 50 pounds you have to give me about 55 euros

"No" he says, "you are buying one euro for one pound twelve pence"

An exchange rate of 0.88 cents to the pound. No thank you

I don't know if it is just a coincidence and a misunderstanding, but it seems deliberately obscure that the rate he told us was remarkably close to the pound/euro rate, but he was telling us the euro/pound rate !!!!!!!!!!

They must make an absolute fortune from people that don't notice, or are too dim to understand, and just hand over their readies and walk away with LESS EUROS THAN POUNDS


If the real rate gets below parity it will kill the european property market as far as the Brits are concerned, and those with euro mortgages would be in real trouble

Thanks for reading. If you want some decent advice on foreign currency exchange, send us an enquiry and speak to one of our professional partners here

Thursday, April 23, 2009

Congestion charge - you couldn't make it up

I have long been one to complain about the level of customer care in Spain in general, and Spanish banks like UCI and Solbank in particular. But since returning to the UK we have encountered a couple of ridiculous situations. BT was the first, which is ongoing, and covered in earlier blogs.
The second is the wonderful London Congestion charge. Here is what happened :-

The GLW (good lady wife) drives in to London, and her normal route blocked by roadworks, so she takes a detour and has to do a U-turn in a road which may be inside the charging zone.

She's not sure, but thinks we may have to pay the charge.

I go onto the website and follow the payment process

Put in her number plate and it identifies the make and model of car

Great , the system has recognised the car so it must have entered the zone, I thought

As a test, I entered the number plate for my car, and the system allowed me to start paying the congestion charge for yesterday

Hang on - my car didn't get within fifty bloody miles of the congestion zone yesterday!!!!!!

So I call them :-

"My wife thinks she may have entered the zone yesterday"

"Well you can check on a map"

"She doesn't know exactly where is was, so she isn't sure"

"Oh, well we aren't linked to the camera capture system"

"So you don't know and can't tell us if the car entered the zone?"


"So if I don't pay, because we aren't sure, then what happens?"

"Well if she went in the zone, you will get a penalty notice"

"OK, so if I pay, and she didn't go in the zone, then we get a refund?"

"No, sorry"

"Why not?"

"Because the congestion charge in non-refundable"

"But you are forcing me to pay, although you can't tell me if I need to pay, so if I didn't need to pay, I am wasting 10 pounds?"

"Sorry. We don't have access to that data"

Jesus. I spent years living in Spain not believing people that said how fucked-up things were here. How can they not tell you if you have to pay the charge - it just implies that you have to pay or suffer a bigger fine........

Tuesday, April 21, 2009

Buy to let fees

I have been looking into buy-to-let mortgages in the UK, having long been mildly embarrassed at the way in which Spanish mortgages are so damned expensive to set up, what with all the notary fees and taxes etc.
But I have seen that so called "best buy" loan in the UK seem to have setup fees of 3.5% or £1999, plus not fantastic margins above base.
So when we have a deal in Spain where the lender is willing to absorb most of the costs, then it doesn't make me feel so bad charging our fees, for what is, to be frank, a job that is both time consuming and fraught with hassle, with never any guarantee of success.
Holiday or investment homes in Spain are, for the most part, second homes, or buy-to-lets, even though that concept is a mystery to the Spanish.
Spanish banks are regressing in their products and willingness to do business. They are in about 1992 at the moment......

$4 000 000 000 000

IMF declares losses from the credit crunch could be 4 trillion dollars

$4 000 000 000 000

That's a four, and twelve zeros

That is a big number, and I'm someone that can remember when a billion used to be a lot

But where was this money, and where has it gone? Was any of it actually real ?

For sure the impact of it is real on real people's lives. Shame that those 12 zeros on a computer screen just can't be comprehended by the average Joe

Thanks for reading. Check out our website - apply for your 4 trillion mortgage here!

Wednesday, April 15, 2009

The great Euribor vs IRPH confusion

I keep getting clients contact me who are seeing the ECB rate dropping through the floor, and yet the rate which they are paying for their mortgage in Spain is not falling half as fast. Most of these people took their mortgages out in the good old days when the rates were about 3.5% and nobody cared what the basis was as long as the rate was good. Now many are discovering that they are not on the Euribor - which is the wholesale or inter-bank rate, but rather they are on the IRPH rate.
Of course, these rates were historically similar, so it didn't really matter. But now, the Euribor is reflective of the whole euro-zone, whereas IRPH is reflective only of happenings in Spain. The IRPH is an average of the mortgage rates charged by banks or caja's in Spain - there is an IRPH cajas, and an IRPH bancos, just to confuse things.
Anyway, as Spanish banks try to shore up their balance sheets, those that are lending or refinancing for their customers, are starting to charge much higher margins on their mortgage products, so now 1.5% is much more common than the standard 1% in the past. The upshot of this is that base rates may be dropping but in margin terms the banks are making loans more expensive, so the average for the IRPH rates are not falling as fast.
This effect could of course last for years, and when rates start to go up again, people with higher margin deals will find themselves struggling again. As Spain is now being identified as being in more serious mess than other countries, it seems likely that their banks will continue to push margins as the problems of the economy and unemployment grip.
Best solution, get your mortgage away from IRPH and onto the Euribor. Send us an enquiry and we'll see how we can help. Thanks for reading.

2 good news stories - I kid you not!

Today the BBC has 2 positive stories jumping out at me from the Business news page. This surely can't be that unusual, but it seems to be so long since there was good news of any kind, that caused me to sit up and take note. Of course, there's a good half dozen rotten news stories to dampen the mood, but I won't dwell on those today.
The good news stories have an undoubted relevance to the Spanish mortgage and property markets. First of all, the news that new property enquiries in the UK have increased significantly, although sales remain low. This means that these consumers are obviously attracted by the price reductions, and are maybe not so negative about the economy as a whole. As we know, people that are still employed should be much better off because of falling mortgage rates, so it would seem perverse for people with more money in their pockets to be negative for too long.
If there is more confidence in the UK property market, then there will be a knock-on effect in the Spanish market. There are undoubtedly bargains to be found in Spain, and people that feel that the UK market is recovering will have more confidence to invest in Spain.
The news from surveyors in the UK has impacted the strength of the pound, which is of course good for anybody paying a Spanish mortgage at the moment, and also good news for anyone planning to buy a property in the eurozone, as their pounds will buy more euros.
Of course, 1.13 to the pound is nothing like it was at 1.45 a few years ago, but any small rises are welcome.
Then there is a diary entry on the BBC site from an anonymous banker in London, suggesting that RBS are going to be back in the lending arena big time in the next few months, and they may be a month or so behind Lloyds HBOS.
Amazingly, somebody has remembered tha banks make profit from lending money to people! Lending 60, 70, or 80% of the property value to normal people is not high risk business - at least not compared to the sub-prime stuff and other dodgy investments that they were chucking billions at.
In Spain we have Halifax re-entering the mortgage market to a degree, and offering to pick up the tab for the considerable costs of remortgaging, and giving a few years of interest only. They are only doing 60% and are fairly rigourous in their application process. Even so, people switching 100,000 euros mortgage to the Halifax in Spain on interest only at the moment can expect to pay a whopping 217 euros a month for the priviledge. How may people are going to default against that - not bloody many I can tell you, particulary if they had been on a repayment at 5%+ with one of the increasingly unfriendly Spanish banks.
So if you are stuck on a high rate and sending too many hard-earned pounds over in exchange for not-many euros, then give us a call and let's see if we can help - 01621 785204 Thanks for reading.

Monday, April 6, 2009

Spain and Madoff

I was listening to Peter Day's World of Business podcast yesterday, in which he explores the effect of the recession on some of the countries of Europe that had less historically developed economies, including Spain. He was interviewing a broker, now unemployed, who had been selling investments in the Bernie Madoff ponzi scheme. He was saying that it was impossible for him to find a new job at the moment. They also discussed the likelihood of Spain's unemployment reaching 15% of the workforce, which is a staggering figure.
I don't know if it is that they didn't believe it could happen, or simply deluded machismo on behalf of the Spanish banks and Government. Either way, they didn't see the property crash coming, ignoring the fact that bubbles always burst, and they denied that there was any exposure to the sub-prime markets and scandals affecting other countries. We have just seen the first rescue of a Spanish bank, and it surely must be the first of many. I have been saying for years that there were too many banks and far too many branches, kitted out like little offices with a manager and a handful of staff that sat around pretending to work all day. Still the managers that I deal with deny that there are any problems with their own banks...........

Friday, April 3, 2009

Meeting Obama - well, almost.

Sitting in traffic yesterday on the way into London, just about to enter the Limehouse link tunnel, when a stream of several motorcades flew past on the other side of the road, carrying the G20 (possibly a boy-band) to a concert at the Excel centre. We knew it was them as the radio news was saying that they were all arriving for the summit. Loads of people complaing on the phone-ins about the cost of the whole event, in the circumstances, although 20 million quid really is just a drop in the ocean. But they could have flown them all to Jersey or somewhere, which would have saved a fortune and stopped all the protests kicking-off. And now we have seen lots of self-congratulatory pics and newsbites about how they have all agreed to invent lots of money to pump in the financial systems and sort out the global problems. Whether or not this will help remains to be seen. Clearly there have been some monumental banking screw-ups that have been going on for a number of years, and there is some reluctance to return to what keeps being referred to as "normal" lending. I don't think that a situation where the majority of adults in the UK have thousands of pounds of unsecured debt on loans and credit cards is particularly normal, just that it has ended up being common. People don't necessarily need access to ever increasing levels of credit, but if someone wants to move house, or change car etc, then redeeming loans and taking new ones simply oils the wheels of life. Better regulation is certainly needed for consumers and the amounts that they can borrow, but that will always grate with the people that insist that they can service more debt, and there will always be another credit card and balance transfer that can be used to borrow more.
Mortgage lending in the UK was up in Feb, a good sign, and net credit was down, so have people started paying back more, perhaps because of falling mortgage payments leaving more cash available?
How will this help this in the Spanish mortgage and property market ? This also remains to be seen as I think we are certainly behind the curve of the UK. If people have confidence and ability to borrow in the UK, then perhaps that holiday home / investment will again feature on people's minds.
What is going to happen with sterling though, is anybody's guess.......