Cost of Living in Spain Series: Watching The Currency Market When Buying And Selling Spanish Property

House in Spain

When I got to point #2 in a recent article entitled 10 Ways To Save Money When Buying Your Spanish Property, it had me casting my mind back almost nine years to when we were about to buy our first property abroad, here in Andalucía.

We had sold our house back in the UK in record time, and were renting a town-house in the pretty, mountain village of Frigiliana.

Having never rented a property before, it seemed sensible to see if we liked the area as a place to put down roots, as well as to experience the full range of the seasons of the year, before we actually bought somewhere. After all, the weather may have been hotter in summer or cooler in winter than we had imagined – and indeed, it was!

We made many house-hunting trips to various towns and villages, both inland and along the coast towards Málaga, and eventually as far along the western Costa del Sol as Estepona. For various reasons, but mainly because of fewer high-rise buildings and built-up areas, we decided that the Axarquía region, to the east of Málaga, was the place for us.

We knew we would be transferring a sizeable chunk of the proceeds of our UK house sale via a currency firm (into Euros) to pay for our new house, so we took the opportunity to keep an eye on the fluctuating currency market.

As a result, we were able to jump in right at the top, to bag a cool €1.50 euros for each £1 sterling.  This gave us almost ten thousand euros more than we had originally been expecting, which was enough to put a brand new kitchen with matching appliances into our new property. Quite a bonus!

And yes, I do know that the market could have gone the other way, but on this occasion, it didn’t.

Blue door in Frigiliana, Spain

Over the next few years, the British Pound made a steady decline against the Euro until it almost hit parity (when £1 only bought €1.08, at its lowest rate).  This meant that for many British expats living in Spain and relying on an income, savings or a pension from the UK, their income in real terms had reduced by almost one third.

Then, of course, came La Crisis, as it is known in Spain, when the difficult economic situation has meant that some British expats who may not have carefully planned for their future (as well as some who did) have been left in the unfortunate position of having to sell up and return to the UK.

Things have improved a little over the last few years, with the current exchange rate against the British Pound being €1.26 as of today’s date (15th July 2014).  But there are still anguished mutterings amongst British expat house sellers that they are having to accept lower prices than they paid for their properties, several years ago.

I want to look at this in more detail, using reverse psychology to see if the situation is really as bad as they think.

Key in house door

Back when I bought my house in January 2006, with the exchange rate at £1 buying €1.50, a €300,000 euro house in Spain actually cost £200,000.  To keep the figures simple, let’s assume that almost nine years later the price of that house has not risen at all and is sold today for €300,000.  Converted back into British Pounds (again keeping it simple, so let’s use €1.25 for each £1) then the initial £200,000 investment now converts from the €300,000 sale price, to £240,000 - an increase of 20%, due entirely to currency fluctuations.

Even if that self-same house were sold for only €280,000 (€20,000 less than was paid for it) the conversion into British Pounds would be £224,000 – which is still an increase of 12% over the £200,000 that was initially paid for the property.

So maybe the situation is not quite as bad as some people imagine.

Rooftops of Frigiliana, Spain

Of course, my example above is a simple one and does not take into account any of the following:

  1.  Capital gains (or any other) tax which might become due once the house is sold.
  2.  Where under-declarations were made at the time of purchase (when everyone in Spain was expected to pay for part of the price of the house in cash,  and furtively sneak  €80,000 to the vendor in a plastic, Mercadona shopping bag).
  3.   Legal and/or estate agents fees.

Whilst the above example is only applicable if someone is selling up in Spain and moving back (or at least sending their money back) to the UK,  if you are selling and want to re-purchase in Spain, because of the current housing market, you are now in a powerful position to negotiate prices when buying your next property.

Stairway to Heaven

To illustrate my point, I have only used simple, rounded figures, and it’s always wise to take legal and financial advice when making substantial property purchases.  

The purpose of this post is to indicate the advantage of never under-estimating the fluctuation of the currency market, which is a point often missed, or at least not discussed, as it should be.

This post is not meant to offer legal advice, merely an observation.

 

 

King Juan Carlos of Spain abdicates in favour of Prince Felipe

Here is a screenshot of this morning’s royal Spanish website (which has subsequently been changed):

King Juan Carlos abdicates

After 39 years on the throne, King Juan Carlos I of Spain has informed Mariano Rajoy, the country’s Prime Minister, that he is to step down in favour of his 46 year-old son, Crown Prince Felipe, “for personal reasons”.

Once one of the world’s most popular monarchs, Juan Carlos has been plagued recently not only with ill-health, but with a series of personal scandals which has sent his popularity amongst Spaniards, plummeting.

An amendment to the Spanish Constitution will now be rushed through parliament to permit the king to abdicate.

VOTING IN SPAIN: LOCAL OR EUROPEAN ELECTIONS

elections-logo

Voting for took place yesterday (22nd May) in the UK for both local and European elections, but we have to wait until Sunday 25th May before election day arrives in Spain.

Thanks to the 1992 Maastricht Treaty, I am entitled to suffrage (the right to cast my vote) as an EU citizen (UK expat) living in Spain, in both the local and European elections provided that:

  1. My name is included on the official Town Hall Register (Padrón Municipal), and
  2. I have indicated my desire to be included on the electoral roll

As I have done both of these things,  my census card (Tarjeta Censal) has duly arrived through the post confirming my municipality, and informing me of where my polling station will be (Cómpeta Town Hall).

Cómpeta Town Hall

On election day, I will need to take along my photo ID (passport or driving licence) as proof of identity and my census card to cast my vote.

Providing a person is registered on the Padrón and the Census, then they will still be entitled to vote even if they have not received their census card through the post, though it might be best to check with the Town Hall where their Polling Station will be.

Unlike the system in the UK where voters place a cross (X) next to the name of the person they wish to vote for – here in Spain it is the party for whom you cast your vote.  Each political party will have already chosen their list of candidates who will represent them, and these lists can be found inside the voting booths.

All I will need to do is pick up the paper listing the candidates for the party I choose, place that list into an envelope, take it to the official at the electoral table, prove my ID and then slot the envelope into the ballot box.

In the Spanish voting system not only are you are not required to mark an X against the name of the person/party you wish to vote for, but if you do mark the paper, your vote would be spoiled.

On Sunday, the people of Spain will be voting for 54 MEPs.  Polling booths are usually open from 9am – 8pm (but times may vary).

The list of parties that you can vote for in Andalucía can be found here.

Have YOU voted in Spain?  Is the system different where you live?

The Long and Short of San Isidro

San Isidro, Nerja, Spain

Whilst it’s true that there are fiestas and festivities in Spain throughout the year, I always feel that it’s the month of May that really kicks off the party season!

At the start of the month there’s El Día de la Cruz (the Day of the Cross) and last week I posted about my visit to the Patio Festival in Córdoba where I saw the most amazing displays of flowers.

The Romería de San Isidro takes place on 15th May each year, in honour of Isidro, a farm labourer who, according to legend, received divine assistance to perform his work and was known for his goodness toward the poor and animals. As a result he has become the patron saint of farm workers and other labourers in many Spanish-speaking countries.

San Isidro is also the patron saint of Nerja, so this is one of the biggest fiestas of the year to be held in the town.

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The festivities begin with a service at the church of El Salvador on the Balcón de Europa, before the effigy of the saint, (which normally resides at the Caves of Nerja), is taken back to the Hermitage of San Isidro in Maro.

The spectacular procession to accompany the Saint normally takes more than three hours and is a fantastic opportunity to see the many decorated carts, Andalucían thoroughbred horses, traditional costumes and pairs of magnificent oxen pulling beautifully adorned carts, including the one carrying the statue of San Isidro, himself.

San Isidro, Nerja, Spain

What was of particular interest to me this year, were the beautiful dresses worn by many of the ladies.

I noticed that as well as the traditional Spanish dresses, many of the younger women were wearing much shorter “flamenco-type” dresses with flat boots.  

Long Spanish dresses, Nerja

I love the elegant, longer dresses – but which do you prefer?

Short Spanish dresses, Nerja

Spanish dresses - long and short, Nerja, Spain

Anyway – back to the procession!

On arrival at the Caves of Nerja the celebrations really begin, with families and friends sharing picnics, paella, BBQs and, of course, plenty of wine and beer. This is followed by singing and dancing amongst the thousands of revellers until late into the night.

San Isidro is one of the best festivals of the year – vibrant, colourful and great fun. It usually heralds the start of good weather for the summer, as many locals say that the summer starts on 15th May!

Here´s hoping!

Which is your favourite Spanish festival or fiesta?