Euro Zone Crisis-Local Impact

[djk99]

As we enter yet another week of the ongoing Euro zone crisis, there is no more clarity in sight. Some financial experts have concluded this is the new' norm', and we will stagger along with ongoing emergencies for the foreseeable future – others have seen it as a game of 'chicken' between Greece and the Euro moneylenders whereby Greece's left-wing is of the opinion that they have nothing to lose from exit and can therefore force the euro-zone into accommodating their demands. In contrast, the Euro moneylenders argue that they aren't about to make Greece an exception and, if they want to push themselves out of the single currency that is fine by them. Here in Fuerteventura, the repercussions will affect many people – property buyers / sellers...people with pensions /savings abroad and Ex-pats with Spanish bank accounts, to name a few. The next couple of weeks will be interesting as the Greece Vs Germany saga plays out – if indeed, there are any Euros left in Greece by the end of the week! Spain seems to have been given the accolade of 'next to crumble', and, as of today, Italy, Portugal and Ireland have escaped - so far. I haven't seen the term 'Spexit' coined as yet....but, it will have an irresistible ring to some journalists. As always, big international stories will be used to mask smaller domestic issues and as a community we could help each other by highlighting effects we see in Fuerteventura. The Madrid Government is presently appointing independent property valuators to assess our local banks finances in relation to property holdings which will have a major impact locally. There may be many other local implications to come, and this forum can be of help in discussing the potential issues as they arise, with a local perspective. We all pick up snippets of information, I can't think of a better time to share and discuss them. There is so much misinformation and hype regarding this Euro Crisis at the moment we could all benefit from sharing our experiences and informed opinion.

[appy ammer]

I would imagine short term the fuerte local economy is benefiting from a good pound to euro exchange rate but as we all know its for the wrong reasons

[Cameron]

no reply when i try and contact Bancaja for the last 3 days...Hope they haven't changed me hard earned into a sack of pasetas and done a runner.

[austin7]

The strong pund may help as Brittish tourists get better value, however it seems that the tourist authorities have stopped promoting the Canaries to the UK/Irish market in favour of the French, Italian, Russian, Polish and Spanish markets. We don't know about the Russians and Polish, but experience tells us that the Spanish, French and particularly the Italians, do not spend much money here, and that is not just the prospective from a British owned business, this is true of all businesses.

[Cameron]

We've always been the biggest spenders (ask my wife). If its the same across Spain my suspicion would be Gibralter and the Falklands may have something to do with it.I can't think of any plausible reason other than i've been told on good authority that the local population are not partcularly happy at the number of British property owners.

[lionfish]

I think it is unlikely that local businesses are benefiting much from the good UKP to Euro exchange rate - that only helps if the Brits convert their UKP's and then come over here and spend them! My impression is thet the streets (in Caleta) are extremely quiet and that the proportion of Brits is smaller than we might expect. Lots of French and Germans walking the prom; but mainly staying A/I in Barcelo.
Cameron:- If the Spanish are not happy with Brits owing property, would they prefer the Sapnish banks to have even more property on their books, with the inevitable consequeces?
The Spanish need to welcome tourists who spend money and all property owners who pay their bills and therefore contribute towards keeping Spain afloat,

[ANDMAG]

quote:Originally posted by Cameron

no reply when i try and contact Bancaja for the last 3 days...Hope they haven't changed me hard earned into a sack of pasetas and done a runner.

We had the same problem last week and they were not responding to emails either, probably the bank was full and no staff as usual.
By luck we got the Bankia English speaking direct dial number 0034 916 024 643 who answered all our questions re the website issues we had and confirmed there is no problem at the branch in Corralejo.
We suspect that some of the Branches on Fuerte will close in the not so near future to save money.
We are back on the Rock next week and are going to the Bank to see if our usual contact is still there.

[Cameron]

yes we managed to get through this morning.

Lionfish from some of the stuff i read about what the Spanish authorities are up to i can only come to the conclusion they either have no idea what they are doing or do but couldn't care less.

[trench]

As a rule of thumb the further north in europe the tourist comes the more they spend

[appy ammer]

it then tails off @ scottyland;)

[djk99]

Not that it's any consolation, but, tourist figures in Greece have dropped dramatically too.
 Visitor numbers rose nearly 10 per cent to 16.4 million last year, but, bookings were down 20 per cent up until the recent election, and plunged 50% as the results were announced.
Tourists are associating Greece with riots, strikes and shortages.
According to Sete, Greece's tourism trade body, the collapse in numbers is not just due to the economic crisis: last year's record visitor figures were flattered by tourists steering clear of countries affected by the Arab Spring. Over the past week, bookings have improved, slightly: they're now only 25 per cent behind day-to-day bookings of this time a year ago.

[moodyblue]

It was always my experience that tourists from outside of the UK always spent quite freely in Scottyland , the only ones who didnt were our miserable neighbours from across the border []

[macb]

Spain is trying to help encourage tourism from UK?? Queen Sofia snubs the UK by not attending the diamond jubilee celebrations. Oh yes, That will help.
How many tourists will snub Spain by holidaying in Turkey etc.

On Financials, How can Santander be allowed / able to buy up the RBS retail bank branches in the UK. RBS are being forced to sell by Euro law due to their financial assistance from UK PLC during the crash. UK market clarity highlighted the financial plight that the domestic banks and banking system were in. UK Banks were a hair breadth from a complete meltdown.  What drama can we expect when the asset value of property in Spain's bank system is re-assessed.

[djk99]

quote:Originally posted by macb



On Financials, How can Santander be allowed / able to buy up the RBS retail bank branches in the UK. RBS are being forced to sell by Euro law due to their financial assistance from UK PLC during the crash. UK market clarity highlighted the financial plight that the domestic banks and banking system were in. UK Banks were a hair breadth from a complete meltdown.  What drama can we expect when the asset value of property in Spain's bank system is re-assessed.

Santander UK plc are probably better financed than most UK banks and are 'apparently immune' to the parent bank's problems. Unfortunately, if enough of their customers think there is a problem and withdraw their money, then, there will be a problem. As for Spain's forthcoming drama - it really is uncharted territory. The Greeks have had months to move their assets and many have done so and will be looking forward to a Grexit in order to capitalise in the short term. There has been such a run on Greek banks it's questionable if they will be able to function until the next election. The IMF and The European Bank will have learned lessons from this and account holders in Spain may not have as many options. It's interesting that Spain's problems have been
 highlighted above any of the other under-preforming nations and it's difficult to ignore the possibility that The Eurozone financial experts have already decided they would be better off without either Greece or Spain.They have the ability to work quietly in the background and manipulate each country's  government bonds - which cause the press headlines and subsequent panic - and so far, it would seem, Spain has not benefited.

[appy ammer]

quote:Originally posted by djk99

quote:Originally posted by macb



On Financials, How can Santander be allowed / able to buy up the RBS retail bank branches in the UK. RBS are being forced to sell by Euro law due to their financial assistance from UK PLC during the crash. UK market clarity highlighted the financial plight that the domestic banks and banking system were in. UK Banks were a hair breadth from a complete meltdown.  What drama can we expect when the asset value of property in Spain's bank system is re-assessed.

so why was it downgraded yesterday?

Santander UK plc are probably better financed than most UK banks and are 'apparently immune' to the parent bank's problems. Unfortunately, if enough of their customers think there is a problem and withdraw their money, then, there will be a problem. As for Spain's forthcoming drama - it really is uncharted territory. The Greeks have had months to move their assets and many have done so and will be looking forward to a Grexit in order to capitalise in the short term. There has been such a run on Greek banks it's questionable if they will be able to function until the next election. The IMF and The European Bank will have learned lessons from this and account holders in Spain may not have as many options. It's interesting that Spain's problems have been
 highlighted above any of the other under-preforming nations and it's difficult to ignore the possibility that The Eurozone financial experts have already decided they would be better off without either Greece or Spain.They have the ability to work quietly in the background and manipulate each country's  government bonds - which cause the press headlines and subsequent panic - and so far, it would seem, Spain has not benefited.

[macb]

Fear is the enemy now. The Euro which could never have worked in the long term is now dead in the water. The Politicians who have signed up to this folly now have to play poker with the markets. It is too late for a structured and in any way orderly exit to be managed for any of the troubled latin countries. It cannot be admitted (publicly)that Greece has to be kicked out if they will not swallow the bitter pills but they cannot be seen to benefit from defaulting on their debts to the rest of Euroland (Germany). If that happens there will be a queue of defaulters. The Greeks are not stupid and are emptying the coffers while the procrastination continues. There will be few Euros left to convert into Drachmas when the time comes which defeats the purpose.
The fear of making the inefficient countries leave is now greater than the fear of keeping them in so perhaps we are in for an extended period of wobbly Euro. Is a managed exit strategy ever going to be possible.
Scary Times http://www.thisismoney.co.uk/money/news/article-2148335/Fleeing-Costa-catastrophe-Thousands-hand-villa-keys-Spains-economy-teeters.html?ito=feeds-newsxml

[andi]

No pain, no gain is my view. It's about time the Spanish banks got their repossessed property back on the open market instead of keeping their portfolios overpriced to make their balance sheets look better. Far more preferable to get them sold off at realistic prices and in the medium to long term the market will begin to stabilise again.

As far as the stronger pound goes that's very welcome news for UK visitors, ex pats dependent on income from UK and those with mortgages. A 600 euro a month mortgage payment is now only 500 pounds......one hundred pounds wiped off the commitment in only a few weeks....significant stuff.

There will be winners and losers as with every economic cycle.

[Cameron]

Good riddance to the whole bloated, money guzzling, fraudulent, eurocrat lifestyle enhancing,arrogant venture. Its been a total disaster. Lets take the pain as quickly as possible and hope the pheonix rises from the ashes.

[Spike On Q]

AND
Welcome to the UK coalition!

[PeterHeirman]

quote:Originally posted by appy ammer

I would imagine short term the fuerte local economy is benefiting from a good pound to euro exchange rate but as we all know its for the wrong reasons

Independent property valuators could use the rule:
http://www.investopedia.com/terms/p/price-to-rent-ratio.asp#axzz1vjOoxS6L
low valuation: long_term_monthly_rent  times  12(months)  times  10
high valuation long_term_monthly_rent  times  12(months)  times  14
where 10 is low valuation (cheap) - 14 is high valuation (over 14 : then don't buy but rent)

So if your condo or house rents for EUR 500/month (over 6months or longer) then your property has a value of about EUR 72000 (500 x 12 x 12)

[appy ammer]

Peter how did you come to a valuation of 12?

[andi]

Useful tool Peter thanks. A few weeks ago I bought a place and the ratio is 15 so it's just within the 'better to buy than rent' bracket. However there were other factors too. One being the fact that I couldn't find a similar property to rent as none were available. The other was why would I want to spend my hard earned on improvements to the place if it only ultimately benefitted the landlord. A no brainer really.

[djk99]

Very Nice tool indeed Peter. (appy, I think he used 12 as the half way point between low & high valuation marks.)
In local terms, this would translate to a 2/3 bedded house on Caleta's Golf course valued at €93600 assuming a monthly long term rental of €650 and a similar property in Nuevo reaching €57600 assuming a rental of €400. At a factor of '10' which might be expected if the housing market was saturated with unsold properties, the prices may be €78000 and €48000 respectively.

[appy ammer]

scary djk

[macb]

The tool gives values way below what is being asked though.
Our long term for 2 bed apartment is 500 Euros so valuation by tool is between 60000 and 84000.

They are marketing them at 150,000. Ok that is overpriced but the tool looks to be giving a figure which is too low.
Or, What is to come!

[appy ammer]

no m8, those prices are here already.

rule of thumb, wotever they were pre 2008, divide by 2 then your nearer the mark

[andi]

appy is right I purchased a 2 bed house quite close to one of the resorts and it was acquired for 95000. With the strength of the pound at the moment it cost me 80k but I still reckon it's true value at the moment is lower. When the banks eventually release their stocks someone is going to enjoy some far better prices.

[Cameron]

can't work that one out andi. Why did you buy now if you think there will be a drop in the near future?

[andi]

Case of it was super value at the given time and nicely furnished too. I'm not going to sell it probably ever so for the sake of it dropping 10k or so in next year or two I'd rather enjoy it now and not worry about whet prices do in the future. What I often find is missing from these discussions is valuation is only relevant IF you wish to sell. It simply doesn't matter if you don't.[]

[Cameron]

very true