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There is much comment in the UK and worldwide press about the present slow down in the buying of properties in the UK and in Spain. I have copied onto our web site a very reasonable discussion to do with the situation for your information. This is from a Spanish web site that is focused on property sales, and we believe a balanced opinion.

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An update on where I expect sterling-euro to head:   Keith Spitalnick

Business Development Manager

Currencies Direct Limited

 

After the doom and gloom in the markets over the winter months, spring has brought a cheer back into the markets and talk of “green shoots” are now actually looking more founded and the pound is leading the march.  We have seen a wealth of improved economic data from around the globe and the overall better sentiment is helping the pound which was sold heavily and progressively as the recession enveloped the global markets.  In 2008 sterling lost over 23% against the euro and flirted just above parity at Christmas- an incredible slide!  Since the turn of 2009 sterling has clawed back 10% against the euro so far and I believe this trend will continue to bring us back above 1.25 by the end of the year. The reason why I believe sterling will continue to gain echoes the recent improvements in the UK economy and increased optimism in the global markets that the worst is behind us.

 

In the month of May we witnessed a significant rally in commodity prices with Gold and Oil rising- a sure sign of increased investor confidence and movement away from safe haven currencies- this means money coming back into sterling.  On top of this we have seen well or should I say improved indicators from the UK economy.  House prices provide a simple yet critical platform to view the health of the economy- we saw a surprise bounce as the average house price rose by 1.2% in May reported by Nationwide- this is the strongest monthly gain for 19 months, UK consumer confidence is also charting 11 month highs and there is improved business confidence.   Now we could say we are looking forward with a glass half full mindset for a recovery to commence soon in the UK and only time will tell.  But even if recovery turns out to be slower than recent optimists have declared this still could be sterling positive.  The Bank of England was recently praised by the International Monetary Fund for their proactive approach to the recession in relation to swift interest rate cuts and the introduction of Quantitative Easing.  This contrasts starkly to the European Central bank who adopted more of a wait and see approach to interest rate cuts and other unconventional measures to curb the slowdown.  There also exists a concern over the health of the Eastern European banking sector which could hamper the speed of a recovery in the euro zone which will be euro negative. 

 

The short term negative factors weighing on the Pound are political and became very clear this week, as the in fighting in the Labour part and the rumours that prime minister Brown may quit dented Sterling and it dropped form € 1.1600 to € 1.1300.However looking through that …

 

…the pound is well primed to continue to push on and gain as the global markets look forward in optimism to a recovery rather than backwards in horror at the economic crisis.  I would expect to see a rate of 1.20 by the end of summer and 1.25 by the close of the year against the euro as the pound looks to recapture some of its former glory!

 

The Canaries and Spain

Buying property on the Canaries is actually quite easy, once you get your head round the process.

The first hurdle is the language; we are English . Outlined below is the basic process. this can vary with different developers and owners, but mainly follows the same rules. For new off plan properties there are often stage payments depending on completion times.

  1. Find the property you want to buy and put down a holding deposit of around 3000 to 6000 euros. this holds the property for you for 30 days.
  2. In 30 days you are expected to go to contract for 10% of the purchase price. This includes the holding deposit. The lawyers draw up a contract to purchase the property between you and the vendor, at this stage you are obligated to buy. Should either party pull out then the deposit will be lost to the other side, so the vendor should pay the buyer the equivalent of the deposit paid, if it is the vendor who has broken the contract.
  3. When all the monies are in place (and if new, the property is now habitable), all parties involved `Go to Notary´. A Notary is a local judge who signes the deeds over to you and the bank (if a mortgage is involved). You can also do Power of Attorney if you do not want to come over to sign. You then receive the keys to your new home in the sun.
  4. NIE Numbers, These are tax code numbers for Spain, similar to the NA number in the UK. They are needed to pay the taxes to purchase a property legally in Spain. You can apply for the NIE number anywhere in Spain and it can be used in The Islands or Mainland Spain. Since the 2nd October 2006, clients purchasing properties will need thier NIE number prior to going to Notary, this is because there is only 30 working days from notary to pay the taxes. Should it take longer to get the NIE number and it goes over the 30 days, fines will be incurred. So what this means is that the NIE number will need to be applied for before leaving Spain either in person or setting up the power of attorney. Or sending over the power or attorney from their home country and organising the NIE numbers before a notary date can be arranged. For the majority of our customers there is no change as we usually arrange for this to happen, however not all agents work like this.

NOTES

In Spain it is not a legal requirement to use a lawyer, which is where the mistakes can be made. We suggest you do use a legal representative, and we can recommend a few that speak good English. They will also help you set up the utilities and taxes.

Local Tax in the Canaires is 5%, (Spain is higher) so always add about 10% to the cost of a property to cover the tax, legal fees and notary costs. All prices quoted on our web site include commission, so except for taxes that is the price you pay. We do not charge a finders fee on top of our prices.

A popular service we offer is to pre arrange mortgages in principal. The means you know how much you have to spend before you arrive. Constantly, we talk to the local banks to get the latest products and best rates possible for our customers. So if you think you will need a mortgage to buy, save time and start the ball rolling from the UK before you come out.

Local Spanish mortgages have very favorable rates at around 3.5% to 4% for off shore customers, lending of 80 to 85% of valuation. We will send you a list of what is needed by the lenders to pre arrange your mortgage. The majority of mortgages here are still repayment and buy to let and other types of mortgages are still not available.

Applying for mortgages here does not affect you credit rating in the UK or leave any footprints on your history. However banks are now asking for you to send a copy of your Experian credit check to confirm you do not have any large payments that will affect your ability to pay the monthly repayments on the loan.

Just a word of caution; if you are planning to buy property here after you have lived in rented accomodation for a few months and will then need a mortgage, be aware, this will cause a break in your wage slips and bank accounts. The banks will need to see that you have regular incomes from somewhere.

If you intend to get a job here, you will need one that has a contract, these are not normally given out for bar/resturant work. Because you will need to prove you have an income and are paying taxes for at least 6 months, cash in hand jobs will not be good enough. If you are going to be self employed they will need your accounts for one year or more. Please call us for further information in this respect.

We hope this has given you the basics and shows that it is actually quite an easy process, we look forward to helping you in your investment.


Bulgaria

Investment in Bulgaria is expanding rapidly since the new government took over and became a democracy.Which led to Bulgaria joining NATO in 2004 and is now just waiting to join the European Community in 2007.

Reasons for the attraction for property, is because Bulgaria is a beautifully unspoilt country with a very low cost of living and some tremendous new resorts on the beaches and in the skiing mountains. Predictions are that the property prices will rise by 200% over the next few years before the joining of the EC is complete. Annual inflation is 3.8% and the country is experiencing a very high economic growth of 4.5%. All these figures mean for investors that the return on investment is likely to be good and quick.

Currently there are still some restrictions on non residents buying property in Bulgaria but these will change as compliance with EU regulations grows, towards 2007. So a non resident at the moment can buy buildings ( ie apartments) as an individual but not a house as this involves land and you will need to set up a limited company to do this. Setting up limited companies is actually quite easy, and once this is done the company buys the property and land and you are sole owner of the company.

Once you are an owner of your property as an individual or limited company, local annual taxes are incurred and these are very low compared to the UK. You will also have to pay rubbish tax at about £20 per year. The main power source is electricity and water and elec are metered.

There are 3 airports in Bulgaria, Varna, Bourgas and Sofia.