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Spain: Perfect or pained? - 20 May 2008

Fluctuating prices, the movements of the currency markets and an uncertain property market make this a confusing time to buy a property – either in the UK or overseas. Spain is going through one of the toughest times in recent history for property prices, yet evidence emerges that this could be one of the best times to buy.

Research from Spanish property portal Kyero.com has suggested that property prices in Spain are now 3.6 per cent lower than they were at this time last year, meaning that for people who want to have somewhere to live in Iberia, this could be the time to make sure you are getting more for your money than was previously possible.

At the same time, the website notes, the cost of buying a property in Spain is now about 16 per cent higher than it was at the beginning of the year, due to the strong performance of the Euro in money markets against Sterling.

For property developers and agents in Spain, this makes it a particularly difficult time as although prices are reducing, British buyers are finding it ever harder to afford their property in the sun. For those who have already bought in Spain, especially those who have bought off-plan, this can be a stressful time as they contemplate having to pay significantly more than they had budgeted for at the outset.

Moneycorp, the foreign exchange specialists, says that this isn’t the time to panic. For those making staged payments, the current exchange rate need only affect one payment, without committing buyers to the same rate for the rest of their payments. Those with property already can release equity in Euros and take advantage of cheaper Euro mortgage rates that are currently on offer. The money released in Euros can be converted back into Sterling at the improved rate.

The current strength of the Euro in the currency markets also shows the potential value of the ‘forward rates’ that most of the specialist currency exchange providers that allow customers to fix their exchange rates for up to two years into the future. Many people who are making their payments now on off-plan properties bought some time ago are benefiting from not having to pay for the increase in the exchange rates, and their properties are currently worth more in Sterling than they were previously.

Another sign of the problems facing the Spanish property industry comes from the Spanish National Institute of Statistics (INE). The latest figures show that the number of companies and individuals filing for bankruptcy during the first quarter of 2008 rose by 78.6 per cent compared to the same period in 2007. More than 45 per cent of those came from the construction and property industry.

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