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The Euro and Other Foreigners

Once again, a warning about buying properties in foreign denominated currencies.

Those who bought properties in Cyprus, against my advice, may well have bought using mortgages denominated in Swiss francs. Since the sudden rise in the value of that currency, all those mortgages have become much more expensive at the same time as the value of the properties has tanked.

Those who bought in Brazil are now sitting on properties that have also fallen in value while the Brazilian real has dropped through the floor. Not only that but the country's central bank interest rate has climbed back up to 12.75% thus making loans more expensive, and choking off any rise in house prices.

Those of you who, also against my advice, bought property in Turkey, not only have a full scale war raging across the border, but stalled property prices, and a catastrophic crash in the Turkish lira. In theory, house prices have halved in value over the past year. That's some crash.

A friend of mine thought the bottom had arrived in the Spanish market, and bought a nice place on the Costa del Sol. He is one of many folks who thought they'd timed it just right. Unfortunately, the euro has tanked rather spectacularly. Against the US $ the currency is down from $1.40 to below $1.10, and shows no sign of stopping. There has been a similar drop against sterling, thus effectively taking a serious amount off the value of any property bought a year ago.

The latest magazine I read in a cafe in Portugal last week talked about the rise of buy-to-let in the Algarve. I guess estate agents must be getting desperate. You NEVER buy rental properties in tourist areas unless there is a 90%+ occupancy rate year round. In Portugal the occupancy rate for rental properties is less than 10% out of season (9 months of the year), and varies from about 90% down to less than 10% for the holiday season. That's because of the vast over supply of properties, and the capricious nature of holiday plans. If you want to get into buy-to-let always buy where there is a constant supply of clients, and a solid employment situation.

You should always look to buy in a currency that you use for spending. If you live in the eurozone, then buy an apartment in Paris. If you spend your money in sterling, buy somewhere in the UK where employment is good.

The euro may have hit bottom. On the other hand, it may not. I dont think it's worth guessing. But… if you get a buzz from gambling…

I have been suggesting buying pubs in the UK for conversion to flats. Anyone taken up the idea? Actually, I hope not. I dont want competition.


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