09/05/2007 by Martin Sargent.

STERLING Pound-Euro Exchange Rate boosts Spanish property affordability British buyers of overseas property are enjoying the most favourable sterling-euro exchange rates in over a year and a half. So boosting the affordability of property in the Canary Islands as well as elsewhere in the Eurozone. The Euro began its current rise against the pound in late autumn – hitting heights against the pound which have not been recorded since 2005. This movement has been created by a number of factors, such as a drop in the UK retail sales figures in October 2006, on-going inflationary pressures and subsequentl fears of a further interest rate rise by the Bank of England. At the time of going to press the Euro was trading as high as 1.50 against the Pound. Representing a saving of up to 8,000 pounds on a €250,000 property versus this time last year.

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09/05/2007 by Martin Sargent.

MORE MARKET GROWTH Property prices rise by 8% in the Canary Islands The property market in the Canary Islands continues to grow – despite recent rises in interest rates and the cost of Spanish mortgage borrowing. Figures recently released by Spain’s Ministry of Housing indicate that prices across Spain rose by nearly 3% in the second quarter of 2006. With an annual rise of nearly 11% recorded across the country as a whole. Regional variations reveal that the most significant growth was recorded in the northern province of Galicia – where prices have traditionally been much lower than in the rest of Spain. Whilst the Canary Islands have recorded solid price growth of just under 8% year on year over this same period. Most leading authorities and industry observers predict continued positive growth over the coming twelve-month period.

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09/05/2007 by Martin Sargent.

The Spanish property market was incorrectly portrayed as melting down after the share price correction on the Spanish stock market. In reality, the overall market is not falling, though some regional markets are faring better than others. But the stock market jolt has help focus people’s attention on the serious imbalances affecting Spain’s housing market. The big risk to the market comes from over-provision, as Spanish developers build several hundred thousand more properties per year than the market needs. This oversupply is partly due to years of inappropriately low interest rates for Spain once in the EUM. With the Spanish economy now over-dependent upon the housing sector for economic growth and employment, there is a risk that a much-needed fall in housing starts will bring about a construction-lead recession in Spain. If this happens, demand for holiday homes will be hit hard, and house prices will fall in many areas. But even in this worst-case scenario, attractive properties in desirable locations with foreign appeal should hold their value, and recover quickly as economic conditions improve. With the Spanish economy growing at close to 4% - one of the highest rates in the developed world – and with forecast growth of 3.7% in 2007, and 3.4% in 2008, it is difficult to imagine a construction-lead recession at present. Without a recession, the Spanish housing market is more likely to stagnate over the next few years than fall.

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