Improving Property market in the Canary Islands aided by improvement in Sterling vs the Euro

MPC member sets the ball rolling with talk of higher UK interest rates. Greece's fiscal problems worry the euro.

After a day's hesitation in the vicinity of Monday's €1.11 starting point the pound set off higher. It was not quite a straight-line advance (it almost never is) but sterling did not really come to a stop until it topped out at €1.13 on Friday. End of week profit-taking brought a brief setback but the pound was back up beyond €1.63 by the time London opened this morning.

Sterling had a good week on almost every front. On the rare occasions it failed to make progress - and only the yen springs to mind - it was steady. There was not universal support in every case to start with but by Tuesday there was wind in every one of sterling's sails. The pound owed its uncharacteristic advance to the Bank of England, specifically to Andrew Sentance, a member of the Monetary Policy Committee. He told The Guardian newspaper that 'Threadneedle Street has done enough to lift Britain out of its deepest post-war slump and will need to consider raising interest rates this year if a recovering economy poses a threat to inflation.' In his opinion the sixth consecutive quarter of falling output in the third quarter of 2009 presented 'an excessively downbeat' picture of the UK economy and he downplayed the risk of a double-dip recession.

That argument received corroboration the following day. The National Institute for Economic and Social Research ('Britain's longest established independent economic research institute' according to its own blurb) reckons the economy grew by +0.3% in the fourth quarter, contracting by -4.8% in calendar 2009. That last figure was given added punch by simultaneous news that Germany's economy shrank by -5.0% on the year. Although the NIESR is not responsible for the 'official' figures investors were happy to accept that the UK economy had finally returned to growth and they clung to that upbeat mood for the rest of the week.

By contrast, investors did not have their usual disregard for factors detrimental to the euro. They have at last fallen in with the idea that Greece's membership of the euro cuts both ways. Total public sector borrowing in Greece is set to reach 120% of gross domestic product this year and could be as high as 140% of GDP in a couple of years' time. The Greek government says it intends to barrow this budget gap but its deeds have so far fallen short of its words. Some analysts have speculated that a possible solution is for Greece to abandon the euro and go back to issuing its own currency, a sort of Drachma II.

At his press conference on Thursday the president of the European Central Bank made his position clear. First he said the idea of Greece leaving the euro was 'absurd'. Then he went on to say the ECB would offer no special treatment to Greece. That means, following the downgrade of Greek credit ratings, that Greek government bonds will not be eligible as collateral at the ECB once it retightens its rules to pre-crisis standards. Yesterday's Sunday Telegraph carried a piece entitled 'ECB prepares legal ground for euro rupture as Greek crisis escalates'. The official ECB line seems to be that a) there is absolutely no chance of Greece leaving the euro and b) this is what will happen when it does. Investors are less than relaxed about the situation.

The pound has spent most of the last three months between $1.58 and $1.68. It starts this week right at the top of that range and looking punchy. If it can consolidate its gains there is nothing to prevent it reaching €1.15 without too much effort. The uncertainty principle still points to a 50% hedge of any euro requirement but there might be better levels at which to make the transaction. Buyers of the euro who are not already hedged should use a stop order for protection in anticipation of this rally carrying further.

Report provided by moneycorp

2009/2010 Currency Round-Up from Currencies Direct

Watching the price action between Sterling/Euro over the past few months has been like trying to push a dinosaur uphill - slow and frustrating! However, as we end the year it looks like Sterling has moved away from the threat of parity and should mover higher in 2010 with the potential for a 15 % appreciation against the Euro.

The recent bout of Sterling weakness was partly fuelled by comments from the Bank of England(BoE), underling the fact that a weak currency was crucial if the UK was to not only export its way out of the global economic slump, but it would also make the UK a much more attractive proposition for overseas investors.

A clear sign then from the BoE that a weak pound was of no real concern and something they would not look to prevent. With the UK enjoying extremely flexible labour laws and a fairly resistant consumer, the BoE is looking for the pound to take the “bad medicine “ahead of the Euro and bounce back in 2010.


The data coming out of the euro zone has been patchy to say the least, with the strong data out of Germany and France overshadowing the weak data from the rest of the member states,and following the problems in Greece growth in the euro zone in 2010 could lag behind that of the USA and Japan again a problem weighing on the single currency The ratification of the Lisbon treaty by the Irish has gone mainly unnoticed by the currency markets, as it was seen as a forgone conclusion. Going into 2010 what will be of most interest, is how the different member states handle their economies. It was very easy for the European Central Bank (ECB) to slash rates along with the rest of the world. However, as the global economy starts to gather pace, not all member sates will relish higher interest rates. Ireland, Greece, Portugal and Spain will not welcome higher rates and the Germans, with their huge budget surplus, have stated they will not be prepared to subsidise other member states. It could prove a real test of the “European dream”.

In the current climate, currency markets overreact and that is why a move to parity still cannot be ruled out. However, if the UK economy starts to grow and the ever increasing fiscal debt can continue to be sold into the world markets, then a strong move higher in 2010 will happen . With the threat of a double dip recession upon us, and unemployment continuing to rise in the UK and the Euro Zone, it could be the flexibility and agility of the UK economy against the one size fits all policy of the Euro Zone that sparks this move higher.

2010 will prove to be a real test for Europe as the weaker member states who have mishandled their economies during the good times find the currency markets will be very unforgiving in the bad times.

Source- Keith Spitalnick, Currency Direct

4th Quarter Boost in Property Sales In The Canary Islands

With the majority of 2009 behind us it is becoming easier to piece together a picture of how the Canary Islands and in particular Gran Canaria’s and Fuerteventura’s property markets have been moving this year. Compared to mainland Spain the Real Estate market in the Canaries have enjoyed a certain amount of ‘cushioning’ due to its unique geographical position, endless summer climate and restricted supply of luxury second homes, however it has not escaped the general effects of the downturn over the last 18 months with property prices levelling earlier this year.

Higher sales figures this quarter are no doubt due to the specific price deals available on selected products as no doubt were Q1/2 sales when prices had ‘bottomed’ after a long slide in 2008. GoldAcre Estates reported that the return of buyer confidence in Fuerteventura was quite noticeable in Febuary / March showing particular interest in 1-2 bedroom luxury apartments which offer increasingly higher returns as prices had fallen against potential rental incomes.

Resorts in Corralejo like Oasis Papagayo and Oasis Tamarindo were the biggest movers as these had the added advantage of large swimming pools, lush tropical gardens, security and extra sports facilities which make them ideal for holiday rentals. Others like Oasis Royal, Dunas Residential and Atlantic Gardens were a little slower to react to the market changes but offered high value due their central positions closer to the main tourist centre and beaches. In fact GoldAcre Estates said it was not uncommon to see multiple purchases for these style of apartments.

To begin with, Sterling rates dampened the return of the UK investor early in the year and many British buyers lost out to new European markets including the Netherlands and Italy in particular which have not been affected by the need to exchange their monies as they are already euro based.
New flights from these areas including Poland also helped transfer these ‘holiday’ markets into the second home ownership market with buying interest mainly in the North Island of Fuerteventura.

The luxury villa section also saw growth as private owners and specialist developers offered limited price deals. The villages of Lajares, Villaverde, and to a lesser extent La Oliva and El Roque caught the attention of those who may have never considered these areas due to budget constraints. 3-4 bedroom detached villas with large private pools and 1000m2+ plots in a quite country setting yet 10 mins from the beaches were on occasion lower than the magical €300k mark.

Surprisingly despite recent macro economic conditions the trends still follow traditional historic patterns with the main sales in the periods either side of summer holidays. During August as many public services close for holidays including some Notaries and lawyers offices there are fewer exchanges of contracts plus the main holiday markets are busy enjoying the beaches rather than scouting for their next property purchase. August 2009 however saw a high interest level with many visitors taking a serious look at apartments and villa offerings. This has also been extended into the winter season .

In fact the increase of flights to Fuerteventura and Gran Canaria will be a big factor for Q4 as already Christmas flights are becoming booked out. For those existing property owners and clients of Goldacre Estates, Christmas in their second homes in the Canaries never looked brighter. www.goldacre-estates.com

Where Is Your Pound going in Spanish Real Estate today

Keith Spitalnick Business Development Manager of Currencies Direct predicts an upward trend for the Value of sterling against the euro by the year end. This is good news for Spanish Real Estate and people looking to buy property in the Canary Islands and Spain, prices could not be better as many new properties today are being offered at discounts and of course you have very good prices on some resale properties from people that are having to sell their Spanish property.

Read Keith full story and prediction of how he sees sterling moving, Keith commented, I keep getting asked is where I see GBP/EUR headed by then. I personally feel that GBP/EUR is in an upward trend however the language from the Bank of England is holding it back, trying to hold the pound low. After Christmas sterling could start to rally. 1.1500 is my short term target.


It’s been another busy week for GBP/EUR as the fallout from the latest Quarterly Inflation report was digested in the papers; the Banks assessment for growth is now twice the latest consensus of their panel of independent forecasters and their predictions for inflation and interest rate levels over the next couple of years have been revised sharply higher. This helped to boost the pound ahead of the Bank of England minutes last Wednesday. The pound also rallied as we saw the UK inflation numbers come in higher than expected. This gave Sterling a strong boost all round, on expectations that, with inflation “surging”, rates might have to be raised sooner rather than later. I think that this is an unlikely scenario and that Base Rates will remain at these low levels until the 3rd quarter next year, possibly longer.


The Euro was not so fortunate with comments from ECB president Trichet rattling the euro. He commented that the fiscal situation in some European countries is so bad that there is a danger that markets will lose faith in them. At last a bit of plain talking from the ECB! In addition we saw the Euro current account showing a deficit of €5.4 billion - this was concerning as it identified a surge in imports and slumping exports; this could bring the strength of the euro back to the fore as a red flag for the ECB. If this issue is raised it could start to turn the tide on recent euro strength…

Unfortunately the pound could not hold onto its gains after peaking at 1.13. This was due to the split decision from the Bank of England who were split three ways on the November Quantitative Easing vote. 7 backed the £25 billion increase, David Miles wanted a £40 billion increase and Spencer Dale wanted no change. This undermined sterling which immediately dropped over half a cent against the USD and the Euro. The split has highlighted the indecision on future policy and this is hardly surprising given the implications on monetary policy decisions within the current economic climate.

So overall its the same old problems hurting the pound in the form of QE and concern over public debt. However it is widely expected that UK GDP will be revised higher next week for the third quarter and that fourth quarter data will show an exit from the recession...therefore the pound should start to perform better going forward. Last week we also witnessed one or two red flags from the Euro zone and the recent support of the euro against the US dollar could wane if more concerns arise...this would certainly play into GBP/EUR gains.



www.currenciesdirect.com

Sterlings climb will help overseas property investors

It was a rewarding week for sterling, climbing from below €1.16 last Monday to open at €1.1750 in London this morning. There was moment's panic at the very beginning of the week when the pound dipped briefly to €1.15 but thereafter the only way was up. For overseas property purchasers and investors the exchange rate is an important consideration in Spanish Real Estate.

Nationwide reports a third successive monthly rise for house prices. Sterling close to eight-month high against the euro.

After the sell-off at the end of the previous week the market's first instinct was to buy the pound, although nobody was quite sure why. Hometrack's housing survey was vaguely helpful, inasmuch as it showed prices not falling, but investors found it difficult to get excited because prices were not going up either. It was a similar story with the CBI's retail sales report for July: At -15 the figure was better than the previous month's -17 but did nothing to motivate buyers. Money supply data on Wednesday were another net "don't care" for the market. The number of mortgage approvals went up, true enough, but as Reuters put it; "British financial institutions lent less money to households last month than at any time in the past 15 years." Gfk's index of UK consumer confidence survey produced another utterly useless figure when it remained unchanged at -25.

Investors at last woke up on Thursday morning when Nationwide's house price index came out. For a third successive month the building society saw a rise in the average price, this time by an entirely respectable +1.3%. The annual decline eased from -9.3% to -6.2%. The firm's chief economist offered an impressive hostage to fortune, saying "there is now a reasonable chance that prices could end the year slightly higher than where they started.

"Sterling's performance over the week obviously had something to do with the UK economic data - few thought they were - but mainly it was the by-product of another quiet week during which the mood of investors became more upbeat. As one of the allegedly riskier currencies it is more likely to find buyers when the market is less nervous.

The euro's profile last week was so low as to be almost subterranean. An almost complete absence of pan-euro-zone economic data meant just three useful statistics. Consumer confidence improved slightly from -25 to -23. Inflation - make that deflation - went down from -0.1% to -0.6% in the year to July and unemployment ticked up from 9.3% to 9.4%. Individual national figures did not add much to the proceedings. German consumer confidence was higher and German unemployment was steady at 8.3%. As with sterling, the euro's main claim to fame was to provide investors with an alternative to the US dollar, which was under pressure throughout the week.

Sterling starts August looking more potent than it did in July. It appears to have punched out of the €1.15-€1.17 range that held it for the previous three weeks, helped by its upward break against the US dollar. The high in June at €1.19 was sterling's best level since the beginning of December and that must be its next target. The pound has the potential to test €1.21 but, up here close to an eight-month high, buyers of the euro should take the opportunity to pick up a few more.

For more information and expert guidance on Canary Island property call 0034 928 535 044
Or contact info@goldacre-estates.com

Source Money Corp