June Blog, Balearic & Currency News

Deluxe blog for the month of June by everything deluxe

June Blog, Balearic & Currency News

Balearic Property Values Soar

Figures recently published and derived from the National Ministry of Development indicate that 2016 was a record year for foreign property investment in the Balearics. The total value of real estate purchases grew by 50% over two years to exceed 1,600 million euros. The hike in property aquisition has been largely attributed to European interest, although the market has also seen more interest from Spanish investors and buyers from outside the EU. Reports show a heightened demand for luxury properties, as visitors to the island are deciding to buy holiday homes rather than to rent.

This trend has had the effect of driving up property values in some of the most exclusive locations, such as the south-west of Mallorca and around the capital of Ibiza. The attractions of resorts like Andratx and Calvia in Mallorca, for example, have led to an increased real estate value of some 21%, year-on-year, bringing the average house price up from 1.7 million euros to 2.1 million euros, following a year in which transactions totalled almost 750 million euros. Good news, certainly, for those who already own property on the islands. For those considering property purchase, however, it should serve as a wake-up call to act whilst buying in the Balearics represents a highly lucrative investment rather than an unattainable dream.

Reducing The Risk Of Election Sterling Drop

Theresa May shocked the UK last month by calling a snap general election held on 8th June. This caused ripples of speculation amongst home owners in Spain about the stability of the pound, which has already been hit by Brexit. The run-up to a general eletion in any country will naturally cause a degree of volatility to its currency. However, the effects of the UK leaving the European Union were not as grave as some predicted and, although recent events have proved that danger lies in assuming the outcome of public voting. The polls suggested that the modest rise in the value of sterling, experienced since Brexit, would continue under a country led by a Prime Minister with a definite mandate. The immediate dilemma for UK foreign investors, however, is how to avoid possible losses on exchange rates when transferring funds.

One option is a foreign exchange “forward contract” which protects against adverse fluctuations in currency value by allowing the purchase of currency up to two years in advance at the current price.This has the disadvantage, however, of inflexibility, resulting in a failure to gain should the exchange rate improve. Another possibility to consider would be a “market order”, which allows customers to set a minimum and maximum rate they are willing to pay either side of the current market level. A good option for property purchase and large transactions, this option allows an investor to set a currency rate at which to buy euros. For example, if over six months the customer has to make a large payment and the current rate is 1.20, an order could be placed to buy automatically when the rate reaches 1.30 as well as a further “stop loss” order to buy if the pound experiences a downward spiral and hits 1.10. The market order is useful for avoiding losses when moving large amounts of money, and, although there is no guarantee that either of the rates, upper or lower, will be reached it does provide a degree of stability reducing the risk element involved in speculation. (main photo courtesy of Currencies Direct)


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