Antonio Flores’ Blog

The weakness of the pound is already affecting thousands of property owners with an Euro mortgage, and according to many it would not seem that the English currency will revive in the short run. As we worry about the adverse effect of the exchange rate, some banks are already making predictions in respect of where the pound will be in June 2009, and you would be surprised that they are mostly well away from the terrifying “parity” word.


The chart below has been taken directly from the Sunday Times (Money supplement):

Even if the worst forecaster got it right, the Euribor applied by the banks (higher than the Euro current interest rate) is now at 3.025%, and there is almost unanimity in that they should be in the region of 2% by mid next year, which would mean that mortgages would cost up to 34% less than at the highest Euribor mark (5.5%), at the beginning of October 2008, comfortably making up for the depreciation of the British currency.

Expats and pensioners living on a fixed income paid out in sterling may have lost in real terms approximately 30% of their purchasing power in the eurozone. This is certainly a problem for many thousands of people but is already being tackled successfully by many by either buying in Gibraltar, a good option for Costa del Sol residents, or buying by internet in the UK, for certain products.

And for many who have decided to sell, the benefits are clear: if they managed to buy at a time when the sterling was trading at 1.5 times to the euro and can sell when a euro buys you 1.08 pounds, they are getting a good deal. In this respect many private purchase contract holders who have pulled out of their contracts due to contractual default by the developer are getting, in some instances, 40% more pounds than those they invested.

Finally, anyone deciding to buy one of many bargains which can now be found will necessarily need to take out a Euro mortgage to cover as much as possible of the purchase price so that the immediate exposure to currency risk is limited to the deposit (for example, a typical 70% mortgage). Of course, the euro mortgage repayments will still have to be funded from sterling sources, but at least the exposure to the unfavourable exchange rate is minimal and staggered over a considerable time. And when the pound/euro exchange rate returns to normal values, your mortgage capital in euros will still be the same, but in pounds it will have shrunk to 70-80% of the original amount.

If you live in the UK and have a property in Spain, and you are struggling to pay the mortgage, I would advise that you rent the property out, even if it’s below market rental value. You will be receiving the rent in euros which will cover a large amount of the monthly mortgage repayment. If you are worried about non-paying tenants, you must note that the goverment is enacting new laws which will allow evictions to be performed in a very short period of time.

At last the Government has pre-approved a law proposal (PDF-Spanish) to encourage property owners to rent out their properties. Even though property sales have slowed down substantially, the property rental market is not increasing, and a staggering 2.8 million properties in Spain remain empty. 

The proposed changes will mainly target the excessive length of proceedings (which in some instances can take up to 12 months) to enforce an eviction process. Below is a summary of the main law changes to be approved in due course:

• Notice of payment prior to going to Court is reduced from 2 months to 1.
• The Court proceedings are now conducted via an equivalent to a small claims court procedure and are therefore a ruling can be reached in a couple of months (depending on the specific Court).
• The Court ruling will now be enough to evict a tenant and will be enforced within 30 days, without having to execute the ruling (whereas before the ruling was not automatically enforceable as the landlord had to instigate this action). If the tenant cannot be found the ruling will be notified in the notice board which each Court has and will proceed to send the bailiffs.
• Landlords will be able to demand return of the property if they need it not only for their own use but for that of parents and children. This clause will have to be inserted into the contract in order to be enforceable.

It will be interesting to see how these measures, in addition to others, bring dynamism to an otherwise stagnant market and, more importantly, if the court system will be able to cope with the expectations these changes will introduce.

The tragic Barajas accident has brought about a singular controversy, never heard before in this part of Europe (or at least Spain). Spanish newspapers started it all off and the Spanish Law Society has now taken an interest in the matter. I am referring to the so called “ambulance chasers“, a funny and graphic term given to lawyers who hurry to disaster sites to solicit business from the injured or the relatives of those who have died.

The Spanish Law Society is now studying whether to take disciplinary actions against Spanish law firms who have hooked up with their American counterparts in a quest to attract as much of the personal injury legal compensation business as possible, almost right at the scene of the accident. Also, the Dean of the Las Palmas Law Society has affirmed that that some Spanish law firms are in clear breach of the Law Society Rules and Statutes in respect of legal business solicitation (articles 7. and 8.) and has equally recommended exemplary disciplinary action.

Aggressive solicitation of legal work  is not uncommon in Spain and temptations arise when those targeted are foreigners caught up in nightmarish legal wrangles, for example when buying property. I suppose it is not always possible to differentiate what is ethical from unscrupulous but the above case seems a clear example of someone wanting to profit from someone else’s misfortune. Too bad for those Spanish firms!

Yesterday I was filmed by the Inside Out crew (BBC Northwest) in our offices in connection to the difficulties encountered by the family of Gary Dunne in the repatriation of his body back to the UK. Gary was stabbed to death by a machete-wielding gang in a resort near Torremolinos on the Costa Del Sol in March 2006 and his family have been fighting ever since to have his body repatriated to Liverpool, his home town.

Unfortunately Spanish law is strict with the repatriation of human remains as it will only allow a body to be transported outside the country if it has been previously embalmed (within 48 hours from death) or cremated, or 5 years have passed since the death in any event (in which case it is considered not to pose a sanitary hazard).

The trial is to take place this coming week and full cover is being given by the BBC Northwest in the above programme Inside Out. You obtain more information on the Dunne family ordeal by going to their blog, and can also contribute with a donation at any HSBC bank to the GARY DUNNE FUND.

We would like to offer our full support to the family and demand that justice is rightly served.

The programme is to be aired on the 24th of September on the BBC Northwest channel.

It may sound strange but it is true. Among the new changes Spanish driving laws have implemented is the point system, which would only apply to Spanish driving license holders. So whilst the latter driver can lose his license if he is caught twice doing 151 km/h in a motorway, for example (he/she would lose 6 points every time, plus a fine), a foreign license driver will not be affected and even if the infringement consists in driving over 110 km/h in urban roads, 180 km/h in normal roads or 200 km/h in motorways, for example, where the law envisages the suspension of the drivers license for up to 4 years, drivers with foreign license still remain unaffected, since the traffic authorities are not connected with other countries (which may not even have the point system).

However, beware of committing certain offenses: prisons terms are applicable regardless of the nationality or license of the driver for exceeding the above speed limits as well as drink-driving (where it is not possible to refuse to be ´breathalised´).