Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. You are well advised to contact a professional for advice specific to your circumstances. Nothing contained in this article should be seen or taken as the writer or the publisher providing legal or financial advice.
“When America sneezes the World catches a cold.” The old Wall Street adage has never more apt.
When the prices of shares collapsed, wiping multi-billions off the value of the stock markets around the World, central bankers took emergency action to stabilise fragile markets to halt the decline.
The simple truth remains that many individual investors faced substantial losses as the value of their savings in pension funds and insurance policies reeled and plummeted at the news that the US sub prime mortgage market was overcooked.
Yes…. US lenders had underestimated their exposure to mortgage loan defaults on money lent to those who could ill afford to make the repayments. The resulting loss of confidence had a devastating effect on the performance of Mr and Mrs John Smith’s retirement fund. Such is the frightening loss of control over the success or failure of an individual’s investments.
My pal Russell, a sucessful London builder, buys apartments and houses all over the World. His investment philosophy is very simple. “Bricks and mortar will never be worth nothing” – the same cannot be demonstrably said for stocks and shares. Why should he entrust his hard-earned dosh to a stockbroker? As a consequence, he doesn’t have a pension fund he has a Property Portfolio.
The essence of any Property Portfolio is achieving a blend of investments that suit the “risk adversity” of the investor. It should combine good all-round performers having low to no risk with slightly more “interesting” investments that will deliver mid to long term gains when compared with costs of entry. There should be some match between pure speculation and sense. Past performance is not always the best indicator but for the purposes of many it does the trick. The cyclical nature of the many property economies World-wide have proved “Past Performance” to be one of the best yardsticks around.
But wait a minute, let’s not forget that property within your portfolio can be “used” or even, God forbid in these times of financial misery, “enjoyed”!
So your Property Portfolio may include your principal residence, some home and foreign property - which may be “buy to let”, “jet to let” or solely for you own enjoyment – or you may chose to share its use with friends and family. How can you do that with Tesco or BP shares?!
Many Spaniards, don’t see their holiday property – and a huge percentage of the City dwelling population have a home in their “pueblo” – their ancestral town or village - or by the coast - as being an investment. It’s a place to house and entertain family and friends, store your stuff and who knows if in ten years time its value has increased then that’ll be nice – but it’s not an investment decision!
So do the Spanish have it right? I don’t come from a culture where property is a passive investment. My family property in the UK was purchased in the late 1970’s, it’s value over the succeeding decades has pitch and tossed with boom, bust, recession and boom again but overall its performance has been staggering. I don’t think that was just luck.
Combine a healthy chunk of UK property equity, enhanced by a recently paid off mortgage and what’s next for “the Silver Sellers”* or ”the Empty Nesters”**?
* Parents - with no home based children - rattling around a family home with ever increasing bills and facing retirement within the next five to ten years - and
** Parent who’s offspring have ceased to be a financial drain on family finances but still want to spend quality time with the older generation.
Lucy Denyer in her excellent “Retire Overseas” piece for The Times (27.05.07) gave Spain pole position with a “Total score: 9/10”ahead of other desirable retirement locations the USA, Canada, Ireland and Australia.
Lucy reports Danny Sriskandarajah, from the British Institute for Public Policy Research, as commenting “The silver flight is the result of Britons being increasingly willing and able to spend their retirement in Adelaide, rather than Accrington”. His prediction was that by 2050, more than 3.3m Britons would live overseas.
Regular readers will know that I crow on endlessly about “Quality of Life”, make no mistake its available in Spain by the bucket and spade load but it does come with a compromise – doesn’t everything? We are all very familiar with our Home System – we may not always like it but at least we know how it all works. Whilst a dream home in the Sun is a very attractive idyll achieving peace of mind in a country where you may have minimal grasp of the language is positively daunting.
In whom do you place your Trust? Trust may not have an easy landing in a country where the diet – albeit healthy - is defined by a combination of Olive Oil and Oily Fish. So there may be some need to spread the “investment risk” – all eggs not being in the same basket - it is increasingly usual for purchasers in Spain to keep a foot – often a downsized one in the home market - in both camps. This is often made financially possible by the sale of a principal residence.
Hotproperty.co.uk recently carried comments from Chris Simmonds, MD of Saga noting that “Growth in the UK housing market has generated a lot of equity for homeowners, and despite the similar boom in Spain, many people are finding that their money still goes a lot further on the Mediterranean coast, and they can have a new and idyllic home in the sun.”
Lucy interviewed Tony and Veronica Hastings who purchased a three-bed flat on the Costa del Sol and keep a property in Dorset. They spend the majority of their time now spent in Spain, and Tony is quoted as saying that “We can walk to the beach in 20 minutes, the bills are half what they were in England and our dustbins get emptied every day!”
Its all very well to talk about the examples of individuals who have made the leap but are there trends developing? Surveys over the last few months indicate that retirement overseas, once the preserve of the few is becoming the lifestyle of choice for many.
In his piece on 23 August 2007, Philip Johnston, Home Affairs Editor of The Times noted that the number of Britons emigrating in the 12 months to July 2006 reached 385,000, the highest since 1991 when the statistical analysis was first introduced. Since 1997, 1.8 million British nationals have left the UK and about 900,000 have returned. Troubling for some, and despite the numbers leaving, Philip also notes that the UK population is still rising, thought to be largely due to the number of immigrants.
A survey completed in February 2007 and conducted by Insure4Retirement.co.uk indicated that over half of all Britons hope to retire abroad.
In April 2007, a survey for Bank of Scotland International by GfK found that 42% are interested in buying property abroad or moving abroad.
Statistics from the UK Office of National Statistics show that 1m Brits have retired abroad between 1996 and 2006. With nearly 75,000 retirees, Spain took top slot.
In a recent report, carried by our friends at Spanish Property Alerts and kyero.com, Chris Simmonds, commented that “Many people are finding that their money goes a lot further on the Mediterranean coast and they can have a new and idyllic home in the sun. This and growth in cheap flights from the UK and the strong ex-pat communities within Spain make the country the ideal choice for people looking to retire abroad.”
Barclays Buying Abroad director Richard Exton also highlights Spain, by saying "Brits are familiar with the idea that we only have two seasons: the winter and July. It seems that this year, with the terrible weather we have experienced in July and throughout the summer many people are not prepared to sit through a year-long winter and are looking for a getaway to sunnier climates."
It going to take more than a few encouraging words from me to highlight the vast array of property – and property bargains too boot – that are available in Spain.
My experience over the last four years of running a business on the Costa del Sol has been much more than solely about the difficulties encountered by those – and sadly there are all too many examples - who got involved in purchasing off plan. It has opened my eyes to the potential of this market to tick so many boxes for the overseas property buyer. Whatever their reason for buying.
Delete from your memory the notion of getting rich quick or the expectation of a simple property investment that delivers double digit return by the end of next week. Growth will happen but it will be slow.
At this stage, the Mother and Father of Growth, Trust and Confidence, are tentatively talking about dating before bolding walking down the street arm in arm. The good news is that signs are starting to emerge which suggest that a new political will - aimed at curing the previously chronic ailments - is starting to work. The Big Clean Up is underway and with it the shoots of re-growth are being irrigated.
As Mark Stucklin in his piece for the Sunday Times (26.08.07) notes that “Marbella is trying to rebuild its reputation and restore buyer confidence, particularly among foreign investors. It has a new urban plan from the regional government of Andalucia, based in Seville, and an amnesty is being declared on many of the illegal developments.”
Mark also reports that Angeles Munoz, the new Mayor of Marbella, is obtaining compensation for the town in the form of money and land payments by imposing fines upon errant property developers - who inflicted the worst damage.
Further, she is reported as being against the threatened demolitions and believes that they are not “an appropriate solution for Marbella”. Further that she’ll do “everything in my power to protect the interests of innocent buyers….. We will appeal against demolition orders.”
I firmly believe - as do our property buying clients – that whilst location is the main priority it is followed sharp on its heels by “the Deal”. Iain Maitland at Spanish Property Alerts reports that according to a new “Overseas Desirability Report” a place by the beach in Spain is the most favoured overseas property of choice for Brits – so the Three “Ls” still rule!
Written by: Mark FR Wilkins
About the author: The Rights Group SL
0034 600 343 917
© The Rights Group SL 2007 (Marbella)
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