Since that indescribably foolish day in June, agents, property pundits and others, including myself, have been blaming any apparent drop in demand by British buyers, at least partially, on the variation in the exchange rate of Pound to Euro. Yes, there has been a drop in the pound’s value, which makes property buying in the euro zone more expensive for sterling buyers.
But hold on a sec, haven’t we been at these levels before and the demand has continued? And has demand really fallen. Dealing with the latter, undoubtedly, Survey Spain has seen a drop in the number of pre-acquisition building surveys since the beginning of the year. I feel that this can be a guide to the number of buyers who are considering purchasing a property. It slowed over the couple of months before June, dropped to almost nothing during the week after the vote, but then picked up and has continued at a lower level over the last few months. Not everyone gets their property inspected, on which they can be spending millions, but then ‘easy come, easy go’! The prudent person knows that armed with a comprehensive report on the condition of the property they can get a substantial and justifiable discount in the price. It’s a no brainer in two ways. ‘No brainer’ not to do it and a buyer shouldn’t really have to use his/her brain to see the benefits of a survey. We have so many clients who have saved many times our fee in price reduction. You’ve only to look at our testimonials page on our website to see the truth of that.
Back to exchange rates! I’ve done a wee bit of research. Has the pound really been exceptional in its variation this year? I compared it to the currencies of the other non-euro buyers and here is a chart of the findings
Variation in monthly average exchange rate from the beginning to the end of 2016 (26th December)
Currency Highest Lowest Difference
UK Pound 1.3263 (Jan) 1.1196 (Oct) -15.58%
Norwegian Krone 0.1110 (Oct) 0.1044 (Jan) +5.93%
Swedish Krone 0.1086 (Apr) 0.1015 (Nov) +6.52%
Chinese Yuan 0.1402 (Jan) 0.1337 (Sept) -4.64%
Saudi Riyal 0.2526 (Dec) 0.2351 (Apr) 6.95%
US Dollar 0.9477 (Dec) 0.8816 (Apr) 6.98%
So the answer has to be ‘Yes’. Over the year all except the Chinese Yuan have risen in strength compared to the Euro, whilst over the year the pound has dropped. Now we know why there are all those ‘Scandi’s’ out there! Ten years ago, at the end of 2006, when the market was close to it’s top, the rate was 1.49€ euro to 1 British Pound. That compares to 1.175€ euro on the 26th December this year, a difference of 21%. So, a house at the same price then and now, will be 21% more. But this hasn’t been the first drop in the comparative value of sterling and demand by UK buyers has been pretty steady over the last 10 years. In December 2008, you could only get 1.04€ euro for your pound, so on that basis it’s risen by 13%. Since then, the average exchange rate has been 1.212€ euro to the pound. Aren’t statistics great!! So, in summary, we are only 3% less than the average for the last 8 years and 13% better than the worst. So, what’s all the fuss about?
Armed with this information, which I’ll be telling all my clients, buyers should stop dithering, get out there and ‘Just Do it!’ – after instructing a ‘money saving’ survey of course!!