Cost of €100,000 euros in sterling. Its not all that bad.

Capo Boi Image
10/09/2009 - 06:54

As with most things in life there will be winners and losers. For example anyone buying outright at start of 1999 will have seen a currency gain in sterling terms of 38%. (start 2000 +57%). Anyone renting a property in Italy and paying the rent through a sterling income will be the equivalent worse off. In general, however, anyone with an Italian asset (house with say 70% euro mortgage) will have been a net gainer.€100,000 buys at start of year:1999  £71,1102000 £62,4602001 £63,1502002 £62,6202003 £65,2002004 £70,5452005 £707252006 £68,6502007 £673502008 £74,1302009 £96,100Current £97,890


I am not sure how this all works out for those that have retired to Italy and have pensions in sterling? also for those that purchased property between 2000 and 2006, when their sterling was worth approx  1.5 Euro's things would not be so rosey either. So i am not certain how you work out a generlisation that people are generally  better off, surely at this present moment using your data anyone converting assets bought in this period back to sterling would be 30% at least worse off then had the pound not collapsed.And given the evidence that a large percentage of second homers or retirees eventually return back to their original country, then the time scale you are using would suggest staying put was the best option property wise.But those with UK based pensions might not have that option,and if their home in Italy is their only property, selling and returning back to the UK could be a financial  disaster.

I think you've got your exchange rate around the wrong way. If for example you bought a house at the start of 2006 for €100,000 this would have cost you £68,650. If now you sell today for the same price (€100,000) and transfer the proceeds back to the UK your €100,000 is now worth £97,890, a gain in sterling of £29,240. Anyone with net assets in the euro zone for the past few years have made big gains in sterling terms. In parts of Spain for instance, that have seen large house price falls, sterling's fall means that if you want to return to the UK you can sell at  say a 25% loss and still walk away with a pound profit.

Nah. If you bought at the start of 2006 for e100,000 and sold at the same price today your gain would not be anything like £29,240. After entry and exit charges, notary fees, tax, agents fees and moving costs you would be lucky to have much of a gain at all. If you then had to to re-enter the UK market, after stamp duty and legal fees you would almost certainly be nursing a loss. Property is an illiquid asset and nobody makes a net gain however favourable the prevailing exchange rate unless they find a buyer. We know 5 sets of people trying to sell at the moment, most stuffed by exchange rates, 2 of them for over 2 years, very difficult middle market, not sure they feel like "winners", they just want to move on with their lives.  

Silly me, i did mix up a few different subjects,thinking more along the lines of the more typical cheap buy property and do up job which is more popular it seems and which would be suffering at a time like this,if one also needed to off load and return home because of say pension issues......

Yes, for anyone who has just bought or carrying out a renovation project, paid for through a sterling income/earnings, the cost in euros of this will have substantially increased. One estate agent I spoke to recently told me that his letting business with UK holidaymakers was 20% down this year and whereas in the past he would sell 3-4 properties a year to UK buyers, he has not made any this year.

 Anyway,What does seem to be a plus piont is how the Italian economy whilst suffering,has not suffered on the same scale as the other major economies of Europe, OK a big portion of this could be laid at the feet of Italy not being as advance on all economic fronts as its major partners in Europe, ie the massive banking crisis of last year. So there might be something in Nonna keepimng her money under her bed matress afterall

Sure I ignored transaction costs and I agree that these are substantial. But anyone trying to sell now for whatever reasons and return to the UK would be in a much worse position if euro-sterling was at 2006 levels. Also, UK house prices are something like 20%-25% lower over the past two years whilst in Italy prices falls over the same period are in the region of 8%-10%.

Lagging National house price price data is pretty irrelevant when you consider the area of the market you are talking about.UK transaction volumes are the lowest on record, the trickle of good houses coming on to the market in nice areas are being fought over tooth and nail by equity rich purchasers, (and in the case of prime London wealthy Euro Zone purchasers), these are the areas that many British sellers in Italy will be gravitating to, and they are widely reported to being close to peak 07 prices, and in some cases more. Anyone hoping for minus 20% + is going to be very disappointed. Whether this will remain the case after the election who knows,  but this is the absurd reality now.