Euro update for overseas buyers from Moneycorp and how to buy wisely in 2008

January 22nd 2008

For current buyers, the state of the Sterling is going to have an impact but Homes in Italy provides some pointers on how to buy wisely and even benefit from these unusual market conditions...

A year ago the Pound and the Euro looked comfortable together. For a long time the Pound had trundled along between €1.46 and €1.50. Unfortunately, with the US economy slowing and the troubles in the City, the UK economy showed signs of following suit. The Bank of England's gloomy messages reinforced the idea that UK interest rates were no longer going up. They were going down. Meanwhile in Frankfurt the European Central Bank was telling a different tale. The Euro zone economy was fine. Inflationary pressures were still a problem so Euro interest rates were going up.

Since September, when the credit crisis burst onto the scene, the Sterling has been in retreat. In January it was more than 13 per cent down from the highs of last year. It was only in mid-January this year that a reprieve began to look possible with rates moving upwards from €1.3 to €1.34.

It has now dawned on everyone that the Euro zone is no more immune from a global slowdown than anyone else and at last it seems that the Euro could be in the same boat as the Pound. Investors are not yet convinced of that notion but the heat on Sterling is being turned down. There is only the remotest chance that the Pound will return to €1.50 according to currency exchange specialist Moneycorp but it no longer looks so certain that it will hurtle downward to as low as €1.20.

For current buyers, the state of the Sterling is going to reduce the buying power of many but the Italian property market, unlike some of its European counterparts, is expected to remain stable for the next two years. Generally speaking, there is still demand for houses and the prices have not decreased. Compared to other forms of investment, property in Italy is still an attractive option proving good returns on investment. According to recent reports from Nomisma (an independent company who deals with economy studies and policy advice based in Bologna) and the F.I.A.P (Italian Federation of professional estate agents), there are many areas where profitability levels are high and prices are expected to increase over the next few years.

Nomisma states that even though there will not be a steep increase in prices as in recent years, the market will be stable with a modest increase. Their average prediction in Italy for 2008 is a small increase of 3.8%, as opposed to the flat rate predictions in the UK. Another institute, CRESME, adds that the market is still lively and the bubble will not explode after all. Even though the trend of prices is levelling, they say that a new phenomenon is now being registered; in 2008 one sale in five will be to a foreign purchaser.

Here are a few pointers from Homes in Italy to ensure that you buy wisely in 2008 and adapt to the changing market:

1/. Put in an offer – Italians can be notoriously firm on prices but with the property market slowing down, it is the time to pick up a bargain and seize affordable opportunities. Many homeowners are becoming more flexible and in light of the current climate will be more open to offers!

2/. Be flexible with your requirements: If you budget has been reduced and you are finding it difficult to afford what you are looking for, its time to be realistic and flexible with your ideal property requirements.

3/. Invest in developing areas: there are many growth areas identified by the F.I.A.P, where property prices are still very reasonable and your funds will certainly go further. Take a look at property in Puglia, Calabria, Piedmont, Emilia Romagna or Abruzzo, where increases are expected to be higher than the national average.

4/. Try a buy-to-let in Italy: with income yields low in the UK and the outlook for buy-to-let investors somewhat deteriorated, Italy represents an excellent opportunity to invest with some excellent short and long term rental returns. The Italian Tourist Board (E.N.I.T) put Italy in 5th position in terms of holidays from the UK in their 2007 report, with over 3 million UK visitors per annum. Independent holidays are on the rise with a reduction in package holidays, which is good news for independent rental owners!

5/. Investigate mortgages: Italian mortgage rates are on average a lot lower in Italy, where you can find a rate of between 4.5 - 5.5% as opposed to 6.0 – 6.5% in the UK.

6/. Protect yourself against foreign exchange fluctuations and use a currency exchange company such as Moneycorp (a Key Business Partner of Homes in Italy), which will offer you a better deal than your bank and potentially save you a lot of money! Click here for further details: http://www.moneycorp.com/personal/?rp=10003908

Sources:

Moneycorp, London, UK

Homes in Italy, Padova, Italy

Nomisma Economic Research Institute, Bologna, Italy

F.I.A.P (Italian Federation of professional estate agents), Rome, Italy

E.N.I.T (Italian State Tourist Board, UK and Ireland), London, UK

CRESME (Research Centre), Rome, Italy