Buying property as the pound drops

Buying property abroad is exciting, but you need to be aware of the constant fluctuations of the pound sterling, which has been greatly affected by recent Brexit delays.

No-deal Brexit and May’s resignation

With the European Parliamentary elections and the constant fear of a no-deal Brexit, the political and economic landscapes remain under threat. The possibility of a no-deal Brexit and a weakened pound would only aggravate the situation. At the moment, after Prime Minister Theresa May’s resignation, things have become more complicated as everyone is wondering who can succeed her in the position and how this could further affect the economy. Her succession by a Leaver and Brexiter such as Boris Johnson can only mean more uncertainty as he has insisted that the UK must leave the EU on 31 October “deal or no deal.” This is definitely not what economists and the markets want to hear.

Economists point towards May’s inefficiency and inability to secure a Brexit deal with the opposition party, as the source of her troubles. The British pound has reacted negatively by slipping for three consecutive weeks.

Brexit deal: What is happening?

The weight now falls on the next prime minister, as business leaders are pressing and demanding that the next prime minister would need to have a clear plan that could reinvigorate Brexit discussions. The worst scenario is the choice of someone that would recklessly defend a no-deal Brexit that, as many politicians and economists agree, could only have a destructive result. As mentioned, Johnson is the favorite among Tories, but the competition is high, with 20 rivals competing and others concerned about his immoderate stance. As the Guardian reported, “moderate Tories alarmed at the prospect of him leading the country to a no-deal Brexit rapidly launched a ‘Stop Boris’ campaign.”

Chancellor Philip Hammond has warned both Johnson and former Brexit secretary Dominic Raab that any prime minister backing a no-deal Brexit would face a no-confidence vote. On the other hand, Jeremy Hunt is clearly against a no-deal Brexit which he has described as “political suicide.” As the situation remains uncertain, the pound’s trajectory would be influenced by the next prime minister and the way they deal with Brexit.

Buying property in Europe: Pound/Euro exchange

The pound has had a terrible run against the euro, and finance experts have forecasted that it will continue. GBP is set to slide as everyone is waiting to see who will be the next prime minister. Sterling will possibly remain very low against the euro due to the ongoing political uncertainty.

If you are considering transferring funds to buy your property abroad, this is the right moment to get in touch with a currency expert such as Universal Partners FX.

Foreign exchange experts such as UPFX have a lot of experience in transferring funds overseas and understand the various hurdles individuals and first-time house buyers face when they want to invest in property. They take the utmost care in understanding your needs and tailoring solutions that will help your finances go further. Delivering fast and secure transfers at the lowest price possible has been UPFX’s long-term goal and they will do everything they can to help you with regular transfers. By managing market volatility and protecting your hard-earned funds from the frequent fluctuations of the pound, their expert consultants monitor the markets on your behalf. By minimizing risk and having a deep knowledge of currency volatility, UPFX will aim to give you the best possible deal. Get in touch with your dedicated dealer and find out how much you can save on your international money transfers.

UK exports to Europe

Brexit has caused a lot of uncertainty for UK importers and exporters. The difficulties facing many British companies trading overseas have become an inseparable part of Brexit debates. For many, the issue lies with the UK’s decision to leave the EU.

In an article on the Guardian, Gareth Stace, director general of the trade association UK Steel, argues that leaving the EU has the potential to cause a great deal of damage to exports and weaken the sector more.

British Steel

In an attempt to present his views and the general steel industry’s position when it comes to its current issues and Brexit uncertainty, Stace admitted:

“There can be no doubt that the ongoing Brexit uncertainty has contributed significantly to British Steel’s problems. Unable to decipher what the UK/EU trading relationship will be in just five months’ time, planning has become fiendishly complicated for both UK exporters and their EU customers.” He also added that things have become more complicated with the EU’s recent measures seeking to prevent steel imports surging, a move that reflects a more general protectionist turn seen elsewhere.

As Stace wrote, “Post-Brexit, UK steel exports to Europe will be restricted by these measures, with a disorderly no-deal Brexit affecting them particularly badly.”

No deal Brexit is bad, but what about an orderly Brexit?

Stace elaborated on the question of whether a well-organised Brexit would improve things for steel exporters. For example, he questioned those who claim that with the UK being outside the EU, the government would support extensively the steel industry. As he argued, “the UK steel sector has no interest in operating under the support of state subsidies (we are vociferous critics of this practice in places such as China).”

He emphasised that the UK’s ability to provide state support was restricted nonetheless, due to its WTO membership, “which bans certain subsidies outright, and allows others to be counteracted by other WTO members with the imposition of ‘anti-subsidy duties’ – effectively closing off important export markets.” He also pointed out that the EU has already aligned itself in terms of state aid rules, so any agreement between the UK and EU would not be beneficially better. Similarly, other countries such as the US would also want to align themselves with the current provisions when they strike trade agreements with the UK, so the UK would not, in essence, enjoy any special treatment.

“Brexit would not provide greater trading opportunities”

The Brexiters’ mantra has been, since the beginning, based on the premise that the UK’s withdrawal from the EU would come with the promise of striking limitless deals. Boris Johnson used this slogan in many occasions, but the “freedom to do our own trade deals,” as many Leavers have proclaimed, is not an easy fit. This is also the case for the steel industry. Stace clarified that Brexit would not come with the opportunity to strike many deals. As he said: “WTO tariffs on steel in developed countries are already zero, and the EU’s expanding list of FTAs is providing tariff-free access to many others. There is little advantage any new UK FTAs could offer.” Additionally, as UK-produced steel “qualifies as EU steel under complicated rules of origin within the EU’s FTAs,” this means that any European country can use it, whereas, after Brexit, UK steel “would be classified as UK not EU, reducing the attractiveness of it to EU manufacturers.”

In essence, Stace explained, “Brexit will not improve the situation for the steel sector but it has the potential to cause a great deal of damage.” For him, the biggest priority is to secure a withdrawal agreement as soon as possible. And this is what most businesses are also demanding.

Brexit

France and Spain’s property markets are among the favorites for many Brits, despite Brexit. In many ways, Brexit did not change Brits’ desire to move permanently to France or Spain, indeed, it has, paradoxically made it stronger. With Brexit strategy in tatters, the UK confused about its own European identity and a climate that cannot compete with that of sunny Spain, for example, many are determined to look for a home overseas.

Uncertainties of moving abroad

Planning to purchase property abroad is a long process, and for those who have already started or are in the midst of deciding, there is nothing that can really stop them, not even the uncertainty of Brexit. Nonetheless, there are worries about their new life in Europe. For instance, many Brits worry about the lack of affordable healthcare, long legal processes of buying property, or just simply maintaining their property back in the UK due to a weak pound. But these are issues that can be tackled, to a certain extent. Finding a place in the sun to retire is perhaps a bigger enough reason that propels Brits to move abroad, even though they are aware of the possible problems. A peaceful life in the countryside is definitely more attractive, than remaining trapped in a little house back home. Enjoying a higher standard of life is a solid fact that cannot be shaken by the uncertainties of the process or the current unstable political landscape. As many have enjoyed the perks of living abroad through their regular visits and holidays overseas, it is very difficult to resist the lure of the good weather and of long cool nights under starry skies.

More European because of Brexit?

With the European elections taking place from the 23 to 26 May, it is impossible to forget Brexit. It is interesting to see how it has affected Brits in the way they perceive themselves. According to Radio France Internationale, 23-year-old English au pair Emma has been in France since August and despite coming from Thetford, where many voted for Brexit, she feels European and wants to live in Europe. It was, ironically, Britain’s decision to leave the EU that pushed her to move to another country. Like many other Brits living abroad, Brexit has affected their decision and made them understand the benefits of their European heritage. As the article reported, “the Brexit decision has created practical problems for them but also raised questions about identity.”

Sterling and Brexit

Whether motivated by Brexit or your own personal desires and wants, the decision to move overseas comes with a lot of considerations. One of the biggest ones is making your money go further, and taking advantage of currency volatility so that it does not affect your savings. Everyone has noticed that this week the pound has suffered against the euro due to turmoil in Downing Street affecting currency markets worldwide.

The fact that Theresa May’s premiership is now being questioned after her failure to get approval for her Brexit deal, has impacted on the pound, which dropped against the euro.

Theresa May’s time is coming to an end. Initially against Brexit and later having to negotiate a deal— which for many hardcore backbenchers and hardline Brexiteers was not desirable or close to what the British people have voted for in the 2016 referendum—May was given an almost impossible task. Her replacement and the possibility of a no-deal Brexit are now appearing to be, not only the stuff of nightmares, but also a reality leading currency traders to avoid the pound.

Buying property overseas is a complex process and having a trusted currency broker by your side is a massive advantage when it comes to the current movement of the pound. Universal Partners FX can help you navigate a volatile market and transfer money internationally, mitigating the negative effects of Brexit and a weak pound, and ensuring that your funds are not impacted by exchange rates. Get in touch today with your currency dealer and find out how much you can save on your currency transfers.

International trade after Brexit

The future of the UK’s international trade is still uncertain as Brexit looms and the terms of the UK’s departure are not yet set in stone. Financial Director reported that the future relationship of importers and exporters with Europe and the world after Brexit continues to be the subject of much debate.

What has been happening?

Brexit has indeed already tarnished the economy and is affecting UK exports, despite the wishes of many Brexit supporters who had claimed the opposite. It was perhaps partly due to Brexit that, in February 2017, Secretary of State for International Trade, Dr Liam Fox, had changed the Conservative government’s expectations of “doubling UK exports to £1 trillion by 2020.”

While not up to £1 trillion, Fox would later change the Government’s target to increase exports as a percentage of GDP from 30% to 35%, after positive ONS figures were released for the period between November 2017 and November 2018. In particular, it was shown that the number of SMEs exporting to overseas markets increased by 6.6% to 232,000 (9.8% of all SMEs), and of larger businesses exporting increased by 6.1% to 3,500 (41.7% of all large business). The UK’s total exports increased to £630bn in November 2018. While towards the right direction, problems still remain and many exporters are considering costs and how to grapple with the changing landscape, while continuing to develop their business.

Stirling volatility

According to SMEs, a volatile market is one of their biggest problems. As the Institute of Export and International Trade reported, “While it was expected that a weaker pound would make UK exports more competitively priced, this was offset for many SMEs by both more expensive imports and currency volatility. In fact, (34%) said at the time that currency volatility was the greatest challenge they faced.  So, whilst a weak pound may have had a positive impact, the uncertainty certainly didn’t help SMEs manage their currency costs or importing foreign goods and services.”

Alongside worries about the effects of a weak pound, businesses have been concerned with “export licences, customs declarations and VAT invoices” in order to protect themselves and comply with legislation.

Brexit

Brexit is a major disruptor of international trade. According to government statistics, the EU is currently the UK’s main trading partner, with 44% (£274 billion) of UK exports to the EU each year. UK imports from the EU were estimated to be 53% (£341 billion).

In terms of VAT and customs duty, Brexit will affect taxes and result in higher import taxes and more complex administrative procedures. Brexit also means defining the trading relationship between the EU and the UK, which will demand further negotiations, as well as the trading relationship of the UK with other countries.

Additionally, currency traders are currently worried that a hard Brexit—exiting the EU without a deal—might even be back if Nigel Farage’s Brexit party does well in the European Parliament elections. A large Eurosceptic vote would open the path for Boris Johnson to succeed Theresa May, analysts have noted.

Universal Partners FX

As an international business which specialises in helping other businesses deal with currency fluctuation and international transfers, UPFX understands the difficulties and challenges of transferring large amounts of money. Whether Brexit comes with the promise of future relationships or with added uncertainty, your business, nonetheless, will most likely be facing a volatile pound and an unpredictable market. To mitigate unexpected market movements and protect your business, get in touch with your dedicated currency dealer at UPFX to discuss how they can help you save money and hedge your funds.

Spanish property market

Buying property abroad has remained a popular investment for Brits, as Spain, France and Portugal are the top desirable locations for holiday homes. So buying property in Spain, for example, more particularly in Madrid, is currently on demand.

According to Homes & Property, Madrid “represents good value against other capitals. Prime prices are 70 per cent lower than in London and a third of those in Berlin.” Speaking to Homes & Property, Carlos Zamora, head of residential at Knight Frank Madrid, said that “Prices rose eight per cent in Madrid in 2018 against a global average of 1.3 per cent and we forecast a six per cent increase this year. Transaction numbers are increasing and building permits rose 35.5 per cent between 2017 and last year. All signs point to a clear, stable recovery in Madrid.”

While Brexit has affected the exchange rate and many have initially postponed the decision to buy their overseas property, things are now much clearer in terms of what might happen. Most possibly many privileges enjoyed in the past might be lost after the UK’s exit from the EU, but being able to own your dream holiday home and live abroad are still as feasible and attractive as ever.

So, let’s have a look at how much Spanish property costs and all the details you might need to consider before buying your property abroad.

Buying property in Madrid

Whether you are buying or selling, transaction costs are around 10-15% of the property value. If you are not certain whether you want to commit to something permanent, renting is also a valid option, especially when one takes into consideration the expensive capital gains tax.

But, nonetheless, if you are searching for sophistication and luxury and you can afford to spend a bit more, you can enjoy five-star luxury with Four Seasons residences, which are unique in Spain. As the Homes & Property website noted, “the outstanding architecture, top-quality building work and extensive wellness facilities, as well as the five-star luxury of dedicated, on-site Four Seasons service mean the remaining five residences for sale have price tags starting from £2.76 million.”

If you want something more affordable, but still modern, Javier Ferrero is a contemporary development of 87 apartments in the fashionable residential area of Chamartín, where prices are approximately half of the average in Madrid. These properties start from £254,000 for 344sq ft to 1,960sq ft, and owners are able to choose the design for their apartment. 

How it works

Once you found your dream home and your offer has been accepted, then you will sign a preliminary contract (contrato privado de compravento) and pay a deposit, usually something around 10% of the purchase price.

Mortgage

If you are thinking of getting a mortgage, this is the time to make arrangements, if you haven’t done so already. The contract of sale (escritura de compravento) is finally signed in the presence of a notary, who is usually required by many mortgages. You will be responsible for paying all related taxes and costs, as well as registering the property. Registration can be done for free by the notary who will notify the registry office about your property being sold.

It is normal that you might not be able to get a mortgage until you actually own the property, so you might need to make sure that your contract does not deter you from exiting it if you have not acquired a mortgage.

Costs you will be paying

The estate agent will be paid by the seller, as it usually happens, but you will need to pay the notary costs. You will have to deal with paying the property transfer tax 6–10% (for existing properties) / VAT (or IVA) at 10% (for new properties), the title deed tax and land registration fee 1–2.5%. Legal fees will cost you 1–2% (including VAT).

Buying property overseas will involve many considerations and especially financial complexities that a foreign exchange specialist like Universal Partners FX can help clarify and overcome.

As you make arrangements to transfer large amounts of money internationally or you are required to conduct multiple transactions, you will find that navigating a volatile market and the uncertainties of Brexit can be time-consuming and stressful. Entrusting your international money transfers to a professional and dedicated currency dealer at UPFX will significantly have a positive effect on your currency transfers. This is very important when you want to transfer your hard-earned money to buy your property abroad.  UPFX’s research and technology is coupled with professional dealers’ expertise to help you access the best exchange rates, at the most opportune moment, without sacrificing the value of your funds. Give your personal dealer a call to find out how much you can save when you buy your dream home.

Brexit for businesses

Everyone is talking about Meghan and Harry’s royal baby, but have you considered how to Brexit-proof your business? Businesses importing to or exporting out of the UK have been advised to prepare for a no-deal Brexit. While many have reportedly shaken off the threat of a hard Brexit, the possibility of a no-deal still remains, with economists expecting growth to remain subdued for the rest of 2019.

So how ready are you and your UK business when preparing for the possibility of a no-deal Brexit?

What does no deal mean?

A no-deal Brexit means that the UK will leave the European Union (EU) without an agreement that would define their future relationship. This will result in the UK losing its access to the European single market which allows for the free movement of goods. If politicians are unable to come to an agreement, and the government fails to provide the necessary plans, the UK would be trading on World Trade Organization (WTO) terms.

Trading on WTO terms?

What are the implications of the UK falling back on WTO terms? Trading on WTO terms means that the UK would lose the benefits it currently enjoys, with more British imports and exports facing tariffs. UK services will obviously lose access to the EU’s single market and would only be able to have more restricted access following the WTO terms.

According to  UK in a Changing Europe, an independent initiative funded by the Economic and Social Research Council (ESRC), by reverting to WTO terms, the UK will face import duties and various controls when trading with the EU. This will specifically affect such industries as those of agriculture and those depending on products such as components to make cars or ingredients for processing food. Additionally, the initiative pointed out that “the UK would lose the benefit of free trade agreements it now has with countries such as South Korea and Canada as a member of the EU.”

While many countries are trading on WTO terms this does not mean that they are limited to the deals they can have. As the UK in a Changing Europe notes, “All 164 WTO members have better access to at least one market either through a free trade agreement or through duty-free preferences for developing countries. Most countries have several deals, even if they do not all have one with the EU or the US.”

Beyond preferential agreements on market access, there are also other agreements that help trading between countries. The Financial Times has reported in 2017 in “After Brexit: the UK will need to renegotiate at least 759 treaties,” that the EU has at least 759 agreements with 168 non-EU countries, including those relating to regulatory cooperation, customs and agriculture. Many countries pursue agreements beyond those of the WTO agreements in order to overcome boundaries and increase economic growth.

At the end of the day, independent bodies such as that of the UK in a Changing Europe, stress that the benefits of a free trade agreement with the EU are less than those of the EU single market, but greater than just the WTO terms.

What does this mean for your business?

As a recent Forbes article noted, in the possibility of a no-deal Brexit, your business can take some actions into consideration when preparing for the impact of Brexit.

The article mentions, among other things, that assuring what your business’ needs are to maintain operations in case of a no-deal Brexit, is important. As it states, “If you’re importing goods from the EU to the UK: you’ll need to register for a UK Economic Operator Registration Identification (EORI) number and Value-Added Tax (VAT) number.” Also, if you are “importing goods from the UK to the EU: you’ll need to either incorporate your business within the EU or find a third party established in the EU who is willing to act as the importer of record.” As the article points out, if you are not aware of Customs classifications, it will be helpful to get help from a customs brokerage, with 180,000 importers  “expected to need to clear Customs for the first time after Brexit.”

Mitigating Brexit impact

Your company may have several strategies to mitigate the effects of Brexit, including, optimizing your supply chain by re-evaluating the location of your warehouses or “setting up mixed bonded and free circulation facilities.”

But it is also very important to work closely with a currency broker such as Universal Partners FX (UPFX) who can help you with your international transfers and suggest ways to mitigate the negative effects of Brexit. You can also follow Universal Partners FX’s news to remain up to date with the latest developments regarding financial data and Brexit.