SURVIVING THE EURO SHOCK: Britons rush to ditch euros…but some will buy a half-price holiday home By Richard Dyson And Jo Thornhill
PUBLISHED: 15:56 EST, 19 May 2012 | UPDATED: 15:56 EST, 19 May 2012
'Lucky': Christine and John Watson, with Bonnie, left, and Ruby, got the asking price for their spacious French home in Poilhes on the Canal du Midi
Britons are switching record sums between pounds and euros as fears grow over the future of the single currency and the safety of Continental banks.
But while hundreds of thousands of people are bringing money back to sterling accounts in British banks, many others are doing the opposite.
They are buying euros, often with an eye to purchasing savagely discounted properties on the Continent, or refurbishing the properties that they already own.
Among the uncertainty and panic, reports are emerging of desirable properties in Greece and elsewhere selling for half the price of just three months ago.
Mark Bodega of foreign exchange firm HiFX in Windsor, Berkshire, says euro-to-sterling transactions are almost treble their usual level ‘in spite of the euro’s recent weakening’. He says: ‘Fear is clearly driving these transactions.’
But the traffic is far from one-way. Rival forex firm MoneyCorp says that while euro-to-sterling deals have doubled in the past month, transactions the other way have mushroomed even more.
‘The majority of transactions between the currencies is still sterling buying euros,’ says MoneyCorp’s David Kerns. ‘Britons are as much as ever in love with the idea of buying a home in France or Italy and this turmoil is providing an extra enticement.’
Euro-to-sterling transactions at Caxton FX, a low-cost forex firm popular with British owners of homes in eurozone countries, were last week running at three times regular levels. ‘A proportion of clients are definitely set on bringing money back to Britain,’ says managing director James Hickman.
‘This is partly due to nervousness about the security of European banks â€" people just don’t feel comfortable.’
But Hickman says Caxton is processing floods of transactions in the opposite direction as wealthy Britons order millions of euros. ‘It’s a double benefit for people wanting to own properties in the eurozone,’ he says. ‘The currency is getting cheaper, and so are the properties.’
The British-based owners of an estimated 1.1?million properties in the eurozone, who need to transfer money regularly to cover the cost of their holiday homes, are also pushing more cash abroad at today’s lower euro rates, Hickman says.
Elisabeth Dobson of World First, another London-based forex specialist, says people are making greater use of ‘forward contracts’ to hedge against further volatility. This can protect future transactions in either direction. ‘Those trying to sell property in the eurozone are more anxious and we have seen a rise in people wanting to buy forward contracts at today’s rates,’ she says.
‘It gives consumers peace of mind that when their property is sold they can transfer their euros into sterling at today’s rates, even if that doesn’t happen for another year.’
Retired Ministry of Defence civil servant John Watson, 76, and his wife Christine, 72, sold their home in southern France in February after becoming concerned about the situation in the eurozone. They had lived in France for nine years.
They sold their four-bedroom detached house with swimming pool and workroom for 280,000 euros, netting them just over £234,000. By contrast, converting the same sum at Friday’s price would have left them with £10,000 less at £224,098.
‘We had been thinking about coming home for two years,’ says John. ‘We are both getting older and we want to be nearer our children.
‘We had been watching the value of the euro decline so we bit the bullet. I think we were lucky. We sold quickly and at the asking price. If we had not sold at that time, we’d be much worse off.’
John and Christine, who are living in Corby, Northamptonshire, with their standard poodles Ruby and Bonnie, say many of their expat friends still in France are not overly concerned.
But John says he is aware of some panic. ‘One couple we knew sold their gite and put all the cash into Australian dollars, such was their fear about the eurozone,’ he says.
All firms report big increases in calls from clients seeking advice. Hickman says: ‘The most common question of all is, ‘‘Will a Greek exit from the euro trigger an entire currency breakdown?’’?’
And the answer? ‘We tell them that while we believe Greece will eventually exit, we expect the process to be relatively orderly, and that other countries will not follow,’ he says.
This is a growing consensus among economists and market-watchers. No one knows how much chaos would result from an exit, if it happened â€" but the prospect has caused the price of properties in Greece and elsewhere to fall.
Spyros Mantzos of estate agent A Property In Greece in Chislehurst, Kent, says: ‘A fall in values of up to 40 per cent since February means British buyers can get in at almost half price, if you factor in the stronger pound.
‘Investors are snapping up properties for bargain prices. Interest today is double the level of last year. Greece is now decidedly cheap.’ Top locations remain Crete and Corfu.
Les Calvert of international online estate agent property-abroad.com in Hartlepool, County Durham, says: ‘Over the past month we have seen interest soar, with Greece pushing up into the top five. A month ago it was not even in the top ten. It’s a buyer’s market.’
But Simon Conn, an overseas property and mortgage specialist consultant in Hove, East Sussex, says: ‘Banks are still lending in Italy and Spain, but no lender will offer on a property in Greece. That means cash buyers only.’
Lynnette Reynolds, 55, and husband Paul, 57, from Bristol, are among those taking advantage of the favourable euro exchange rate. Last week they converted £125,000 into euros at a rate of 1.24 to buy a two-bedroom 19th Century cottage in Brittany.
They are close to completing, but Lynnette and Paul, who work as child-minders following his redundancy from his job as a research scientist at the University of Bristol, were worried about exchange rate fluctuations so they bought a forward contract through World First to lock into the rate when it hit 1.24 last week.
Lynnette says: ‘The rate could go higher, but we are cautious people and didn’t want to wait in case sterling started to fall in value. As it turned out, we are better off than if we had bought the euros the week before.’
Additional reporting by Toby Walne
ForexNews.com
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