French House Price Inflation

[groslard]

[quote user="Logan"]

Do not buy until Sterling comes back to 0.68-70 pence to the Euro.

[/quote]

Don't you think that that won't be for a long time? I see the Euro going to 75 pence this year

[Russethouse]

Just as an aside to this debate, two of yesterdays papers in the UK had 'House Prices rise again' as a headline....make of it what you will......

[Logan]

The Sterling value against the Euro is related to UK/EU interest rates. Most forecasters see interest rates in 2008 falling by 1% in 4 x 0.25% cuts spread over the year. Hence the recent falls because the EU central bank has stated they will not reduce theirs. However the UK economy is still performing well and inflation remains a problem. So the question is can the UK central bank keep cutting rates in the teeth of rising inflation? I don't think so since their mandate from government is to keep inflation at 2% of RPI. The only real tool in their armoury is interest rates. Put them up to choke off demand or lower them to stimulate growth? My bet is they will do a bit of both. So my prediction is for Sterling to rise against the Euro in the third quarter of 2008. We shall see. 

[Grecian]

Many thanks for all the feedback, it has all been most helpful.

DerekJ, I can certainly relate to what you have posted, regarding the fall in value of the pound versus the euro. We to started looking back in the summer, and using a rough exchange rate of about 1.46 euros to the pound, now it is somewhere near 1.36 euros to the pound, I find myself thinking how much extra we will have to pay at the current exchange rate.

Logan, sound advice regarding waiting hopefully for the pound to appreciate against the euro before making a purchase. I know the ECB are still talking tough regarding inflation, and not dropping interest rates at the moment, but if the credit crunch starts to bite in euroland, then I think they will have to cut interest rates, and hopefully this will then weaken the value of the euro.

Taking into account everything that has been posted, I think if we still make the move to France, renting in France, and hoping the exchange rate will swing in our favour eventually, and take a chance against French house prices rising too quickly.

Cat, thanks for the deletion, never felt a thing!

 

 

[Alan Zoff]

There is plenty to be gained - or lost - on trying to play the currency market. You might wait a long time before your optimum rate of exchange is reached. Meanwhile, other factors might have moved against you for reasons you cannot at present foresee. We are all experts with the benefit of hindsight.

More importantly, if the reason for buying in France is other than financial - e.g. for a different way of life - then is a possible saving of a few thousand euros worth more to you than putting off the move? As as often been said on this forum, you only get one crack at life and sometimes it pays (but not necessarily in financial terms) to make the leap. OK, we all want to buy on the best terms we can get but - unless it is to be regarded as an investment rather than a home - the most important factor is to buy the property that is right for you in the village, town, wilderness or whatever that is right for you. And then make the most of enjoying it, sooner rather than later.

I wish I were better at taking my own advice....

 

[Scooby]

Sound advice Alan - life is not about money.

[Logan]

[quote user="Grecian"]

 but if the credit crunch starts to bite in euroland, then I think they will have to cut interest rates, and hopefully this will then weaken the value of the euro.

[/quote]

In Euroland the worst aspects of the credit crunch have been avoided. By that I mean EU financial institutions who have not bought derivative instruments from the US. However there will be a knock on effect from elsewhere as consumers rail back investment. 

I do agree there is more to life than money but wise investments make for a more comfortable one.

[Alan Zoff]

[quote user="Logan"]

 "I do agree there is more to life than money but wise investments make for a more comfortable one."

[/quote]

'Can't disagree with that.

 

 

[Benjamin]

[quote user="Scooby"]Sound advice Alan - life is not about money.

[/quote]

So long as you've got some. [:)]

[Benjamin]

I've just lifted this off the Reuters UK web site

European stocks up 1.6 pct in '07, worst since 2002

2:23pm GMT 

LONDON, Dec 31 (Reuters) - European equities rose on Monday

in thin trade but key markets stayed closed, with the region

notching a slender gain of 1.6 percent for 2007, its worst

performance since 2002 as a credit crunch whacked stocks. 

Full Article

That's the problem with experts..............they've all got an opinion.

[Grecian]

Alan totally agree with your sentiments, and no the move to France would not be for financial reasons, hopefully for a far better quailty of life, and to leave the UK before it finally disappears down the plughole. Saying that the difference on the price of property we are looking at, as it stands at the moment, would be somewhere near £12,000-£15,000 more expensive now, due to the exchange rate going against us. Just trying to hedge our bets and hope things turn back in our favour somewhere in the medium term. If we choose to rent in France, as opposed to the UK as we are at the moment, at least we will be experiencing the French way of life, without any ties if things don't turn out as we have hoped.

 

[groslard]

[quote user="Grecian"]

the move to France would not be for financial reasons, hopefully for a far better quailty of life, and to leave the UK before it finally disappears down the plughole.

[/quote]

What do you know that makes you think that France isn't disappearing down the plughole too?

Read the posts about Sarkozy's reforms and the need for them...

[Scooby]

[quote user="Grecian"]

 If we choose to rent in France, as opposed to the UK as we are at the moment, at least we will be experiencing the French way of life, without any ties if things don't turn out as we have hoped.

[/quote]

To be frank - if I was advising anyone re a move to France then that is what I would recommend.  Rent first to see if it's for you.  It's a darn site less expensive if you decide France is not for you.  Even if you do decide to settle permanently in France it gives you the flexibility to move area for work etc. without incurring expensive transaction costs.

[Logan]

When you evaluate your loss if any due to the Sterling/Euro exchange rate you should calculate values annually or even over the economic cyclical cycle. By that I mean 7 years. You will probably find that actually Sterling and therefore in essence your income holds its value internationally very well. Although currently Sterling is historically quite low against the Euro so is the Dollar and most other currencies. I advise investors/pensioners to hold their nerve and remain in Sterling if you can or even buy. You will be sitting well when the wind of change blows in the other direction. It always does eventually. Think medium to long term not short.

 

[DerekJ]

Logan. perhaps I'm missing your point? But if one buys a property at the present time with Sterling when the rate is low, surely if/when Sterling rises again, the effective (relative) value of the property has decreased in terms of its sterling value?

[Alan Zoff]

I'm no economist but I assume by "buy" he was referring to buying sterling rather than French property.

[Logan]

Apologises, I was side tracked by another thread debating currency. I did indeed mean investing in Sterling and the yields that produces over time. If you have an income in Sterling tot up the annual yield and the value it was exchanged into Euros. Then calculate the average monthly income for that period. I find consistently that over a period of 5-7 years although exchange rates vary enormously the average income continues to maintain value.

Currently Sterling looks a bargain for investment especially bought with Euros. Over the long term yields should remain constant and continue to increase. However Sterling may well fall even further this year as the UK economy struggles.

Of course if you buy a French property now, effectively you are buying Euros at a very low rate. Since property values in France are unlikely to rise much above the rate of inflation over the medium term the investment is poor. Its a life syle decision not investment, although your capital is perfectly secure.

[Diddion]

Thank you everyone for the interesting posts in this thread.  I also am in the position of having found a house in the summer and put mine on the market...just before Northern Rock.  Excellent timing.  Instead of a compromis de vente, the notaire created a Promesse document, restricting the vendor to ourselves for a period of time (mid January 2008, though I know the vendor will extend this).  Unhappily, because of the exchange rate and UK housing position, we will now, I think, have to withdraw and look for a cheaper property - we can do this without loss of our deposit (which will now be worth more than when we paid it!) but with legal costs of about 1000 euros.    I disagree with those who assert that we purchasers should wait until the euro weakens.  Although of course it may do so, there are no guarantees - look at historical dollar exchange rates, for example.  You might find you are waiting forever.  This is, as others posting in the thread have wisely said, a lifestyle decision., so if it can be afforded, we at least will still go ahead.

[Logan]

I have been around this problem of fluctuating exchange rates for long time. Sterling has the ability to recover quite quickly. However it depends on how the UK economy is managed. The present UK government has a good track record in that respect. I expect Sterling to come back to near previous levels in the third quarter of 2008. What will prevent that is a serious global recession particularly in the USA.

I repeat my advice. Wait a while; it could save you between 5% to 8% of your purchase. You also can also be sure others will also do the same. This will result in a slowdown of property sales and prices levelling off slightly. 

 

[woolybanana]

I am house hunting here in the Vendée at the moment and it is clear from talking to agents and to notaires that prices have already come way off their peak and that more property is coming onto their books than is going off. Sellers are having to drop to realistic levels to get buyers too.

[AnOther]

[quote user="Logan"]I expect Sterling to come back to near previous levels in the third quarter of 2008.[/quote]Bookmarked this thread and made a note in my diary.

I sincerely hope you're right but I'm not as optimistic as you seem to be, let's wait and see then [;-)]

[WJT]

We were going to transfer more sterling over a few months back for our renovations and decided to wait a while. A terrible mistake. We have a little left in our French bank account that we transferred over a while back but now are very hesitant in going forward with finishing the renovations. This along with the medical changes is making us re-think everything about France for the moment.[:(]

 

 

[Sprogster]

Diddion,

I would not be in a hurry to buy in France as we are increasingly moving into a buyers market, especially if you are looking for the type of old rural retreat that mainly appeals to British buyers. (The French much prefer new properties as they are cheaper to heat and maintain.)

I agree about not waiting for the Euro to weaken, but it might be worth waiting if as seems increasingly likely we are going into a period of reducing residential property values over the next two to three years.  

[AnOther]

The bulk of my money is still in UK so I guess you could say that in the very broadest of terms what I'm earning in the UK is effectively being lost on the exchange rate so I'm really marking time.

It's times like this that the old Nationwide card comes in handy because it you're paying attention you can time your ATM cash withdrawls to coincide with whatever meagre "up's" there are these days and not be forced to commit larger sums to the currency exchange market at what it such an unpalatable rate.

I do feel for those whe are coming up to completing a purchase and faced with finding maybe 10's of thousands of un budgeted pounds extra but unfortunately it's the nature of the beast.

Of course, because I'm still working and paid in UK but ultimately need €, my salary purchasing power has declined significantly but I'm not quite on my uppers just yet [;-)]

 

[Ian]

Go long on Japanese yen, silver, uranium and Berlin property.  If crude oil breaks support at $86, primary trend has reversed so go short.

Just my two cents/pence/won/lek/krona etc.

Don't forget: if you laid all the world's economic forcasters end to end you still wouldn't reach a conclusion!