Pound may rise in 2017, cutting your costs to buy Spanish property

Uno de nuestros lectores del blog, ha escrito este artículo sobre la evolución de la libra, titulado: La libra puede subir en 2017, así reduciendo el coste si compras una propiedad en España. Lo adjuntamos por si sea de vuestro interés.

Do you intend to buy a property in Spain in 2017? If so, whether you've got your eye on a 3-bedroom apartment with a terrace in Madrid for 890,000€, or a 7-bedroom villa with a private swimming pool in Orgaz for 690,000€, you'll want the best exchange rate. After all, if sterling flies high, you'll receive more euros, when you transfer money to buy a Spanish property!

With this in mind, what's in store for the pound to euro exchange rate this year, especially in light of Brexit, and how might this affect you? Well, read on to learn how the pound may rise versus the euro.

The good news if you intend to buy a Spanish property this year is that sterling could strengthen against the euro. This is because the UK economy has so far remained resilient to Brexit. For instance, just last week the OECD upgraded its 2017 GDP growth outlook for the UK by +0.4%, to 1.6%.[1]

According to The Independent's Ben Chu, this is "due to a less severe impact from Brexit than it previously anticipated"[2]. What's more, the UK has "shown resilience since the UK’s surprise Brexit vote last summer,"[3] says The Scotsman's Martin Flanagan too. So this may bolster sterling!

Meanwhile, the euro may weaken this year, benefiting you when you buy Spanish property, if Marine Le Pen wins France's upcoming presidential election. To be specific, 23 out of 38 economists think that the common currency could hit a 15-year low if Ms. Le Pen triumphs at the polls, according to a new Bloomberg poll this week.[4]

In particular, the euro could fall, because Ms. Le Pen is virulently anti-Brussels. For instance, just recently the National Front leader said that the EU "shuts us in, constrains us, bullies us".[5] Hence, this could boost sterling, for you to buy Spanish property!

Moreover, the euro could also fall in 2017, cutting your costs to buy a property in Spain, because the European Central Bank still looks unlikely to hike interest rates. To be specific, although inflation in the common currency bloc hit 2.0% in February, above the ECB's official target, core inflation, which strips out volatile food and energy prices, was just 0.9%.[6]

This suggests that "inflation fears are still far away," according to the analysts at BBVA Bancomer[7], meaning that the ECB may keep interest rates at 0.0%. In turn, this may weigh heavily on the euro in 2017!

With all this in mind, there's good reason to think that sterling will strengthen versus the euro in 2017, making Spanish property cheaper for you!

Peter Lavelle

Pure FX

By Peter Lavelle at foreign exchange