Like thousands of other British expatriates, Bob Puddicombe and his wife, Phyllis, found that their retirement dreams of a place in the sun turned into a nightmare following the financial crash.
After 13 years living in the south of Spain, the couple returned home in 2012. Their three-bed villa in Almayate, near Malaga, was initially on the market for €250,000 (£206,000). It eventually sold for just €87,000 (£71,500). They have moved back to the Plymouth area, where they lived before moving to Spain.
Mr Puddicombe, who is nearing 70, said they decided to return to the UK as they were getting older and wanted the security of the NHS. But at the same time the adverse exchange rate has hammered the value of their pension in recent years.
"At least we were able to sell, and have used the proceeds to buy an ex-council house back in Britain," he said.
But many of the friends the Puddicombes left behind have not been so fortunate.
Property prices have continued to fall in many parts of southern Europe, particularly the popular and overdeveloped coastal regions of Spain, where the supply of holiday villas now outstrips demand.
House prices in Spain have fallen by more than 30pc since the crisis, with prices in some resorts plummeting by up to 70pc. At the same time, house prices have risen sharply in many parts of the UK in the past two years. This has had the devastating effect of pricing some returning expats out of the British housing market, making the return home costly or impossible.
To make matters worse, many are expecting that the pound will continue to strengthen against the euro in the next few years. While this will give some relief to those receiving a fixed income, such as a pension, from Britain, it means those selling properties to return home will find the sale price is exchanged for fewer pounds when they arrive.
Edward Knox, an analyst at currency brokers Caxton FX, said that this, in part, explained the sudden rush of expats returning to Britain. Figures published last week showed almost 90,000 Britons left Spain in 2013 - a 23pc reduction in British expatriate numbers in the country.
"Many may have been holding on, hoping property prices would recover," Mr Knox said. "But now they face the double whammy of prices falling and a weaker euro. Not surprisingly, many are opting to get out now before the situation gets worse."
Geoffrey Sword: 'We loved Andalusia, but it started to change'
This exodus is also being driven by demographics. There was a significant spike in the number of people retiring to Europe in the early 2000s, when mortgages were easy to arrange and the cost of living abroad was cheap. These pensioners are now heading into their late 70s, and are more likely to suffer imperfect health or to have lost a partner. Although free health care is available in countries such as Spain, it can be more limited, and there can be language issues for those who have only conversational Spanish.
Mark Bodega, a director of currency broker HiFX, said: "Many expats moved abroad seeking warmer weather along with a more relaxed lifestyle. Unfortunately, the Spain of several years ago - when the economy was thriving, jobs were relatively easy to obtain and the cost of living was cheap - is fast disappearing."
The flight is not confined to expats, either. Many with holiday homes are also selling up, which is acting as a further brake on property prices. Geoffrey Sword, from Bury in Lancashire, recently sold his holiday apartment in Calahonda in Andalusia after owning it for 12 years.
He and his wife, Kay, had enjoyed more than a decade of "fantastic holidays" with their family and friends, such as Margaret Brown (pictured above with the couple) but he has become "disillusioned" by the state of affairs in Spain.
"Everything has got a lot more expensive, from the parking tickets to a game of golf," Mr Sword said. He believes the introductions of higher rates, fines, sewerage fees and other costs are more to do with raising revenue than maintaining standards. "There isn't the same laidback atmosphere," he said. "There are so many add-ons, it seems as though they want to drive tourists away, not keep them, and it's becoming more difficult to enjoy."
His apartment took two years to sell and had to be reduced from €195,000 (£160,500) to €139,000 (£114,300). Mr Sword was dismayed by the additional charges, fees and taxes he had to pay to complete the sale. "Even now there is 3pc of the sale price in our Spanish bank, as I had to leave some in case it was needed to cover any unpaid taxes we didn't know about. I still have no idea when we might be able to transfer the funds back to the UK."
Exchange rates
For many expats, living costs have rocketed. It is less that prices have gone up - at present inflation in the eurozone stands at 0.5pc and 1pc in Spain - and more that the exchange rate has swung, In April 2007, €1 was worth about 67p. This meant each £100 of your pension would convert into €149, before fees. Expats who had been in Spain for a decade more enjoyed even better rates. In 2000, each £100 of pension delivered €170.
Today €1 is worth around 82p. So the same £100 of pension gives just €121. "In other words, expats have lost almost a quarter of their income in the past seven years," Mr Bodega said.
But the pound has rallied against the euro in recent months. This trend looks likely to continue, according to foreign exchange brokers, due to the strong economic recovery in the UK.
By contrast, many southern European states are still struggling economically, with unemployment at 26pc in Spain. This, coupled with low inflation, is likely to further weaken the euro against the pound.
Mr Bodega said he expected the pound to be worth almost €1.30 by the end of the year. While this should bring some relief for expats who are surviving on a British pension, it will hit those who are selling up and moving home.
Many Spanish banks, which were happy to grant mortgages to British buyers in the boom years, are now calling in debts. This has trapped buyers who can no longer meet mortgage payments - perhaps because they cannot find work or their pension no longer covers the repayments in euros - since they are unable to sell the property to cover the debt.
Some properties are being repossessed and sold on by the Spanish banks at knockdown prices. This is making it harder for those looking to sell to get a decent return on their investment, particularly if the pound continues to strengthen against the euro.
Property prices have continued to fall in many parts of southern Europe, particularly the popular and overdeveloped coastal regions of Spain, where the supply of holiday villas now outstrips demand.
House prices in Spain have fallen by more than 30pc since the crisis, with prices in some resorts plummeting by up to 70pc. At the same time, house prices have risen sharply in many parts of the UK in the past two years. This has had the devastating effect of pricing some returning expats out of the British housing market, making the return home costly or impossible.
To make matters worse, many are expecting that the pound will continue to strengthen against the euro in the next few years. While this will give some relief to those receiving a fixed income, such as a pension, from Britain, it means those selling properties to return home will find the sale price is exchanged for fewer pounds when they arrive.
Edward Knox, an analyst at currency brokers Caxton FX, said that this, in part, explained the sudden rush of expats returning to Britain. Figures published last week showed almost 90,000 Britons left Spain in 2013 - a 23pc reduction in British expatriate numbers in the country.
"Many may have been holding on, hoping property prices would recover," Mr Knox said. "But now they face the double whammy of prices falling and a weaker euro. Not surprisingly, many are opting to get out now before the situation gets worse."
Geoffrey Sword: 'We loved Andalusia, but it started to change'
This exodus is also being driven by demographics. There was a significant spike in the number of people retiring to Europe in the early 2000s, when mortgages were easy to arrange and the cost of living abroad was cheap. These pensioners are now heading into their late 70s, and are more likely to suffer imperfect health or to have lost a partner. Although free health care is available in countries such as Spain, it can be more limited, and there can be language issues for those who have only conversational Spanish.
Mark Bodega, a director of currency broker HiFX, said: "Many expats moved abroad seeking warmer weather along with a more relaxed lifestyle. Unfortunately, the Spain of several years ago - when the economy was thriving, jobs were relatively easy to obtain and the cost of living was cheap - is fast disappearing."
The flight is not confined to expats, either. Many with holiday homes are also selling up, which is acting as a further brake on property prices. Geoffrey Sword, from Bury in Lancashire, recently sold his holiday apartment in Calahonda in Andalusia after owning it for 12 years.
He and his wife, Kay, had enjoyed more than a decade of "fantastic holidays" with their family and friends, such as Margaret Brown (pictured above with the couple) but he has become "disillusioned" by the state of affairs in Spain.
"Everything has got a lot more expensive, from the parking tickets to a game of golf," Mr Sword said. He believes the introductions of higher rates, fines, sewerage fees and other costs are more to do with raising revenue than maintaining standards. "There isn't the same laidback atmosphere," he said. "There are so many add-ons, it seems as though they want to drive tourists away, not keep them, and it's becoming more difficult to enjoy."
His apartment took two years to sell and had to be reduced from €195,000 (£160,500) to €139,000 (£114,300). Mr Sword was dismayed by the additional charges, fees and taxes he had to pay to complete the sale. "Even now there is 3pc of the sale price in our Spanish bank, as I had to leave some in case it was needed to cover any unpaid taxes we didn't know about. I still have no idea when we might be able to transfer the funds back to the UK."
Exchange rates
For many expats, living costs have rocketed. It is less that prices have gone up - at present inflation in the eurozone stands at 0.5pc and 1pc in Spain - and more that the exchange rate has swung, In April 2007, €1 was worth about 67p. This meant each £100 of your pension would convert into €149, before fees. Expats who had been in Spain for a decade more enjoyed even better rates. In 2000, each £100 of pension delivered €170.
Today €1 is worth around 82p. So the same £100 of pension gives just €121. "In other words, expats have lost almost a quarter of their income in the past seven years," Mr Bodega said.
But the pound has rallied against the euro in recent months. This trend looks likely to continue, according to foreign exchange brokers, due to the strong economic recovery in the UK.
By contrast, many southern European states are still struggling economically, with unemployment at 26pc in Spain. This, coupled with low inflation, is likely to further weaken the euro against the pound.
Mr Bodega said he expected the pound to be worth almost €1.30 by the end of the year. While this should bring some relief for expats who are surviving on a British pension, it will hit those who are selling up and moving home.
Property prices
The economic problems in many European countries have dented property prices. This is particularly true in Spain, where a construction and credit boom before the financial crash has ground to a halt. As a result, house prices have slumped. Prices are down 30pc since 2007, according to the Bank of Spain. They are still falling by up to 14.5pc a year, with the coastal regions popular with British and other international buyers recording some of the biggest falls, according to Sociedad de Tasación, a surveyor.Many Spanish banks, which were happy to grant mortgages to British buyers in the boom years, are now calling in debts. This has trapped buyers who can no longer meet mortgage payments - perhaps because they cannot find work or their pension no longer covers the repayments in euros - since they are unable to sell the property to cover the debt.
Some properties are being repossessed and sold on by the Spanish banks at knockdown prices. This is making it harder for those looking to sell to get a decent return on their investment, particularly if the pound continues to strengthen against the euro.
Advice for Britons selling property in Spain
• Get legal and tax advice, and set a realistic price based on values of similar properties sold recently, rather than the price you think it merits.• Remember you need to pay solicitor and notary costs. Get an independent abogado (solicitor). If you are not living in Spain, you can give your solicitor "power of attorney", potentially saving you time and money.
• Sign the arras/contrato privado de compraventa (preagreement contract). This should include the agreed selling price, what is included and the date for the final payment. Don't forget to include conditions in the contract (e.g. financing, survey results, planning). When the arras is signed, a deposit of around 10pc (paid in euros) will normally follow. If the buyer pulls out, they will lose the deposit, but more importantly, if you pull out you will have to pay twice the deposit back.
• Consider how you will transfer the proceeds of the sale back to the UK. Compare exchange rates and fees offered by your Spanish or UK bank with specialist currency brokers. Many claim to be able to save you up to 4pc on exchange rates alone.
• If you are worried about the pound strengthening further, consider a forward contract, which allows you to fix the exchange rate for up to 12 months. Mr Bodega said: "You'd never buy a property in the UK without knowing the final cost. But if you buy or sell a property overseas and don't fix the exchange rate, that's exactly the gamble you're taking. For those on tight budgets, this could result in some sleepless nights."
From the Telegraph
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