Expert who may have got property figures right...

Governments and so-called experts have opinions and hunches but often are proved wrong within a short space of time – as shown by the fantasy budget produced by the McBroon Government in the UK and trashed by latest GDP figures, clever economists and the IMF concerns on the UK economy.

That got many Brits thinking about the dark years promised under the McBroons and the decades of high taxes to balance the books. Many of them made the obvious ontrast with living in a sunnier place with a brighter future, such as Spain. This, despite UK media reports on Brit pensioners stretched on their UK pensions paid in Spain.

Strangely the coverage didn’t include any criticism of the McBroon’s financial mismanagement and wrecking the once-strong sterling exchange rate and devaluing the pension by 45 percent or a net 16 percent allowing for lower living costs in Spain and the mortgage repayments that are now effectively lower. Mortgage interest in Spain has gone from rates of 6.25% in September to 3.25% today.

Gonzalo Bernardos, a professor of economics at the University of Barcelona believes that demand for property is tempered by the cost of mortgage borrowing. With interest rates declining, the clever prof. expects sales to pick up.

'There is a fundamental variable. People buy homes in response to mortgage costs, which have gone from rates of 6.25% in September to 3.25% today. We are talking, in general terms, of a fall in mortgage repayments of 40%,' he explained.

Likewise, property values have fallen by up 40% and the savvy buyer can find plenty of good bargains in prime locations. We are not talking “cheap”, but good value homes that can be expected to grow in value over three to five years of happy family holidays, rental income or fulltime living for the buyer.

So 40% lower price property, funded by 40% lower mortgage repayments, located in a country with 30% lower living costs is a formula that many McBrooned-off Brits will applying to their own finances and family aspirations.

Professor Bernardos believes that there will be more property sales in 2009 than there were in 2008. He lists five reasons why this is likely:

Lower interest rates, property prices now at 2003 levels, Spanish banks lending more, the return of property investors attracted by the bargains, and many people who were thinking of renting deciding to buy instead using the low mortgage rates.

However, the window of opportunity is short as “Sales will start to rise in 2009, whilst prices will stop falling in most places in Spain by the end of 2010,' he said.