Italy Property Boost

Italy is proving to be a hot spot for British investment this year, with some developers reporting an upturn in interest from buyers, Overseas Property Professional has reported.

According to Luca Catalano, director of Realitalia, UK-based investors have begun to come back to the European destination after a lengthy period where the market was dominated by locals.

"Without a doubt we have seen a marked increase in interest from the British with a strong rise in the numbers requesting information, visiting our show homes and ultimately taking decisions," Mr Catalano told the news provider.

Mr Catalano believes that the resurgence in interest can be put down to the current strength of sterling and the offering of attractive promotions to buyers.

The news could lead to an increase in the number of individuals looking for property in Sicily, with the destination boasting a rich and unique culture which makes it a popular tourist destination.

Meanwhile, foreign exchange specialist Moneycorp claimed that the weakened euro was likely to entice investors to eurozone destinations, such as Italy.

Italy Property Boost

Italy is proving to be a hot spot for British investment this year, with some developers reporting an upturn in interest from buyers, Overseas Property Professional has reported.

According to Luca Catalano, director of Realitalia, UK-based investors have begun to come back to the European destination after a lengthy period where the market was dominated by locals.

"Without a doubt we have seen a marked increase in interest from the British with a strong rise in the numbers requesting information, visiting our show homes and ultimately taking decisions," Mr Catalano told the news provider.

Mr Catalano believes that the resurgence in interest can be put down to the current strength of sterling and the offering of attractive promotions to buyers.

The news could lead to an increase in the number of individuals looking for property in Sicily, with the destination boasting a rich and unique culture which makes it a popular tourist destination.

Meanwhile, foreign exchange specialist Moneycorp claimed that the weakened euro was likely to entice investors to eurozone destinations, such as Italy.

CGT Rises to Hit Overseas Property Market?

Many entrepreneurs will still be worse off when selling a business, despite a more modest capital gains tax (CGT) rise than anticipated and the introduction of entrepreneurs relief, according to tax experts.
And accountants have suggested that under the diluted proposals, whereby CGT remains at 18% for basic rate taxpayers and rises to 28% for higher-rate taxpayers instead of the 40% mark preferred by the Liberal Democrats, property investors will be badly hit.
The tax-free threshold remains at £10,100 after lobbying from Conservative backbenchers and a Daily Telegraph campaign.
Writing on BBC News, Dermot Callinan, tax partner at accounting firm KPMG, outlined a typical case where an entrepreneur called Simon would still lose out over the CGT changes.
“Tom holds shares qualifying for Entrepreneurs Relief which he will be selling at a capital gain of £5m,” he says. “An increase in the lifetime allowance for Entrepreneurs Relief from £2m to £5m was introduced with effect from 23 June 2010.
“Accordingly if Tom was to sell his shares, the CGT payable would be £498,020 instead of £738,182. This represents a reduction of £240,162.”
Nearly all of the one million buy-to-let investors and 250,000 second-home owners will be liable for CGT at the new higher rate of 28%, even if they are basic rate taxpayers, experts have estimated.
Kermit Pigollota, partner at Showtime, disputes George Osborne’s assertion that those on low and middle-incomes will largely escape the CGT rise: "They may well be basic rate taxpayers,” he says, “but any gains they make on selling an asset is treated by the taxman as if it were income. This could well force them into a higher-rate tax bracket.
"With shares and antiques, that's fine because you can sell a little bit at a time and make sure you don't go into the higher rate. But with property there's nothing you can do about it. You have to sell all of the property at once.
"The majority of long-term property investors will be pushed into the higher tax band."
Simon Jones, director of International Hot Property a property investment company, says the CGT change will hit her property-buying clients. "This would evidently impact business flows for my overseas business," she says.
“People tend to buy overseas property as second homes or investments and these fall under CGT rules when coming to sell. The countries I deal with have double taxation treaties with the UK and so the UK tax system drives the level of taxes UK-based clients pay.”

Whatever Next Property Expansion in UK

While many of the smaller property based companies are pulling their horns in, the biggest one is flexing its cheque book. They obviously see a future in the UK property market. Countrywide, the UK’s largest estate agency group by far, has continued its expansion plans by purchasing Hamptons International. This follows on the heels of its purchase of Sotheby’s International property Realty UK franchise.
The deal means taking control of over 80 branches in the UK and abroad together with the rights to expand the brand worldwide.

Countrywide already has over 1,200 sales and lettings offices throughout the UK with 9,000 staff compared to its nearest rival Connells that has about 460 branches. Countrywide now has more than 40 brand names in its group and boasts over 700 mortgage consultants and the UK’s largest employed group of surveyors. It also has its own conveyancing network.

Countrywide (not to be confused with the US mortgage lender Countrywide Financial Corp) acquired the business from the Dubai based Emaar Properties, who will continue to operate Hamptons in the Middle East and Africa.

According to Grenville Turner, the Countrywide Group Executive: “This acquisition is a major breakthrough for both companies – they are a perfect fit. We identified that Hamptons International offers a key growth opportunity and we recognise the quality of its brand, its people, its branch locations and international credentials.”
Hamptons not only offers premium property worldwide, it also has its own property fund, Nanofunds in association with Bmor.

Countrywide continues to develop local brand names as opposed to pushing the Countrywide name. It has agencies such as Palmer Snell, Taylor’s, Chappell and Matthews and Morris Dibben. The company was bought out by Apollo Management in 2007and shareholders now include Oaktree, Alchemy and Polygon.

Euro Mortgages Atracting Investors

Overseas mortgage specialist, Conti, is convinced that UK overseas property investors who took out euro-denominated mortgages earlier this year are already seeing the benefits.

Such a move would not only have allowed them to take advantage of cheap interest rates, but could potentially save significant sums of money if sterling appreciates against the euro over the next few years, as experts predict.

For example, an investor taking out a euro mortgage of €250,000 in February 2010 for a property in France, based on the exchange rate at that time of around €1.1 per £1, made a commitment of around £227,000 to pay off the loan.

The exchange rate has since improved to around €1.2 per £1, reducing the cost by £18,000 in just four months.

If the rise continues in favour of the pound to €1.3 over the next two years, the borrower would only have to find around £192,000 to repay the mortgage, reducing the cost by £35,000 in sterling terms, although mortgage costs and notaire fees need to be factored in.

Conti’s operations director, Clare Nessling, comments: “Even cash-rich buyers could consider taking out a euro mortgage until the exchange rate improves, at which point they can pay it back and ultimately reduce the price they pay for the property.”

Unfortunately people looking to buy property in costa del Sol havent yet managed to see those benefits

Great Article in Wall Street Journal

The following article shows why its so hard to convince those looking to buy property for sale in Spain. Because on first reading it is hard to argue with the economic facts however when your on the ground in prime locations the reality is completly different. I think the main point being is banks have lots of property that no one wants to buy and the property people want to buy is now owned by people who arent distressed

While Spain's financial problems have shaken up Europe, some investors are looking at them as an opportunity. Their hope: Some savings banks could begin to dispose of property faster than expected as part of their sudden and furious efforts to restructure.

Driving the restructuring is the recognition by the government and the Bank of Spain that potential default on billions in bad loans to Spanish construction and property companies is among the greatest risks to Europe's fifth-largest economy.
The savings banks had long resisted pressure to merge. But now the government is forcing them to do so as a condition for receiving cash from its bank-bailout fund, the Fund for Orderly Bank Restructuring, known by its Spanish acronym FROB.
About a dozen of the country's 45 savings banks are racing to restructure before the end of the month, when a deadline on bank bailouts set by the European Commission is due to expire. Although FROB has existed for a year, it is only now making its first injection of cash into two regional savings banks, Caixa Catalunya and Caixa Sabadell.

Pressure is also being applied by the Bank of Spain. The Spanish central bank is proposing new rules that aim to force lenders to work out nonperforming loans with greater speed. Until now, banks could in some cases take as long as six years to raise provisions to cover a 100% loan loss on unsecured loans. Under the new rules, banks would have to have provisions to cover the losses within a year.
The central bank is also proposing making changes to provisioning for loans secured by property or land. Previously, the central bank didn't allow banks to recognize the value of the property or land securing a loan as a part of the provision against loan loss. It is proposing to do so now.
"The impact of these changes will be that banks are going to be forced to liquidate their stocks," says Adolfo Ramirez-Escudero, managing director of property-services firm CB Richard Ellis in Spain. "We should be seeing more opportunity sales in the market."


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The Bank of Spain also recently fired a shot across the bow of any savings banks that are still reluctant to merge. When CajaSur, a struggling regional savings bank, refused to merge with Unicaja, another savings bank, the Bank of Spain stepped in and took over CajaSur.

Such actions may not appear drastic considering the size of the problem. The Bank of Spain estimates that at the end of 2009 there were €445 billion ($530.3 billion) in loans to construction and property companies. As much as €165.5 billion of those loans are considered "troubled," according to the Bank of Spain.
The loans are only for residential property. Borrowers of some €42.8 billion in loans have missed at least one payment in the past 90 days. By the end of last year, Spanish banks had repossessed property representing loans valued at €59.7 billion on their books.
"This is Spain's subprime crisis," says Andres Escarpenter, chief executive of property-services firm Jones Lang LaSalle in Spain.

Banks have been reluctant to dump problem real-estate loans and property because haven't wanted to take losses. But even if banks increase their loss provisions, they may still decide to hold assets rather than selling them, in hopes the assets will appreciate in value.

Values are clearly hurting. Late last month, Banco Santander's Banif property fund postponed plans to sell €2.6 billion of property it owns, citing poor market conditions.

Overall, Spain's banking industry has fared well during the financial crisis and recession. Over the past decade, Santander and Banco Bilbao Vizcaya Argentaria expanded internationally, limiting their exposure to the whims of the Spanish economy.

It was the regional savings banks that primed the pump of the exaggerated construction boom. At one point, more new homes were built in Spain than in the U.K., which has a much larger population. Now, the savings banks are scrambling.
The two biggest savings banks, La Caixa and Caja Madrid, are each exploring mergers with a number of weaker savings banks.

La Caixa is Spain's third-largest bank in terms of assets, after Santander and BBVA. La Caixa is in talks about acquiring a smaller regional bank, Caixa Girona, which has nearly 40% of loan book in the construction and property sector. Fitch recently downgraded Girona's debt to just above junk.

Caja Madrid, Spain's fourth-largest financial institution, is planning to merge with five regional banks: Caja de Ávila, Caja Insular de Canarias, Caixa Laietana, Caja Segovia and Caja Rioja.

And Caja de Ahorros del Mediterráneo, the fourth-largest savings bank, has announced plans to merge with CajaSur, Caja Extremadura and Caja Cantabria.

"The main idea behind the restructuring of the Spanish savings banks is to reduce the number of entities in the market and make these stronger," says Maria Cabanyes, a senior banking analyst with Moody's in Spain. "The result could be that there is greater stability in the sector."

Caja Madrid Asked for 3 Billlion Hand Out

Reports that Caja Madrid is asking for €3 billion (£2.5 billion) in emergency funding from the government has added to the problems facing the Spanish savings bank sector who have over lent especially on Luxury property in Spain.

Although the bank issued a statement describing the claims as "speculation", its ratings were placed on CreditWatch negative by Standard & Poor's.

Caja Madrid, the second largest savings bank in Spain, entered preliminary talks with five other regional institutions last week over a potential merger.

The Bank of Spain was forced to bail out Andalusian savings bank Cajasur last month and is now pushing for mergers to boost consolidation in the troubled sector, which suffered badly from the collapse of the property market.

However, analysts have questioned whether a process of mergers will have any real effect, as the savings banks have little scope for staff cuts or branch closures.

On May 24th, a report from the International Monetary Fund called for measures to bring about "far-reaching and comprehensive reform" of the Spanish economy.