Round Town News

EVERYWHERE ONE looks, town centres, urbanisations and commercial centres are littered with empty business centres, with for sale and for rent signs adorning their doors. After the property boom years when new property agents, corner shops, pubs and restaurants all seemed to pop up on a weekly basis, the last four years have seen a global downturn in earnings and high unemployment with many families and businesspeople and fearing what the future will bring during this current crisis.

One local, popular restauranteur said “The first indication of a problem was the change in the Euro to Pound exchange rate, which for a lot of people made such a difference to the amount of their pensions, followed by a lot of scare mongering amongst the World’s media, which in effect stopped the economy. Everyone stopped spending; people held on to what they had because they were not sure what was going to happen.

Every week we look on as a steady number of local businesses close their doors. The problem that they are faced with is that whether they take any money or not, they still have the same overheads to pay, Electricity, Water, Gas, Social Security, Wages. IVA, Supplies, Advertising, Asesoria, (Lawyer), Rent, Rates, That is all before they can think about making any money! A very good friend of mine who runs a very popular restaurant said that one day last week she only took 11€ and as you can see from the list of overheads, it cost her a lot more to be open than she took. She also said she was not sure just how long she would be able to remain open as without the support of her clientele she has no cash flow left to put back into the restaurant to keep it open!”

The Spanish Government have remained bullish when it comes to the self-employed and are inflexible when it comes to demanding at least 250€ from them, whether or not they make this much each month! This also stops business owners employing part time staff, as they can’t afford to put them on contract and the wages make it not worth the while of workers that would like to work part time. Thus many business owners are forced to work seven days a week from morning till last thing at night to cut down on staff costs and then sleep evades them due to the worry of it all.

The message is clear. As our restauranteur says “Let’s be positive about our future; let’s get out there and support out local businesses even if only to have a cup of coffee or a sandwich or to buy a pint of milk, if not we are going to see an awful lot more closing during the coming months which is such a same as it only takes a little bit of help from us. If not we will lose in the long run as we will not have the choice of places to visit.”

THE CREDIT crunch started five years ago - instead of things getting better they have steadily become worse. In fact things are so bad the Eurozone is in chaos with the Euro on the brink of collapse and the global economy on the brink of a full blown recession.

The UK has suffered a double-dip recession and the economy is about 4% smaller than it was in the third quarter of 2007.  The FTSE 100 is still 8% lower than at its close on 9th August 2007 that is even after multiple rounds of central bank intervention and heavy doses of quantitative easing in the US and UK.

I think everyone around the world is asking how much longer can this go on, with the economies of the UK, US, Japan, Spain, France, Italy, Ireland, Greece, Portugal and now even Germany under pressure.
In Europe the ECB under Darghi’s leadership just lurches from one failure to another and seems unable or unwilling to do what is needed to stimulate growth and pull the Eurozone back from the edge and mass social unrest.

Even gloomier, Spain seems on the verge of asking for a full blown bailout closely followed by Italy: right now the yield on 10-year Spanish bonds is above 7% and the yield on 10-year Italian bonds is above 6% - those are unsustainable levels.

The only thing that is going to bring those bond yields down permanently to where they need to be is unlimited ECB intervention. But that is not going to happen without German permission.
An article in Der Spiegel recently described the slow motion bank run that is systematically ripping the Spanish banking system to shreds....

Capital outflows from Spain more than quadrupled in May to €41.3 billion ($50.7 billion) compared with May 2011, according to figures released on Tuesday by the Spanish central bank.
In the first five months of 2012, a total of €163 billion left the country, the figures indicate. During the same period a year earlier Spain recorded a net inflow of €14.6 billion.
If those numbers sound really bad to you, that is because they are really bad.

It looks like the authorities in Spain are starting to panic; it has imposed the following new capital restrictions during the last month alone....
•    A minimum fine of €10,000 for taxpayers who do not report their foreign accounts. Secondary fines of €5,000 for each additional account
•    No cash transactions greater than €2,500 - this applies to both individuals and businesses

What other restrictions are they going to impose in the months ahead?
At moment of truth is approaching for the Euro and the Eurozone and nobody is sure what is going to happen next.

It is crucial people look at where their savings are, and what currency and product they have, to see if they can make them more secure or work more efficiently.
Now more than ever taking independent advice regarding investments, pensions and savings has never been more important.  If you would like a free impartial financial review, or have any questions please don’t hesitate to contact me on 658 892 330: email This email address is being protected from spambots. You need JavaScript enabled to view it.  

The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity.
Blacktower Financial Management Ltd is licenced by the UK by the Financial Services Authority and is registered with both the DGS and CNMV. Blacktower Financial Management (Int) Ltd is licenced in Gibraltar by the Financial Services Commission (FSC) Licence No: 00805B and registered with the DGS in Spain.
 

THERE CAN be no denying that, as a consequence of the worldwide recession and ongoing uncertainty regarding the Euro-zone and associated bank issues, the current property market is both competitive and challenging. It is overwhelmingly a ‘buyer’s market’ which is one issue, the secondary issue being that the media-led perception that the market conditions are much worse than the reality; this is very misleading and very damaging in the short term.

At the same time, from a buyer’s perspective the current situation provides a very rare ‘window of opportunity’ to purchase a property at price levels which haven’t been seen for a number of years.
This situation will not last for long for the following reasons:

a)    The fundamental attractions of the area have not changed: fabulous weather, a great lifestyle, comprehensive and unstressed infrastructure (roads, parking, airports, healthcare, education, domestic services etc.).

b)    Underlying buyer demand (particularly in the Moraira, Benissa, Benitachell area) has continued to be relatively strong throughout the recession.

c)    The ‘must sell’ vendors were never too plentiful in our particular area – even during the worst of the downturn, and they have generally been bought out of the market now.  The remaining vendors are now becoming more resolute and are refusing offers which come in at the rude end of the spectrum.

d)    Many vendors have either removed their properties from the market or are delaying offering them for sale until the market picks up. Thankfully this is a self-prophesying situation and currently manifests itself by the fact that, having sold twenty properties so far this year, our biggest concern at SELECT Villas is replacing those sold properties with fresh stock of similar quality and value.

So, how do we arrest this stagnation and boost the market? This calls for collective responsibility, as follows:

AGENTS: Should value their property stock realistically and responsibly at prices which will attract viewings, then hopefully offers and sales.

VENDORS: Should only offer their property for sale if they are serious about selling, seek out and listen to professional advice, and realistically price their property accordingly.

BUYERS: Need to also seek out professional advice and guidance in order to differentiate between cheapness and sound value. In many instances, better deals can be achieved with 5-10% off a sensible asking price, rather than a headline grabbing 20-25% off a stupidly inflated one. Some naïve buyers must learn that the %age off any asking price is a very crude and unreliable assessment of value!

MEDIA: Locally – We all know ‘Shock Horror’ disaster headlines sell papers, but during these economic difficulties why can’t the local media support the community that feeds them and quote more positive local headlines, rather than the typical Brit negativity, week in, week out?

Once again, it’s a call for collective responsibility!

www.select-villas.es             

STERLING BEGAN to slide in value against the euro on Wednesday morning immediately after shock economic figures showed the UK was officially back in recession.

Markets hoped the Gross Domestic Product for the first quarter of 2012 would show a slight positive growth  – unfortunately the important preliminary statistics revealed 0.2% of negative growth, following a 0.3% decline in the final quarter of 2011 – and technically putting Britain in double dip recession.

Sterling had reached a 21 month high in value against the euro at 1.225 and foreign exchange specialists Moneycorp said it triggered “a flurry of activity” from clients cashing in on its strength against the single currency.

The bad news immediately ended sterling’s strong performance and its value fell to 1.217 by mid-morning.  Moneycorp’s private client dealing manager and market analyst David Kerns believes the “very, very weak figures” would continue to put pressure on the pound.

And he added a major concern was the coming three months when people would enjoy bank holidays and the Queen’s Diamond Jubilee celebrations. “That means the economy in the UK will not be working and I have a funny feeling that not only are we in double dip recession but it could follow through into the second quarter.
Mervyn King, the governor of the Bank of England, said he was hopeful for the first quarter but was extremely pessimistic for the second.

SLOW DOWN
“I am not expecting a sterling collapse but it may be we return to the 1.18 to 1.22 level and things begin to slow down.”
However, David said the Eurozone was also covered by a blanket of recession and in a state of flux as political rather than economic factors were affecting member states – at the forefront important elections in France and Greece, with Germany going to the polls next year.

He said changes in leadership could have dramatic results. The German led austerity measures across the single currency nations were extremely unpopular and regime change might mean governments deciding they did not wish to stick to agreed deficit targets.

“It is a very hard one to call. They may want to drive economic growth, which could be positive – austerity alone does not drive growth and it might be good for a bit of a rethink.”
Until the GDP results were announced, he said sterling had been climbing against the euro, “a big move up which has been very nice for clients selling pounds and buying euros.”
David said the earlier “surge” in sterling’s value had been triggered by a fall in overall inflation – despite a hike in petrol, oil, and energy costs – while the Bank of England’s monetary policy committee had decided not to introduce a further round of Quantative Easing, because of worries about inflationary pressures.

WEAKNESS
“QE is seen as a weakness in any particular currency,” he explained. “So the decision not to call for additional QE was like a red rag to a bull, pushing sterling higher.”
Further, there had been a “surprise” fall in UK unemployment figures, the unexpected positive sign also causing the value of the pound to climb.

Consumer spending had remained erratic, with a retail sales bounce, despite confidence and spending power limited. “That was slightly skewed by the panic petrol buying on the back of David Cameron’s ill advice that consumers should go and fill up jerry cans because of the threat of a tanker driver strike.”

Reductions in the UK government borrowing requirement had also been on target for 2011/12. “That was good news and clearly heading in the right direction.”
However, he said negative GDP figures meant it more likely QE would be introduced, the next borrowing target was more likely to be missed and the credit agencies would become more “vocal” with the potential the UK would be downgraded.

“This means the exchange rate against the euro will drift lower. If we had been given a positive figure on Wednesday morning, sterling would have been stronger.”

Smart businesses know that they are only as good as the people they employ. This is never more important than in a sales environment. The problem is, sales positions on the Costa Blanca tend to be commission only and as a result, staff tend to be more transient. Why are they transient? Because they are usually not trained in sales and they cannot earn enough money to survive.

Unwelcome as a recession may be, it should spell long term success for businesses that embrace the opportunity to run a tighter ship in terms of basic management disciplines. Declines in consumer confidence and decreased sales threaten all businesses, but small businesses are particularly vulnerable as they often don’t have the reserves to help them weather difficult times.