If you are thinking of buying a property in Spain in the near future it´s certainly becoming an interesting market. The part that the fluctuating euro/sterling exchange rate is playing cannot be overlooked, the primary reasons being these:

-    the majority of Spanish property enquiries received by most of the popular portals and websites originate from prospective buyers based in the UK (and therefore likely to be buying in sterling).
-    The majority of vendors seeking to sell their properties in Spain are British, and most will therefore be seeking to repatriate the proceeds of their sales back into sterling.The fact that the majority of interest in property in Spain still originates from the UK clearly indicates that the Brits still have a desire to own a holiday home or property investment in Spain, particularly now that prices have dropped to such low figures.

Although Spanish property prices are at their lowest for several years in most of the popular areas, most Brits are reluctant to buy until their currency recovers some of its lost ground against the euro. Most Brits remember the heady days of 1 pound being worth almost 1.5 euros, and the thought of exchanging their hard-earned cash for a figure such as 1.10 euros, especially in such hard times, fills most of them with dread.

Of course, everything is relative. British buyers were queueing up in their droves 3 or 4 years ago to buy properties at a rate of 1.40 - a rate that is around 20% better that recent sterling/euro exchange rates. But it mustn´t be forgotten that property prices have also plummeted since those heady days, and in most cases prices have fallen by well in excess of 20%.

So in 2005, buyers would happily pay €300,000 for a property at a rate of 1.40 – equivalent to £214,286

But now, buyers are reluctant to pay €210,000 for the same property at a rate of 1.10 – equivalent to £190,909 – a net ´gain´ on the purchase price of over £23,000. Doesn´t this seem odd?

Certainly, European buyers have been quick to take advantage. Most agents on Spain´s Costa del Sol have reported brisk business in the last 3 months, with the majority of buyers coming from countries unaffected by the demise of sterling – places such as Belgium, the Netherlands, Russia, Poland (where the economy has actually benefited from growth in the last 12 months) and of course the Spanish themselves who, although in the grip of a hard recession, have been snapping up property bargains along their cherished costas.

Read more in Part 2