January 30th, 2015

Having previously
covered the concerns many owners of Spanish properties express regarding the
level of Spanish bank charges, it has been recommended that the issue of
Foreign Exchange (FX) should also be specifically mentioned.

The current weakness
of the Euro currency is fueling interest in the Spanish property market, where-
even with the currency issue on one side- prices in many areas remain
attractively low.

However, the converse
of this happy consequence of Euro weakness for inward investors, is that
sellers of Spanish properties wishing to repatriate funds to their countries
outside the Eurozone, are facing unattractive exchange rates- which can impact
strongly on final returns from Spanish property sales.

But an important (and
potentially very costly) issue which faces all individuals coming into or going
out of the Euro currency is often overlooked. This is the process and cost of
FX- particularly in the context of larger transactions, e.g. buying and selling
properties. It comes as a shock to many, to find that the total cost of a High
Street bank to High Street bank transfer where currency changes between Euros
and Sterling (for example) can be as high as 5%. That is a 5% ‘loss’ to the
individual making the transfer!

And a significant
proportion of this cost represents the banks’ profit in the FX trade. Indeed,
several major banks make a point of emphasising their free or low cost
electronic transfers in and out of the Eurozone- superficially making this
option appear to be economical. However, as the real profit for the bank is in
the FX trade itself, the relatively tiny cost to the bank of the actual
electronic transfer is of no real consequence in larger transactions.

It is therefore
advisable before committing to an FX transaction, to be absolutely clear (based
on comparing the actual amount debited from your account in one country; to the
final net amount which will be credited to your account in another and
considering official FX rates) as to the cost to you of the FX transaction.
This also enables a like for like comparison between the cost of your High
Street bank to High Street bank transfer; and the deal offered by an
independent FX specialist.

Of course, before
engaging an independent FX specialist to save money on the FX trade, it is
essential to be assured of the legal and regulatory standing of the FX
specialist in question, to avoid the obvious risks and pitfalls.

But professionals
engaged in transactions in Spain for foreign nationals where there are
frequently FX requirements, will generally be able to recommend a pre-vetted
independent FX specialist, to assist in minimising the otherwise hidden costs
in the FX process.

Please speak to us at
Legal 4 Spain when considering a sale or purchase of a Spanish property- or if
you have any FX requirement- as this is an area we will be able to assist, to
protect your interests fully; but always at a competitive rate.