The pound in your pocket

[Gary/Gaynor]

Just noted on Bloomberg the Euro is now 84.32 to the pound imagine tourist rates will be a lot worse. Does anyone out there think it may reach parity.. Mind you I think there are a lot of currencies trying to outrace each other to the bottom. The man at the BOE seems to be doing a good job of talking it down though. The average pint in my local is 5 euros which is about 4 pounds 30 that must be dearer than London !!

Makes you think..

Gary

[Gazza]

Gary,

USD / Euro more likely to hit parity before GBP/ Euro....

BR

Gary

[SAM SPARKLE]

Just noted on Bloomberg the Euro is now 84.32 to the pound imagine tourist rates will be a lot worse. Does anyone out there think it may reach parity.. Mind you I think there are a lot of currencies trying to outrace each other to the bottom. The man at the BOE seems to be doing a good job of talking it down though. The average pint in my local is 5 euros which is about 4 pounds 30 that must be dearer than London !!

Makes you think..

Gary

You can still get a pint for less than 5 euros Gary but only just, I was at Newmarket a couple of weeks ago, a pint of Guinness was GBP 3.90 and that was in the Owners and Trainers bar, when I put my empty glass on the bar the barman asked if I wanted another round, I said, I'll have to go out and back another winner to afford those prices.

[cereza]

Gazza - think that is wishful thinking ! the pound is the weakest of the major world currencies due to the fact that the UK is in the worst position to withstand recession and will have to further slash interest rates. Browns idea to spend more means borrowing more which will only exacerbate the position. Euro parity with the Pound is a realistic possibility I regret to say in my opinion.

[pato]

Well! Well! I surely recall twelve months ago Mr Brown boasting in the house about the strength of our economy and that it was the strongest in Europe I know, having information from a friend who was working in finance in Germany eight years ago, that the German economy was in dire straights and that they couldn't handle the situation, what happened there?

[ceh]

Having bought a property near cvo almost 2 years, when I got close to 1.49 to the pound, periodically transferring money to my account in portugal to carry out works is getting increasingly painful. Thankfully I moved some money a few weeks back which cushions the pain but only slightly.

At this rate of fall and with further cuts in interest forecast I think it will reach parity.

[bazza]

Parity, Pound to Euro!!! Now wouldnt that be a good thing for the politicians who want UK to adopt the Euro !!!!!!!!!!

[SJ & RE]

Well done Bazza for saying what a lot of us knew

[cereza]

Spot on bazza. Mervyn King at the bank of england has not missed a chance to talk sterling down - it looks like a planned strategy to devalue sterling possibly in an attempt to boost exports but the problem there is that every other country has their own problem and may not want to buy our goods anyway but the underlying fear is that this is a chance for the left to further the UKs adoption of the euro. The big danger is that once you undermine the currency it will be very difficult to support it at the time of your own choosing and it may go into freefall.

[Gazza]

Cereza - I think your points are well made and King has for sure made some strong statements on GBP, but in these markets with most economies in or about to enter recession, intervention in the currency markets is a dangerous game. Eurozone rates are strongly tipped to fall by a further 50 bps in Dec and fall further to 2 in early 2009. Brown is indicating addtional cuts in the short term, and the US have seen rates drop from 4.5 to 1 this year alone. Factor in the the US's change of policy on the use of the $700 bio bail out fund to clear toxic debt off of their Banks' balance sheets, the euphioria of Obama's victory already faded, and you have the ingredients for very choppy currency markets over the coming months. This is quite often the case after extreme volitility in equity markets.


G

[cereza]

Mainly agree with your points Gazza but personally I don't think equitiy markets will calm down for some time yet nor commodities and currencies. I agree that Euro rates will have to drop just as in every other zone but the ECB will do it in a more gentle way as they are more concerned with inflation than the others. In my humble opinion the Bank of England is no longer the "independent" voice that it is supposed to be. To me the last 1-5 % drop in interest rates smacked of political intervention by Brown and this will continue. I believe that Brown has seen his ratings rise and sees a chance here for him to look better than at any time since the start of his tenure. For this reason I believe that he intends to cut interest rates sharply and also cut taxes - these movements along with reduced prices for petrol and energy will give a feel good factor for 2009 and he will call a general election because he knows that if he waits until 2010 the economy will be in dire straits and he would sufffer a humiliating defeat then. With all of this in mind I can only see Sterling weakening further against the euro which will hit me hard just the same as other British owners of property in Euroland. The sad thing is that that this will adversely affect the economy in the Algarve as Brits cut back their spending. I do hope that my theory is wrong but my head must rule my heart.

[cereza]

Just about 1 month has passed since this topic was active and I am sorry to say that pound/euro parity has almost arrived in rapid time. The business rate dipped below 1-05 today which means parity at best for tourist rates ! The euro is extremely strong - even pushing towards 1-5 to the US Dollar!,
Visits to virtually anywhere on mainland europe now are extremely expensive for UK tourists resulting in them staying at home or not spending if they do travel on pre-booked trips. I live in Kent and I know that busnesses in the Calais area are suffering badly. Things are bad enough in the UK itself so why would anyone want to buy in euroland at this exchange rate?
The prospects for the Algarve for 2009 have to be bad as far as UK tourists are concerned. Hopefully some slack may be taken up by tourists from other mainland countries but in view of the expected recession there this cannot be relied on.
I think that the pound may recover a little in 2009 as the ECB is obliged to also reduce interest rates but the damage has been done and rates would have to go back to above 1-30 before any confidence returns to British tourists. Consumer confidence is a huge factor now - no previous recession has received such media coverage and Brown & Darlings borrowing splurge will not be enough to bring a quick fix. Regretfully I believe that we will have to suffer a couple of very difficult years.
I very much hope that businesses on the Algarve will resist the temptation to increase prices in an attempt to protect profit margins - their best hope is to sharply reduce prices and profit margins and try to maintain turnover to survive.
I fear that the mainstream Algarve property market will suffer badly and that many estate agencies will disappear in 2009.
The name of the game is survival now - realise as much cash as possible and hunker down until the new dawn arrives.

[Bruce Wallis]

I think your concerns for the Algarve economy are well founded.
I am certainly reviewing my costs that didnt seem to matter too much at 1:40 to the pound.
People I have spoken to are certainly reviewing their management costs.
Suddenly the notion of paying an even well loved maid 13 months money +NI for effectively 7 months work doesnt seem to make economic sense.

I have spoken to my management company, and we will be meeting in February to review costs.
My private research on this forum tends to suggest that some owners could well benefit from getting alternative quotes for management. They could be surprised. I am surprised at the level of charges that at least one company I have heard of are getting away with.

There will be some sort of a knock on for restaurants. We normally eat out 6 out of 7 nights. We intend to reduce that down to maybe 2 out of 7 on our next visit.
If that attitude is reflected fairly generally, then that will represent a significant reduction in winter and spring business in the restaurants.

There is a school of thought that suggests that Carvoeiros villa rental business may not suffer too much in 2009.
The rationale behind that is most rental charges are set in sterling, and therefore dont reflect the falling value of the pound relative to the euro. We absorb the loss in terms of effectively reduced revenue from Sterling based charging.

Not being snobbish, but most of our clientelle is in the upper socio-economic groupings, who may not be quite so exposed to the problems, (unless they work in the finance sector!)
The other suggestion is that people who tend to holiday long haul, may lower their sights, and we may appear as an attractive alternative.

My hope is that by reviewing costbase, and improving advertising, we will weather the storm.

Having taken those steps........we can then revert to praying for a slump in the value of the euro

[tricky]

I'm finding it really difficult cleaning the kitchen floor with both fingers and toes crossed

[destroyer]

Not being snobbish, but most of our clientelle is in the upper socio-economic groupings

...... and might be expected to know how to spell clientele!