Costa Tropcal info

The Credit Crunch

In Spain, the talk is all of unemployment - el paro - with unemployment at 14.4% and forecast to reach 20% before too long.

Spain has the highest unemployment in Europe with 3.3 million out of work at the moment,.

Yet the expats here in Spain are being hit hardest by UK policy actions, not the unemployment situation here.

With a large number of retired people from the U.K. living here, the effect of the credit crunch is dominated by the weak pound and the fall in interest rates in the U.K.

The pouring of money into the failing banks and businesses in the U.K. has only weakened sterling against the euro and other currencies.

The problem has been made worse by the Bank of England reducing the interest rate to nearly nothing.

Anyone who has a pension in the UK and then has it paid into a Spanish bank have seen a reduction of 30% in their income since the credit crunch began. Add this to the reduced interest on their savings and you can see why it is so difficult for people to balance their budgets here.

Having said all this there seems to be a glimmer of hope as the exchange rate at the beginning of the year was almost 1 euro to 1 G.B. pound, now 6 months on the exchange rate is now 1.18 euros to the pound.

Some more work needs to be done to improve the return on savings but I think people need to look further than the banks to invest their hard earned cash. 

Why sell your house in the U.K. when you can let it and get a much needed tax break.

If you still own a house in England that you haven't lived in for over three years, the increase in price over the last 3 years is exempt from capital gains tax.

Although the U.K. is still in the middle of the credit crunch you are still better off keeping your property there and letting it instead of selling it, as well as earning the rent you can also get some tax breaks.

If you are renting your old house to tennants then you could qualify for lettings relief.
Lettings relief applies to any time that your house in the U.K. was not your main residence regardless of the amount of time you have been absent.