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One kind of hangover is enough………

By Chris Webb - Topics: Financial Planning, Madrid, Spain
This article is published on: 2nd December 2019

02.12.19

If you´re anything like me, you´ll be busy planning Christmas. Anything from where to see the best festive displays in Madrid, to trying to get your family EVERYTHING they want.

Christmas is an exciting time of the year for all of us. As a parent I still love that my children think Santa will make a personal appearance to our house and that he will be parking his sleigh right in the back garden (I have some doubts that they´re now just stringing me along, but I will continue to enjoy it while I can).

We´re all busy fitting in lots of social occasions, handing out gifts and cards and trying to squeeze in a party or two. However, there is also a serious side to the festive season: it’s very easy to overspend and overindulge and end up paying for it well into the new year.

Statistics show that most of us use credit cards to fund Christmas present purchases and to attend occasions we might not normally attend. Unfortunately, many people have problems paying back that debt after Christmas.

I have put together some tips to make sure you start 2020 on the right financial foot, and hopefully this will help you get through the festive season without a financial hangover.

1. Plan your shopping
Always write a list! My wife will laugh aloud at this as I am useless at writing lists BUT it is one of the most important things to do. Never just hit the shops; always write a list of who you want to buy for, an idea of what you want to buy and how much you want to spend. Without your list you´ll shop aimlessly and make purchases on a whim. You´ll lose track of your budget and spend unnecessarily.

Planning and making a list also means you can do some internet research to see what shops have the best sales, or if you could buy the gift online cheaper and save some money.
Research shows that people spend more than they can really afford on Christmas presents each year and end up with a credit card debt they didn’t anticipate after the ¨silly season¨ ends, so it is important to plan and make sure you know how much you can afford to spend.

2. Establish some ground rules
This is an important tip. Too many people get caught up gift giving. It’s nice to give and receive gifts, but it’s helpful to have ground rules. Have the conversation up front with family and friends to make sure everyone is on the same page. Agree on spending limits and who you will and won’t be buying for. This avoids offending anyone or any awkward moments at the Christmas table.

Being part of a big family, we decided to make it about the kids. If we didn’t it would mean buying a lot more presents and spending a whole lot more. When the whole family do get together for Christmas, which is rare due to the geographical situation of our family, then we do a Secret Santa for the adults where limits are set so everyone is on the same page.

3. Focus on personal value rather than financial value
All too often, people get caught up in spending money on gifts at Christmas and focusing on the financial value of those purchases. Instead, focus on the personal value.

From my own experience, I´ve had many a ¨nice¨ item bought for me, but the one present that means more to me than anything else is a framed picture where my kids used their hand prints to make a picture of two robins sitting in a tree (it has a very personal meaning). It has pride of place in my office and is appreciated far more than anything new, shiny or tech related.

Remember, it’s the thought that counts.

4. Avoid the financial hangover of festive season events
Festive season events can cause more than one hangover and let´s be honest, we don’t really enjoy any hangover.

Additional and sometimes unexpected events can really hurt the finances, as we never tend to factor them in to our regular spending habit´s but everyone thinks it’s ok to do it because it’s Christmas. Its amazing how these additional costs add up. Tickets to events, food & drinks, transport, new outfits…the list goes on and on.

If you are planning on being a social animal, think about the event before you go. Plan your whole evening and understand the whole cost of the event, not just the ticket price.

If your budget is a bit tight, be selective and choose the events you can afford to go to. You don’t have to go to everything. Don’t be pressured into attending something just because it’s Christmas. And remember, it’s ok to say no and you don’t need a new outfit for every event!

Finally, if you´re the host don’t be afraid to ask people to bring something to share. Whenever we plan an event, we always ask people to either bring a plate or bring a bottle. People are more than happy to help and generally aren’t expecting a free ride.

5. Make room for the new by getting rid of the old
This is probably more important when kids are involved. Why? Because they seem to have everything already and as they get older it becomes a struggle to know what to buy them. Generally, kids are going to get a lot of gifts. If you have children, you´ll know exactly what I mean. Don’t be afraid to ask them what they don’t play with anymore or what they don’t want anymore.

Look to see what you can dispose of. That’s a harder job before Christmas but can help financially if you can offload unused toys to offset new toys. I had this exact conversation with my daughter, Christmas 2018. All she wanted was a new iPhone, so after first agreeing with the wife to splash out on a new model, we then agreed that the old one was ours to do what we wanted with. A quick online sale gave us €200 which made the new purchase a lot less painful.

We also donate some items to charity; whilst that doesn’t help us financially, it makes a huge difference to others.

6. January sales
Post-Christmas sales can be a great opportunity to get a bargain, but they can also be a good opportunity to get sucked in and enhance the Christmas hangover. Do you really need to go out splurging cash just because there´s a sale? If so, then it’s important to go into the sales with a plan, just like in tip 1. Have a list of what you need so that when you go to the sales you go looking for specific things.

And remember, if you’re planning on hitting the shops with your credit card, you have already put pressure on that pre-Christmas.

7. Survive the school holidays with budget-friendly activities
This is important throughout the year but is still a big part of the silly season. Kids are about to start school holidays and it’s important to budget for entertaining them during that time.

There are so many free things to do with kids in and around Madrid. Most of this can be researched online and within our many local Facebook groups. You don’t need to spend a fortune. We´re lucky enough to have some fantastic parks nearby, some amazing countryside within a short drive and all at no cost.

Planning is crucial. If you plan the money you have available for the period it needs to last, you are less likely to feel the strain of not having enough money.

No Financial Hangover!

8. Plan now for 2020
Planning for 2020 and next Christmas is very important. Talk to your family early about the plan for next year and get the ball rolling straight away so you can be prepared well in advance. Plan birthday and Christmas presents so you can buy in advance and save spending more on less just because it was last minute.

The most important thing to take away from all our tips is to PLAN. Planning plays an important part in being in control of your finances and aware of what you can afford and how much you are spending.

I make no apologies for writing a sensible guide to avoiding the Christmas hangover. Most of us are too focused on the here and now, ensuring we have a great time, only looking at the implications of that good time when the bills start to roll in come January. I hope this will help you to enjoy the festive season, allow you to spend what is right and celebrate without any financial regrets.

Wishing you all a great Christmas and a prosperous New Year!

To book your personal financial review call me on 639118185 or drop me an email at chris.webb@spectrum-ifa.com

Arts Society de La Frontera event

By Charles Hutchinson - Topics: Costa del Sol, Events, Spain
This article is published on: 27th November 2019

27.11.19

The Spectrum IFA Group again co-sponsored an excellent Arts Society de La Frontera lecture on 20th November at the San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving Advisers, Charles Hutchinson, who attended along with our co-sponsors Prudential International in the form of George Forsythe.

The Arts Society is a leading global Arts charity which opens up the world of the arts through a network of local societies (such as in Spain) and national events throughout the world.

With inspiring monthly lectures given by some of the UK’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.

At this event, over 120 attendees were entertained by a talk on Stolen Masterpieces: The Most Sensational Art Thefts in History by Shauna Isaacs who is one of the UK’s top experts in this field. She gave an excellent lecture revealing to us the history and reasons behind great art thefts. She is also a particular expert in the Nazi thefts of Art prior to and during the Second World War which she covered in a later Arts Society lecture that same day.

The talk was followed by a drinks reception which included free raffle for prizes including a CH supplied book on Stolen Masterpieces, Christmas crackers and mince pies. Prudential International donated a bottle of 12 year old whisky.

All in all, a great turnout and a very successful event at a wonderful venue, although we were in temporary accommodation as the main clubhouse is under renovation. The Spectrum IFA Group was very proud to be involved with such a fantastic organization during its current global expansion and we hope to have the opportunity to do so again.

Arts Society de La Frontera
Arts Society de La Frontera
Arts Society de La Frontera
Arts Society de La Frontera

Financial Planning Impact of the Spanish Election

By Barry Davys - Topics: Barcelona, Elections, Spain
This article is published on: 13th November 2019

13.11.19

The 10th November (10 N) General Election has, like in many other countries in Europe, resulted in no party gaining a majority of seats in parliament. The result is unsurprising, but what does it mean for our financial planning as individuals who are living in Barcelona and the Costa Brava?

With elections come many headlines, often contradictory. More and more we need to look beyond the headlines to find real data that helps with our planning. This is an example of why we need to look beyond the headline. The headline is ‘Ibex (Spanish Stock Market) rises 9.45% year to date’. Beyond the headline we find that profits of the companies that make up the IBEX index have fallen 20% to end of September 2019. How does this contradiction happen? The Ibex has no top weighting, unlike other indices, so can be highly affected by one company or a sector. The largest company on the IBEX 35 is Inditex (Zara etc) at 14% of the index. The banking sector represents 21% of the IBEX. This can lead to a distorted indication of the performance of a broader selection of Spanish companies. I have used the example of the IBEX because we live in Spain but it is similar for most indices around the World.

Below, I summarise points of the Spanish election that will impact our planning:

There is no sign that plans for post Brexit will be changed because of the election. This includes, for example, not changing the double taxation agreement between Spain and the UK.

It is unlikely that the change to a standardised method of Inheritance tax across Spain, as required by the EU, will be implemented as there is no majority government. Existing inheritance tax laws in Spain will remain the same.

The 10 N election was triggered because of the voting down of the budget proposed by the last government. The new government could well face a similar struggle to pass a budget. This means no changes to the tax rules and spending plans.

Still, borrowing by Spain will increase each year and this is similar across many European countries. Despite this, European government bonds have a very high price, many giving negative interest. Should you include these in your portfolio at this price?

The high prices in the stock market index and government bonds mean that headlines appear that suggest investing in commercial property as an alternative (there are lots of commercial property funds available). These headlines can include property growth rates from the last 10 years where property has enjoyed falling and very low interest rates. However, economic growth is slowing across the World and technology is changing our work, how we shop and play. Slowing economic growth and technological change mean that commercial property is not likely to do so well. A very careful approach to which property a fund manager buys will be especially important over the next 10 years. Without a majority government, we are unlikely to see Spain buck the World trend for lower economic growth.

We can take the following actions because of the elections:

Tax in Spain. We know the taxes and how to plan in a tax efficient manner because we have not had revisions since the last budget. Make your investments tax efficient.

Not all commercial property will do badly. Warehouses and logistically important points will do better than factories, for example. Warehouses are part of the Internet delivery system, which is becoming an increasingly large part of the shopping process for both companies and individuals. If we like commercial property we do not have to invest just in Spain. It is possible to invest in most of the developed markets.

When Barcelona city indicates that it will use driverless cars in the centre of the city, investment funds will buy car parks. It is estimated that the use of driverless cars will reduce the need for car parking in a city by as much as 70%. This could be a good opportunity as these car parks will be turned into other property types such as 3D printing manufacturing points, drone landing spots for internet deliveries and more. Admittedly, we may need to wait awhile before this happens.

Do not despair with shares. The major indices are used for headlines to give an indication of the relative price position of the market. Yet these indices are based on only a few companies e.g.

Spain Ibex – 35

France Cac – 40

Germany Dax – 30

UK FTSE – 100

There are many other companies to invest in these countries. We can also use funds which invest in companies doing business in and with India or China, for example.

There are some excellent opportunities in markets but it requires very careful and technical analysis to know which companies. Get help! See a previous article “5 mistakes the rich never make” which explains how the rich get help with their planning. I put this into practice in my own planning by using fund and investment managers to do the day-to-day management of my investments.

Good luck with your planning. If you would like to discuss help please feel welcome to contact me, especially if you own a business or are approaching retirement.

About the Author
Barry Davys is a partner with The Spectrum IFA Group. He lives in Barcelona and provides financial planning specifically for international people who live in Catalonia using his knowledge of Catalan, Spanish and UK tax. The advice is given in English. Business owners and people approaching retirement find his guidance particularly useful.

UK Pension transfer – most common questions asked

By Chris Burke - Topics: Barcelona, pension transfer, QROPS, Spain, UK Pensions
This article is published on: 8th November 2019

08.11.19

Without even mentioning the ‘Brexit’ word, if you have a private or company pension scheme in the UK but reside outside, it’s a good idea to understand what your options are in managing and having access to them. There are a handful of subjects I am regularly asked about regarding this:

UK pension currency
If you transfer your pension outside of the UK, it does NOT have to remain in sterling; all major currencies are usually available. It can also be changed at most times and be held in different currencies. Of course, at the moment this is an even more important thought process for your retirement savings.

Access to pensions
From age 55 you can have access to as much of your UK pension as you like, although bear in mind that in Spain pension money will be subject to personal income tax, after any allowances. Therefore, you might want to arrange this so as to not incur higher taxes (there are several ways to do this).

Pensions from a previous employer
These pensions are known as dormant or frozen, and at the very minimum you should know what you have, where they are and how they work. We help clients track these down, explain how they work, what your options are and start planning to make them either more ‘healthy’ or easier to access. Some pensions may have high charges, or the pension scheme could be financially in trouble. Having all this knowledge as well as the options available will help you make an informed decision.

Can I transfer any pensions I have myself?
In short, if you are abroad, no, since the process is complex and not easy to understand if you are not in the financial world. Also, HMRC won’t allow it unless you have received advice. We have clients with different levels of experience in finance and pensions, and we work alongside them all closely, giving them the knowledge to make their decisions and managing the process for them.

If they are UK pensions and you want to keep them in the UK, then yes, you can usually do this yourself depending on the value involved.

You cannot transfer a pension to another person, although there are ways you can pass it on effectively.

Pensions transfer charges
When overseas pension transfers were started many years ago, the costs were a lot higher than running a UK pension scheme, although the benefits were greater. Now, with increased competition from providers, the charges for moving and maintaining an overseas pension are a lot lower. However, this does depend on who you perform the transfer with and what advice you are given. I still come across clients where the charges are so high it is almost impossible for the pension to grow. There are ways of helping these people, but usually by then they have lost out on many years of growth, which is really frustrating as it didn’t need to be that way. It’s so important you work with a Financial Advisor who is working for you, at your pace and advising in your best interests, not theirs.

Selecting a Financial Advisor to work with when investigating moving a UK pension
There are several points/questions you should check when deciding whom to seek advice from. These are:

1) Recommendations, you cannot beat them. Does anyone you know work with a Financial Advisor and they are happy with them?
2) Does the Financial Advisor have the necessary qualifications to give you advice?
3) How are they remunerated? Ask them how much and when.
4) Do they have any long-standing clients you can speak to? If they do and you manage to speak to them, ask them specific questions so you know they are both genuine and how it worked for them.
5) Look into their eyes… meet them several times, get a feeling for them as a person, their morals and actions.
6) Research them on the internet, or ask around and see what’s said about them.

I do know clients who have done most of this and still not had a great experience. The only additional advice I can give is to look at the pensions and companies they are recommending. If you haven’t heard of them before or you don’t get the ‘spider sense’ that they purely have your best interests at heart, then look elsewhere. Remember, they are going to be looking after your retirement. For years I have helped people evaluate their pensions, and as well as looking to help new clients, the main reason I write these articles is to help people avoid potentially working with someone that doesn’t have their best interests at heart.

Your right to vote and the risk of doing nothing

By John Hayward - Topics: BREXIT, Spain, UK General Elections
This article is published on: 31st October 2019

31.10.19

So we pass another Brexit date with 31st January 2020 the next one. I have some questions:

  • Will there be a (another) referendum before?
  • Who will win the General Election on 12th December?
  • Does anyone in a position of power really care?
  • What will I get for Christmas?

These are all unknowns, to me at least, but there are two that I can have an influence on. If I´m good, I could get something nice for Christmas. Perhaps a matching sock for last year´s. I could also have an effect on who gets elected in the UK on 12th December.

The 15 year rule
It is generally known that one has up to 15 years to register to vote in General Elections in the UK having moved abroad. Although there has been talk about abolishing this rule, it still exists. One aspect generally unknown is that you have the right to vote if you registered within the last 15 years after moving abroad. Therefore, this means that you can vote in the upcoming election if you registered on or after 12th December 2004. In my case, after leaving the UK in late 2004, I believed that I had missed the opportunity by a month or so. In fact, and because I registered to vote in the 2005 election, I have been told by my last constituency office that I have until 2020 to continue voting.

If you left the UK within the last 15 years then you simply register now. I believe that you have up until 25th November to do so. If you have registered to vote within the last 15 years, after leaving the UK, I suggest that you get confirmation from your last constituency office and then register to vote in the coming election at www.gov.uk/register-to-vote.

Unfortunately, this could be an election based purely on Brexit. We know more now than we did in June 2016 and so, hopefully, whoever wins, there will be clear direction and they get on with leaving or staying.

Lost benefits waiting for Brexit
Many people have delayed making decisions due to Brexit uncertainty, especially when it comes to buying property or investing. On the property side, this has meant missing out on property value gains, lost rental revenues, or simply a delay in the dream move. From our side, in the investment world, those who have been invested in the types of cautious fund that we promote have seen their money grow by over 20% since the referendum in June 2016. At the same time, for those people who have left their money in the bank in readiness for what they didn´t really know, have seen their money reduce in real value by around 11% through inflation. In simple terms, £100,000 invested in a low risk fund would now be worth £120,000, £107,000 when allowing for 11% inflation. Left in the bank, with no interest, £89,000. People would be up in arms if they were told that their bank was charging them 2% (£2,000 in this example) a year in charges but this is effectively what inflation has caused and has been the consequence of ‘playing safe’.

There´s probably another ‘Brexit’ around the corner, but life goes on. I look forward to receiving my sock regardless of who is Prime Minister on 25th December.

To find out more about how you could benefit from quality financial planning advice and years of experience both in Spain and the UK, contact me today on +34 618 204 731 (call or WhatsApp) or at john.hayward@spectrum-ifa.com

Is this the time to invest and where?

By Charles Hutchinson - Topics: investment diversification, Investment Risk, Spain
This article is published on: 23rd October 2019

23.10.19

I was having lunch with a friend of many years the other day. When I asked why he was not currently invested and why he had not been for some time, he replied that it is too dangerous a time in the world with too many problems and that we were on the verge of a global market collapse. Further investigation revealed that he had had his money in the bank, largely unprotected against bank failure and earning less than a single digit interest rate (and that was for his Sterling) which was also taxed. What made it worse was that the majority of it is in Euros and he was actually having to pay charges to the bank for the privilege of keeping it there.

Although this sounds an extreme example of bad financial planning, it shows that we need to take professional advice sometimes. We need to diversify and we need to understand that the world is no worse or insecure than during the terrible wars and crises of the past. Money is not a Will o’ the Wisp, disappearing into thin air when not being utilised; it has to have a home in which to dwell for better or for worse. The secret, therefore, is to place it for the better in homes that are largely secure, allowing you to diversify smaller amounts somewhere else for better returns. In this era of low interest rates, which is set to continue for quite a while, that home should not be in a bank, except for your current account and a cash reserve for emergencies and planned spending over the next, say, 2-3 years. There is limited protection against bank failure and the return to be obtained is taxable and insignificant.

My old friend lamented that this was not the time to enter the market, to which I replied that there is no good time until you have left it too late (this is true of most markets). It is not market timing which is important, but time in the market. Unless you have a trading account for speculative investment, you must always plan to invest for the long term (5 years plus). The investment house Fidelity produced some excellent statistics which showed that (once invested) by not being in the market for just 10 specific days in the last 10 years, you would have lost nearly 50% of the market (London FTSE100) growth each year versus staying fully invested. Missing 20 days, this would have been halved again.

Missing out on 30 days, you wouldn’t have broken even after brokerage charges. Markets are like the tide on the sea shore – they rise and they fall. The difference is that each time the tide comes in, it reaches a little higher up the beach. And that is caused by a natural phenomenon called inflation, which moves hand in hand with growth

investing in tough times

I asked my friend if he was invested in 1987. He looked away gloomily and said that he had instructed his broker to sell out all his positions when the October crash arrived that terrible Monday morning. He watched with dismay as the markets around the world collapsed as soon as they opened and there were no buyers, fuelled by a flawed computer system over which there was no control. He lost over 35% of his capital over the next four days. At the time I was a trainee investment manager on the Australian desk of a prominent investment house in the City. The telephones rang off the hook and our advice was emphatic and simple: do not bale out. Hang in there. I remember my mentor, who was a keen yachtsman, saying, “If you are in a boat out at sea and a big storm blows up, you don’t jump overboard, do you? No. you batten down the hatches and wait it out”. This is the advice I have always given my clients ever since. Those who heeded our advice and waited it out actually ended that year in a higher position than when it started.

I can hear some readers already asking where they should place their hard earned capital after a life time of working and saving. There is no one single answer to this. It depends on your risk tolerance, your likes, and your needs (now and in the future). As ably described in our book “A Guide to Investment Risk” by Peter Brooke (opposite), diversification is everything.

Guide to investment risk

This could be across multiple global asset classes (to include gold bullion, diamonds, antiques, rare paintings, rare books, classic cars, etc.) or it could be an investment portfolio containing multi global assets managed by multi managers of different expertise and disciplines. It is always wise to remember that Risk is linked directly to Reward. The higher or lower each one is will reflect in the other. Also reflected is volatility, where the higher performing assets will mostly endure higher volatility (continuous high/low oscillations which are not for the faint hearted). When doing financial reviews with clients, we are careful to establish their risk appetite and the returns that can be expected taking into account that risk.

You cannot have a high performing low risk investment – there is no such animal. What you can expect from a good adviser is a steady performing investment at whatever level you set your tolerance to give you the return you want as long as you run the course, who does not try to time the market and who picks long established names who have been around many years. We often recommend long established (each over 150 years) London based investment managers to manage a client’s private portfolio, or we place clients in multi asset, multi manager investment funds. To those who are averse to volatility, we offer “smoothed” investments which are described by my colleague Anthony Poole elsewhere in this website in “Tax Efficient Investments“. These are safe secure investments which are tax efficient and which produce a steady return year after year, way above anything you can expect from a bank product.

Greed is the enemy of many investors. It is the curse of humanity. If you are not greedy, your money will grow securely at a respectable pace. Manage your own expectations – do not alter course when you see your returns are doing well. Do not cut corners, especially with tax. We only choose tax efficient products. Investment choice and tax efficiency are completely entwined. Tax is another subject to be explored in more detail and is covered elsewhere on this site by my colleagues. If you would like a copy of our Spanish Tax Guide 2019 (there is also one available for France), please contact me below.

To discuss these points in more detail, why not call me to make an appointment and let’s have a coffee together? Please remember, there is no commitment on your part but such a huge commitment on ours! With care, you will prosper.

Acheter un appartement à Barcelone : bonne ou mauvaise idée ?

By Cedric Privat - Topics: Barcelona, mortgages, Property, Spain
This article is published on: 15th October 2019

15.10.19

Vous êtes nombreux à vous poser la question du choix entre l’investissement immobilier et le placement financier, dans l’objectif de faire croître votre patrimoine.

  • Investir dans la pierre est souvent considéré comme une valeur sure, mais est-ce toujours le cas malgré la flambée des prix des dernières années?
  • Faire un placement financier permet de conserver une liquidité et bénéficier d’une imposition avantageuse, mais avec les taux fixes au plus bas et l’inflation actuelle il est désormais impératif de prendre un certain risque

Avant toute décision, il sera important de comprendre les avantages et inconvénients de ces deux options. Nous étudierons dans un premier temps via cet article l’achat immobilier à Barcelone.

Depuis les jeux olympiques de 1992, Barcelone est devenue une des villes les plus attractives d’Europe: à visiter, y vivre, y travailler et pourquoi pas investir?
La ville plaît beaucoup aux français, plus de 20 000 d’entre eux y vivent toute l’année et on ne compte plus les milliers de touristes quotidiens qui affluent de toutes parts.

À seulement 150 km de la frontière, la ville attire par son soleil, ses plages, ses montagnes proches, sa qualité de vie, sa culture, sa population cosmopolite, sa bonne connexion TGV/avion, etc.
Cet engouement comporte néanmoins certains revers dont tout futur investisseur doit tenir compte; notamment une insécurité croissante ces dernières années, une situation politique instable et des lois souvent en faveur du locataire (voir même okupas/squatteurs) en cas de conflit avec le propriétaire. La crise du marché immobilier de 2008 a également inquiété de nombreux particuliers projetant un achat à Barcelone.

Première question: achat perso (pour y vivre) ou achat locatif ?

  • Si vous comptez rester à Barcelone pour le long terme, un achat personnel s’avère souvent être la meilleure solution. Finis les loyers, vous serez enfin chez vous et pourrez potentiellement faire une plus-value si vous gardez ce bien assez longtemps. Mais attention au marché en haut de cycle; des études démontrent qu’actuellement une acquisition ne sera financièrement avantageuse par rapport à une location que si on garde le bien au moins 10 ans. Une revente rapide sera synonyme de moins-value; une stabilité professionnelle et familiale est donc indispensable
  • Pour un achat locatif vous devrez dans un premier temps évaluer le taux de rentabilité brut (diviser le revenu locatif annuel par le prix total du bien), si le résultat est inférieur à 6 % brut alors le rendement n’est pas suffisant (voir le paragraphe “Les coûts” ci-dessous pour avoir une estimation du résultat net). Aucun achat ne doit être fait sans une étude et un calcul précis

Il sera important de ne pas diaboliser le fait de rester en location. L’expression “jeter ses loyers par la fenêtre” est dépassée car nombreuses villes se sont avérées à une certaine période être plus rentables en location qu’à l’achat. Vous gardez ainsi votre liberté, vivez dans une superficie plus grande et n’avez pas à supporter les coûts et impôts d’un propriétaire. Nous aspirons pour la plupart à être propriétaire un jour, attention néanmoins à ne pas se précipiter.

La situation du marché ?
Le prix du marché doit ensuite être étudié, il vaut bien entendu toujours mieux acheter quand les prix sont bas.

Le marché à Barcelone est haut même s’il n’a pas encore atteint les chiffres de 2007, les prévisions annoncent une stabilité pour 2019/2020.

Crédit bancaire en Espagne: comment ça marche ?
Si vous êtes résident fiscal en Espagne vous devrez certainement passer par une banque locale pour votre prêt (peu de banques françaises vous accompagneront, à moins d’avoir un bien en France).

Un maximum de 80 % du prix du bien peut vous être prêté (70 % si non-résident), pour une durée maximum de 30 ans (jusqu’à l’âge limite de 70 ans). Il vous faudra donc un apport de 20 %.

Les espagnols sont habitués aux taux variables (très faibles ces dernières années), ce qui signifie que vous êtes dépendants de l’Euribor (taux de référence du marché monétaire de la zone euro), mais en cas de hausse de celui-ci vous risqueriez de voir vos mensualités fortement augmenter. Nombreux sont ceux qui ont perdu leur bien pour cette raison il y a 10 ans.

Depuis quelques années les banques espagnoles proposent de plus en plus un taux fixe comme le font le plus souvent les banques françaises. Vos mensualités resteront donc inchangées sur l’ensemble de votre prêt bancaire. Les taux sont plus élevés qu’en France, actuellement comptez entre 2.2 et 2.7 % pour un prêt sur 30 ans en Espagne

Quels sont les coûts ?
L’imposition sur un achat immobilier en Catalogne s’élève à 10 % du prix d’achat (11 % à partir de € 1 million). À cela s’ajoute les frais de notaire et frais divers liés à l’achat: comptez entre 3 et 4 %.

Comme évoqué précédemment, un apport de 20 % étant demandé par les banques en Espagne, l’apport global nécessaire est donc de 34 %.

Cas pratique: pour un appartement vendu € 300 000: le nouveau propriétaire doit donc s’assurer de posséder une liquidité de € 102 000 (impôt € 42 000 et apport € 60 000).

Être propriétaire vous impose également des coûts annuels qui viennent s’ajouter à vos mensualités bancaires:

  • IBI (Impuesto sobre Bienes Inmuebles), équivalent de la taxe foncière française
  • Assurances et impôts divers (tels ordures ménagères)
  • Charges de copropriété
  • Travaux d’entretien, maintenance, remplacement des gros équipements, rénovation (votés lors des réunions de copropriété ou obligatoire telle la rénovation énergétique)
  • Si vous louez ce bien, vous devrez éventuellement ajouter les frais d’agence (surtout si vous n’habitez pas à Barcelone) et le coût lorsque l’appartement n’est pas loué. Sans vouloir être négatif; il ne faut pas occulter les éventuels frais de justice ou d’expulsion si vos locataires s’avèrent être mauvais payeurs ou insolvables.
  • Et bien entendu le coût d’un prêt bancaire qui varie selon le coût d’achat, les années et le taux négocié
  • Concrètement, en s’appuyant sur l’exemple ci-dessus, l’achat d’un bien de € 300 000, le prêt sollicité sera de € 240 000 (maximum 80 %)
    Supposons que la banque vous accorde un taux fixe sur 30 ans à 2.5 %, vos mensualités s’élèveront alors à € 948.29 soit un remboursement total de € 341 384.
    La banque vous facturera donc € 101 384 pour un prêt de € 240 000

En conclusion, il n’y a pas de réponse évidente à la question: “Acheter un appartement à Barcelone : bonne ou mauvaise idée?” car l’équation a souvent plusieurs inconnues et de nombreux paramètres sont à prendre en compte. Acquérir un bien immobilier est une décision importante, un engagement, qui peut correspondre parfaitement à certains particuliers, mais peut vite devenir un gouffre économique pour d’autres.

Comme toute décision importante il est indispensable de planifier, calculer et comparer les options disponibles. L’immobilier a constitué un excellent investissement pour la génération des baby boomers, mais il ne doit pas être une obligation ni une logique. Obtenir une plus-value n’est plus systématique et comme tout investissement un achat immobilier implique un risque: rien n’est garanti (“sauf la mort et les impôts” disait Benjamin Franklin).

Spectrum conseille à ses clients de toujours diversifier leurs investissements et garder un équilibre dans son patrimoine entre l’achat immobilier et le placement financier. Des alternatives d’investissement existent en France et en Espagne telles l’assurance-vie (2ème placement préféré des Français après l’immobilier) ou les SCPI (Société Civile en Placement Immobilier).

Nous nous proposons de vous guider en nous adaptant à votre situation, chiffrer les différentes alternatives et vous présenter l’ensemble des options disponibles sur le marché.

En Espagne comme en France, Spectrum possède également une section “courtier en prêt immobilier”. A votre demande, nos conseillers sont à votre disposition pour effectuer les recherches nécessaires auprès des banques. Ils sauront vous guider, négocier en votre nom et vous permettre d’obtenir un meilleur taux à moindre coût sans frais de remboursement anticipé.

N’hésitez pas à me contacter. En tant que consultant chez Spectrum, je me tiens à votre entière disposition pour étudier toutes demandes ou répondre à vos questions.

Tax Efficient Savings

By Antony Poole - Topics: Costa del Sol, Spain, Spanish Compliant, Tax Efficient Savings
This article is published on: 10th October 2019

10.10.19

You have moved to Spain … and you are now tax resident here.

You do not want the volatility or risk of investments, but want more earnings than you get out of a savings account.

Is there a middle ground solution?

The majority of expats in Spain move over here for the weather, the more relaxed way of life and let’s face it, because they can afford to do it!

The savings, investments and pensions they built up are used to fund their lifestyle in Spain. The problem many are facing now is the changing financial environment; we have seen the pound devalue against the Euro and interest rates drop due to quantative easing, amongst other factors. This is great if you are looking at taking out a loan to start a business or to buy a house, but most expats are past this stage, so not good news.

That sum of money held in savings is absolutely vital, as it is readily accessible and, in the majority of cases, protected from what the markets are doing, i.e. when the markets go down, it doesn’t affect the cash held on deposit! However, the low interest rates mean that, due to inflation (which affects retirees the most), the purchasing power of that cash is going down.

The investment route does give you the possibility of earning more from your cash, but it also takes away all that protection. The markets have been pretty steady for the last few years, however, with quantative easing at the time of writing looking at coming to an end, so will the volatility of investments increase. The problem most expats face is that they do not have the luxury of time on their side to ride out the dips in the markets. Sorry to be so blunt, but it is what it is. When the markets climb it is all good, however, two weeks later when they are down then it can be very stressful, especially if this is when you need to access some of the money held in the investment!

So what do we do? Is there any middle ground?

Yes, there is, but it is not very sexy! It is for people who are willing to sacrifice the spikes in market prices (this is the unsexy part) while limiting exposure to drops in market prices. It is a very prudent scheme that works like this: The investment you make is combined with a pot of around

Tax Efficient Savings

£500 billion and when this investment makes money they hold some of the gain back, so you do not get it. The flip side is that when there is a dip in the performance, they put the profit back in so you are not overly affected. This is called smoothing and this chart reflects how it works. The expected return is published every three months and is currently running at around 5% (August 2019).

This is a popular product in the UK for those who are either looking at putting a portion of their savings somewhere to earn more than just interest, or for those who are looking at a stable investment fund for their pensions. It can also be set up as last life policy, so can be used to limit IHT. Many expats also use this type of policy, which is now available Spanish tax compliant (your English policy is not, so speak to me about making it Spanish compliant). This is a low risk option for those preparing for market volatility and who want a stress free life!

Interest rate outlook and what it means for your investments

By Barry Davys - Topics: Barcelona, Interest rates, Investment Risk, Investments, Spain
This article is published on: 1st October 2019

01.10.19

I had a very nice dinner a few days ago with an investment manager I have known for 12 years. We meet regularly and he is one of the investment managers in London that we, as a company, use for some of our clients. So we know each other professionally quite well and one of us always acts as devil’s advocate to the other one’s position in discussions. It is a great way of getting your point of view tested. Yes, we did talk about Brexit, but the more important issue was the fact that long term interest rates are likely to stay low for a very long time in Spain and in Europe. So here are some thoughts about what these low interest rates mean for our savings and investing.

First, Brexit. Brexit is on everyone’s lips and quite understandably so. Whether you love it or hate it, no one seems to be able to work out what is going to happen. I admit to not being able to work out where it will end. The Brexit outcome is incredibly important to us as individuals and businesses. Yet what about for our savings? Britain is the sixth largest economy in the World. Sounds important. According to the World Bank, the World economy is $86 Trillion. Britain’s economy is $2.8 Trillion. So Britain represents just 3.26% of the World economy. Which means we still have 96.74% of the World economy where we can invest!!!

Perhaps the more important story for savings and investments is the impact of very low interest rates that could stay low for decades. My dinner guest gave good insight into the future of low interest rates. This insight is important to us as individuals with savings and investments.

In October 2007, interest rates in the UK fell from 5.5% to 0.5% in May 2009. Interest rates in Europe followed a similar path. The ECB in July 2007 cut its interest rate from 5.25% to 0.75% in May 2009. The ECB rate has now fallen to just 0.25%.

Will low interest rates stimulate the economy? Yes, it will, but not enough to get economies back on track. Mario Draghi, the current President of the ECB, says central banks changing interest rates will help, but Governments have to spend more too for sufficient economic growth to happen. As an example, Germany has been taking a lot of stick because it has not been spending. The amount it collects in taxes etc is equal to the amount it spends.

ECB

This is the German Government policy. This is a sensible policy unless parts of the country break down and need repairs. Two items that need repair in Germany are the military and the transport infrastructure.

The military, if the stories are to be believed, did not have one single usable helicopter earlier this year. Roads in Germany need repairs, including bridges. Spending money on these road repairs not only give jobs to workers and their companies but also helps the German transport system to run smoothly. This helps the logistics chain in the economy and gives a boost to the economy. These are two examples of where government spending is helpful and supportive of low interest rates. To offset a recession there has been some suggestion of Germany spending €50 Billion on infrastructure spending. As a comparison, Spain already is spending more than it gets in on taxes.

The Bank of England Monetary Policy Committee is responsible for setting interest rates in the UK. It has said that due to the Brexit uncertainty, the next UK interest rate move is likely to be down. The UK official interest rate is only 0.5% now, which gives an indication of the outlook for interest rates: near zero for a long time.

JP Morgan is the sixth largest bank in the World with assets of $2.73 TRILLION. Bob Michele, Global Head of Fixed Income at JP Morgan, has gone even further than the Bank of England in predicting the European interest rates. His analysis shows that Europe will have negative interest rates for the next eight years. Mario Draghi has also said that European economic growth will be very low for seven years, which is another indicator for low interest rates. Indeed for both the UK and the EU there are many forecasts of very long term, low interest rates.

On the bright side, borrowing costs are much reduced as a result of low interest rates. Monthly mortgage payments are much smaller than normal. Businesses and Governments can borrow at much lower rates. On the dark side, we get little, or indeed no, interest on our savings. How low can interest rates go? Rates are negative in Switzerland and Denmark for people living outside the country. These non resident account holders actually have to pay the bank to take their money. When interest rates on savings are very, very low, what do we do with our savings?

If we have savings should we consider paying off our mortgage? Mortgage rates in Spain around 1.63% fixed for 20 years (via Spectrum Mortgage Services, email me if you require details). It can be better to invest than pay off a mortgage at this rate. If we have other loans you should look to pay off the loan from savings if the interest rate

property investment Barcelona

on the loan is greater than you can achieve by investing. A good benchmark figure to use is if the loan rate is greater than 5% per annum you should consider paying it off from savings.

Despite these low rates it is essential that we keep some money readily available, probably in a bank, as an emergency fund. Yet, with these historically low interest rates, it is also essential we do not leave more than we need in the bank. Inflation, even low inflation, eats into the buying power of money left in the bank. It is an insidious effect we often don’t notice until we come to buy our next big purchase. It is at this point we realise that we can’t buy what we thought we could buy because we have had interest on our savings that was smaller than the rate of inflation. When this happens, buying power falls. Instead of being able to buy the sports version of a car we find we can only afford the base model.

We need to use other types of savings and investing strategies during times like these. There are many other options, but most alternatives come with some investment risk. What does investment risk look like?

You may not have realised, but since the market collapsed in 2009 there have been corrections of -16.0%, -19.4%, -12.4%, -13.3%, and -10.2% in the S&P 500!

What is the investment return on the S&P 500 since bank interest rates hit their lows in 2009? INCLUDING the falls above, it may surprise you that the return has been 219%.

This is just one index based on shares in one country and is used to highlight volatility in a market. To reduce the impact of this volatility our savings should be in diversified pots. A fair question for you to ask me is “With these low interest rates, what pots do you invest in?” The answer is I have a mix. I have some very steady, some

stock-exchange

would say old fashioned, funds. Others are with a mix of investments managed by a fund manager, including some investments in the S&P 500. I have some UK Premium Bonds for my emergency fund as they are easily accessible. I have income producing investments in my pension. Index linked funds give me some protection against inflation (just in case we get an unexpected event). I have some forward looking funds that invest in India and China. And then… well I have three small holdings in UK private companies making new technologies and an Exchange Traded Fund (ETF) for Artificial Intelligence and Robotics.

There is diversity across types of investments, e.g. shares, funds, regions and bonds. Within the higher risk parts there is balancing of risk. The three individual shareholdings in tech companies are very high risk because the value of the shares in each company depends on the results of that company alone. Balance is provided because the ETF performance which depends on the 41 companies it tracks. If one company does badly, there are 40 others to take up the slack. It was sensible for me to diversify from an investment being dependent on the results of one company, to something which is dependent on the results of 41 companies. Especially as I am not a researcher in the fields of AI and robotics.

This is my mix of investments, but it may not be right for you depending on what return you want and how much risk you are prepared to take. Do I also choose superb investments and do these investments avoid market falls? I admit it, no they don’t. But my diversification does.

Tax is also relevant to the good husbandry of your savings at all times, not just when rates are low. With money in the bank and interest rates so low, it is not much more than adding insult to injury when the taxman takes 19% to 21% of your interest. However, it is important that having moved your savings from a bank account you make the investment tax efficient. How to do this will depend upon your situation and requires individual advice.

This brief note gives an example of what we need to do now as we are faced with low interest rates for a long period. What is right for you will depend on your circumstances. Is it worth taking some risk? Yes, especially if you use several different types of investments; investments in different types of assets and different geographical areas. Putting your savings in different pots can help to reduce the investment risk.

As is often the case, what looks like a disadvantage, the low interest rates, means opportunities appear elsewhere!

Tax Advice in Spain for Expats

By Chris Burke - Topics: Barcelona, Spain, Tax, tax advice, Tax Relief
This article is published on: 24th September 2019

24.09.19

Whenever someone gets in touch with me, the first, most important thing I suggest they do is to make themselves and their family as tax efficient as possible, i.e. tax planning. There is no point having a ‘leaky bucket’: their money earning interest but more than needs to is pouring through the ‘tax holes’ they haven’t plugged or planned for.

So, apart from the obvious reason of minimising the current tax you pay, why is it important to review your tax situation? It is to make sure you are aware of ‘stealth taxes’. Stealth taxes are those which are not easy to detect and that many people are not aware of.

If you are a government, you want to win as many votes as possible to be elected (or re-elected). You need money to spend, but raising taxes on the upper echelons will damage your votes, raising taxes on the working classes will also damage you votes, and both will be very vocal. Therefore, what has become increasingly popular with governments is to increase taxes that won’t necessarily hurt voters’ pockets on a day to day basis, but which could do in the future.

A good example of this is something called the lifetime allowance. This is the ‘ceiling’ under which the value of your UK private pension will be in the regular tax bands. However, if your pension pot overshoots this limit, you will pay increased tax of up to 55% on anything over that ceiling. Never heard of this tax? Well, I can assure you there are some very normal, everyday, hard-working people who are not in the upper echelons of society and who, due to long pension contributions and having good investment advice, will reach this limit in their lifetime.

To explain this a little more, the lifetime allowance ceiling was introduced in 2006 and was £1,800,000 at its maximum. Over time, it has been reduced and reduced to its present rate of £1,055,000. During that same time inflation has increased, people’s earnings have increased, contributions to pensions have increased; so why should the ceiling go down? Stealth tax.

Moving forward, stealth taxes are likely to be the most popular way for governments to increase their income without the majority of people noticing.

Let’s think about this. What else could the government do along these lines to increase revenue? How about tax those British people living outside of the UK more? They don’t live there, they don’t have the same rights as everyone that does, so are they not an easier target? So, what could they do? Tax UK state pensions (currently they do not tax non-UK residents, although they are taxable in Spain)? Or how about tax those with UK private pensions a ‘non-resident tax’? Or tax those who move their UK pensions outside of the UK and not into a place where the UK government has an agreement with? In fact, the last one they do already!

What can you do? Well its quite simple really; plan now so that should any of the above or anything like this happen, your assets or monies are arranged to be as tax efficient as possible to mitigate these circumstances. If your assets are working just as effectively as they are now, but are much more tax efficient, it could save you and your family a lot of money in taxes in the future.

Perfect preparation prevents P*** P*** performance I believe is the phrase!