Spain : 2 million homes on the market? The effect on property prices

I read a report on here on the possibility of 2 million homes being on the market in Spain and got to wondering the effect on already deeply reduced property prices in Spain. Two million homes sounds a lot but is it.? After a fruitless search I can not get a provable figure on what is normal in Spain.

Having lived in Spain for many years I know that the country was overdeveloped but it doesn't take a brain surgeon to know that. Having worked with all the major and some minor banks in Spain dealing with repossessions it is also very apparent that bank held property, with a "value" running into tens of billions of Euros, has a varied saleability. I would estimate 50-70% of all bank held property will never sell at a price anywhere near the book value, current value or even sell at all.

Potential buyers are now more savvy and look at value rather than price. Buyers that attained those rose tinted spectacles as soon as their plane left their country are now few and far between. So many properties were sold because they looked cheap, without the buyer having a yardstick for proper value aside from the tales told to them by their estate agent hungry to seal a deal.

There are now fears that as Bankia emerges as the next super bank in need of a bailout, following the resignation of its chief executive, that there may be a glut of property put onto the market as a result of government enforcement. Even if that does happen, do not despair. Prices will not crash further in Spain as so much of the property held by the bank is, for want of a better word, rubbish. When prices get compared there is not a decision on if to buy the bank repo that is cheap but offers no value, buyers now look for value rather than just price. Don't get me wrong, I am not saying all bank repossessions are bad, far from it. We currently are promoting a packaged deal from a bank in Hacienda Del Alamo that offers great value in the resilient market in Murcia on a golf course, near the new Paramount theme park and Corvera airport. Not a "cheap" price, just good value.

My other concern and a partial reason for the mess Spain is in, is the Euro. We can all speculate what will happen next, Greece may withdraw and go on its own which may be followed by other Southern Euro economies like Italy and Spain, but the overall answer is we do not know. Take a mortgage based in Euros for as much as you can and you can only benefit.

Over the last two years the euro has lost around 20% of its value against sterling, making property purchases 20% cheaper. Add that to declining values, low mortgage rates and good spectrum of properties to choose from, and it could be sensibly argued that the time is right now to buy in Spain. Is it the bottom of the market, no one knows. As one client once said to me, markets do not ring a bell when they hit the bottom.

Steve, MD Lydnem Property

Contact us at info@lydnemproperty.co.uk if you are looking for a good deal in Spain or its islands and we will see what we can find for you. Click on the link HERE for details on hacienda Del Alamo. For offers on property all over the world CLICK HERE

Cyprus: Limassol marina site visit.

Last Thursday, March 8 2012, we visited the site for the new marina in Limassol. Having had the brochures, we were a little sceptical given the heady prices northward of one million euros for a two bed apartment and between two and sixteen million for a villa.

Within an hour our view had radically changed. The construction of the first apartments is well under way and a show apartment has been constructed and the shell of the main building is now complete.

Spread out across 120 square metres the show apartment is on the ground floor. Elegant and contemporary, the open plan lounge leads to an American style kitchen. Buyers now get the option to change the internal layout if this does not suit. Off the living area are three good sized bedrooms complimented by an en-suite on the master and a family bathroom. The property has all the latest mod cons one would expect from high quality developments.

At €1.4 million, the price is not cheap but this apartment benefits from two garden areas (total 240sqm) and views across the marina toward the sea, the grassed area unique to only a handful of apartments. The underground garage also has a further storage area. As a security controlled area, access to the Marina is controlled and limited to pass holders only.

Having looked at many developments over the years, you find yourself comparing against other countries and developments. My immediate comparison is Puerto Banus, not so much in its looks but from an investment perspective. When comparing on this basis, prices are in line and have room to appreciate significantly, hence our change of view on the the Limassol Marina development.

The apartments, called Nereids, are set for completion later in the year and hand over of keys in November. Mortgages are upto 70% of the cost and do not attract VAT. The whole development is built on land owned by the government and so all the properties are leasehold, on a 125 year lease, with the Cypriot government benefiting from the sale of each property.

We were then taken on a bus tour of the villa's. Construction of the villas has not started yet as the infrastructure is still being tested. Completion will be in early 2014. With prices starting at €1.8m and as high as €16m (this one has just been sold) this is the playground of the rich and famous. For this price it has to be special, and it does not let us down. We pass dozens of seventy tonne blocks that are testing the strength of the reclaimed land as these properties will be built in the sea, on land that has been built to accommodate them. The views that will afford these villas are second to none, the ultimate sea view with no chance of anyone building in front and not having to build high on a mountain side. Special. There is nothing else like this in Cyprus and it is hard to compare to anywhere else in the world aside from the palms in Dubai. Again, when compared to Dubai, the prices do not look expensive. The villas have a choice of a private sandy beach or with atleast one berth for boats and yachts upto 60m. There are e-brochures and plans and CGI videos to get a better idea of the Limassol marina development but you really have to visit to get a feel for its  beauty, uniqueness and potential.

So, from an investment perspective the numbers do really add up. With the middle East high net worth market right on its doorstep, the strong demand from the wealthy Russian market there will be no difficulty is selling the development and a strong after market is predicted. Footballers, with their wealth and a need for investment is another key area that we see investing. it is not cheap, but it never will be, properties like these are rare and will always demand a premium.

Guide prices 1 bed room apartment from €428,000
                    2 bed room apartment from €809,000
                    3 bed room apartment from €930,000

                    2 bed room villas Peninsula from €1,700,000
                    3 bed room villas Peninsula from €2,812,000
                    4 bed room villas Peninsula from €2,472,000 (without berth)

                     2 bed room villas Island from €1,782,000
                     3 bed room villas Island from €2,884,000
                     4 bed room villas Island from €4,017,000

For a picture gallery on some of the construction and computer generated images of the finished development please click below
For more information including E-brochure, CGI video, plans, availibilty and price list, Please CLICK HERE to receive more information.

Spain: Opportunity not demolition job

Immediately, after the Second World War in 1945, the general consensus of opinion was that there was a huge glut of ships.

You couldn’t give them away.  Ships cost too much to maintain and there was no use for them after the conflict.

The consensus was wrong.  The war had increased the desire for international goods (like Pizza from Italy) to such an extent that international trade doubled from pre-war levels by the end of the 1950’s.  

With hindsight, there was in fact a latent shortage of ships but the market didn’t recognise it.

It sounds like a crazy question but could there be a parallel with Spanish housing market today?

There are between 800,000 and 1 million empty properties in Spain today depending on which figures you believe. Roughly 65% of them are in coastal areas.

The consensus is that most of them are badly built and in sub prime locations.

However the truth is that most of the time, these two things are not built into the price.  Developers and banks are still trying to sell at prices that do not reflect what the market is now willing to pay.

The overseas property market is driven by convenience and price. If you could buy a completed (non-fractional) apartment for £10k, would you be willing to travel an hour and half from the nearest international airport to get there?  I might, provided I could visit it first to check the quality.

Spanish tourism numbers are the one bright spot on a dark horizon.  The crisis has if anything increased the desire of tourists to visit as they expect to get a good deal.  There will always be a market for cheap holidays and holiday homes in the sun.  

Many people tell me the overseas property market will never be the same again.  Over the long term, I’m not so sure.

It’s the entrepreneurs with the vision to buy in bulk now at rock bottom prices who will be the players in tomorrow’s market.

Some of the developments may have to be bulldozed but my guess is that these will be the minority.

Everything has its price even if that price is negative and you have pay people to take developments off your hands.

Source global edge

For spanish bank repossessions in Marbella CLICK HERE

For spanish repossessions across the country CLICK HERE

For repossessed plots CLICK HERE

UK London: Student housing demand outstrips supply despite lower applications

Student housing demand is outstripping supply despite a drop in university applications.

UCAS announced yesterday that final student numbers for 2012-13 academic year fell by 7.4 per cent, as increasing tuition fees deter new UK students. Despite this drop from domestic applicants, which was expected by the organisation, the number of foreign students applying to study in Britain actually rose by 13.7 per cent, pushing housing demand up above supply levels.

"The reduction in applications means that 2012/13 applicant numbers are broadly in line with those of two years ago," Unite commented. "At this level, demand for university places still outstrips supply by approximately 32% and means that more than 156,000 students applying to study in 2012 will fail to secure a place."

Unite confidently predicts that rental yields will grow by 3.4 per cent this year as thousands of students seek accommodation.

Source: StockMarketWire.com

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Croatia: Strong sale at Dubrovnik Sun Gardens with guaranteed 4% yields

iO Adria report that it has had a successful start to the new year with six confirmed sales at its Dubrovnik Sun Gardens development in Croatia, with three more sales in the process of completion.

The developer recently launched the first phase of the development and is offering homebuyers net rental yields of 4% after HOA costs and tax in a bid to push property sales.

A one bedroom residence at Dubrovnik Sun Gardens starts at €170,000 (£143,000) for a ground floor property with garden view, up to €336,000 (£281,800) for sea view. Two bedroom residences range from €308,000 (£258,290) up to €608,000 (£509,920).

Julian Houchin, commercial director of iO Adria, says that he is positive about prospects for the Croatian property market in 2012, thanks in part to its anticipated EU accession in 2013..

He says that demand for homes in Croatia is already growing and expects that EU entry to help generate greater returns from property investments.

Houchin comments: “This [Dubrovnik Sun Gardens] is one of the few lifestyle freehold real estate resort investments available today in Europe offering a balance of personal usage and competitive net yields for owners through a sophisticated rental programme now in its third year of operation.

“[Dubrovnik] one of the most beautiful and fastest growing tourism and second home real estate destinations in Europe where early buyers can also benefit from entry level pricing and mortgage financing at Dubrovnik Sun Gardens.”

Source IEA

For more details on this development CLICK HERE

USA: Contracts to purchase US pre owned homes holds at 19 month highs

The number of Americans signing contracts to buy previously owned homes in December held near a 19-month high, showing the stabilization in the market that began in late 2011 will extend into the new year.

The index of pending home sales decreased 3.5 percent last month after jumping a combined 18 percent in October and November, figures from the National Association of Realtors showed today in Washington. It was the best back-to-back reading since a buyer tax credit boosted demand in early 2010.

“We’ve had a clear turn toward positive momentum in the housing market,” Aaron Smith, a senior economist at Moody’s Analytics Inc. inWest Chester, Pennsylvania, and the third most accurate forecaster of pending home sales. “Lower unemployment and higher confidence, coupled with record low mortgage rates, are coalescing to spur increased buying.”

The ability of the market to sustain gains in the absence of government incentives may mean housing has stopped weighing on growth. President Barack Obama yesterday proposed a plan aimed at reducing monthly mortgage payments, which would help combat a drop in home prices that Federal Reserve policy makers say is impeding the world’s largest economy.

Central bankers said today that they’ll keep their benchmark interest rate low until at least late 2014 to help stoke the economy.
Fed Statement

“While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated,” the Fed said in its statement. “Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed.”

The decrease in pending sales exceeded the median forecast of 40 economists surveyed by Bloomberg News that projected a 1 percent decline. Estimates (USPHTMOM) ranged from a drop of 8.1 percent to an increase of 7 percent.

Sales increased 4.4 percent from December 2010.

Stocks declined as forecasts at Boeing Co. and Yahoo! Inc. trailed expectations. The Standard & Poor’s 500 Index fell 0.1 percent to 1,313.4 at 11:35 a.m. in New York. The S&P Supercomposite Homebuilding Index rose 1 percent.

Elsewhere today, the U.K. economy shrank 0.2 percent in the fourth quarter as factories reduced production and services stagnated, leaving Britain on the brink of another recession, data from the Office for National Statistics showed in London.

Japan Deficit

In Asia, Japan posted its first annual trade gap since 1980 as nuclear plant shutdowns following last year’s earthquake prompted companies to import energy. A third straight monthly deficit in December capped an annual shortfall of 2.49 trillion yen ($32 billion), the finance ministry inTokyo said.

Another report today showed U.S. home prices rose 1 percent in November from the prior month, the biggest increase in six years, according to the Federal Housing Finance Agency. Nonetheless, values were down 1.8 percent over the past 12 months as foreclosures held back a recovery.

Among other recent housing figures, purchases of previously owned homes climbed 5 percent in December to a 4.61 million annual rate, the highest level since January 2011, the NAR reported last week.

Also in December, builders broke ground on 470,000 single- family houses at an annual rate, the most since April 2010, according to figures from the Commerce Department.
Economy Improving

“The economy is beginning to firm up,” Douglas Yearley Jr., chief executive officer of Toll Brothers Inc. (TOL), said in a Jan. 11 interview with Bloomberg Television. “We see more people coming out to buy. The affordability has never been better.”

Three of four regions of the U.S. showed a decrease in contract signings from a month earlier, led by an 11 percent slump in the West. Pending sales also fell in the Northeast and South.

The report showed an index level for pending home sales of 96.6 on a seasonally adjusted basis, down from 100.1 in November. It was the highest two months since March and April 2010. A reading of 100 is consistent with the average level of contract activity in 2001 and coincides with “historically healthy” home-buying traffic, according to the NAR.

At the end of 2009, the Obama administration extended a tax credit for first-time buyers through April 2010 and expanded it to include some current owners. The government incentive, worth as much as $8,000, helped bolster sales of previously owned homes before they dropped off in the middle of 2010, at one point touching the lowest level in at least a decade.
Leading Indicator

Economists consider pending home sales a leading indicator because they track contract signings. Existing homes sales are tabulated when a contract closes, usually a month or two later.

Faster job creation may help push more people into the market for homeownership. The economy added 200,000 jobs in December, and the unemployment rate declined to an almost three- year low of 8.5 percent, Labor Department figures showed earlier this month.

Homebuyers are also enjoying cheaper borrowing costs. The average rate of a 30-year fixed mortgage fell to a record-low 3.88 percent as of Jan. 19, according to data by Freddie Mac.

Lower rates combined with prices that have slumped for four out of the five past years are making homes increasingly affordable. The median price of a previously-owned home declined to $166,100 in 2011, the lowest annual average since $165,000 in 2002, NAR data show.
More Affordable

The agents group’s affordability index was at 194.5 in November, second only to the prior month’s level as the highest on record. A reading of 100 means a household earning the median income can afford a median-priced home at current lending rates.

“Housing affordability conditions are too good to pass up,” NAR chief economist Lawrence Yunsaid in a statement accompanying the release. “Our hope is lending conditions will gradually improve with sustained increases in closed existing- home sales.”

President Obama is proposing a plan to help reduce monthly mortgage payments. The program will give “every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low interest rates,” Obama said during last night’s State of the Union address. “No more red tape. No more runaround from the banks.”
Obama Plan

Costs would be covered by a fee on financial companies with more than $50 billion in assets, according to two senior administration officials who briefed reporters on the plan. Obama said “a small fee on the largest financial institutions will ensure that it won’t add to the deficit.”

The proposal follows Federal Reserve Chairman Ben Bernanke’s call for lawmakers and the Obama administration to offer more aid for housing. The Fed, which is holding short-term borrowing costs near zero and buying government-backed mortgage bonds, said in a paper sent to Congress this month that a previous Obama administration effort to make refinancing easier had failed to go far enough.

Source Bloomberg

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Spain: International buyers snap up homes in Spain

Foreign buyers spent €3.6bn (£2.3bn) on buying homes in Spain in 2011, as they took advantage of significantly discounted properties, according to data supplied by the Bank of Spain.

The figures show that foreign property investment in Spain increased by 27% last year compared to the preceding year.

With Spain’s economy in turmoil and the housing market in disarray, owed largely to a major oversupply of homes, property prices have been in freefall, attracting more bargain hunters in the process.

The hike in property sales in 2011 marks a second consecutive year of growth in international investment with 2011 beating the total value of transactions in 2010.

Many property professionals believe that the rise in foreign investment activity is a sign that property market conditions are improving.

But with about 818,000 vacant homes on the market in Spain, the existing glut of properties is unlikely to be absorbed anytime soon, despite the recent rise in demand from foreign buyers.

Source International estate agent

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Spain: Far fewer homes available in the Costa del Sol

The number of unsold new build homes on the sales market almost halved in 2011 as more bargain hunters snapped up reduced priced properties, while construction output has fallen significantly.

According to the Association of Builders and Developers of Malaga (ACP), property developers sold 10,000 new homes last year, representing about 40% of the housing stock on the market at the beginning of last year.

The property market in Malaga, home to the Costa del Sol, has suffered in recent years because of a chronic oversupply of homes. But the figures provided by the ACP suggest that market conditions are improving, thanks to the fall in supply.

Property sales have been boosted by dramatic price reductions, while house building activity has come to a virtual halt in the past three years, in order to allow the glut of homes on the market to be absorbed.

“Given the long lead times in the building industry, there could be an acute shortage of new housing a couple of years from now,” said Mark Stucklin of Spanish Property Insight.

He added: “Shortages will be made worse if demand recovers to its normal level of around 22,000 new homes a year, based on the size of the population. Unemployment or fear of unemployment is keeping many potential buyers out of the market.”

Source International estate agent

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Developers in Malaga province (home to the Costa del Sol) sold 10,000 new homes in the course of 2011, almost half the stock of 25,000 new homes on the market at the start of the year, according to the Association of Builders and Developers of Malaga (ACP).

Lower house prices have helped boost sales, and a huge drop in housing starts over the last 3 years, most acute in popular tourist resorts like Marbella, means that the housing glut is shrinking fast.

Given the long lead times in the building industry, there could be an acute shortage of new housing a couple of years from now.

Shortages will be made worse if demand recovers to its normal level of around 22,000 new homes a year, based on the size of the population. Unemployment or fear of unemployment is keeping many potential buyers out of the market.

45pc of Malaga’s 200,000 unemployed are young adults who be first time buyers looking to start a family if they could afford to.

Much of the blame for this sorry state of affairs lies with politicians says José Prado, President of the ACP. “In recent years they’ve done nothing but earn a fortune from construction and made no effort to attract investors.”

Source Spanish property Insight

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Euro: What we expect next and how you can profit from it

The Euro, a great idea if you are one of the few beneficiary's. The main beneficiary are the countries like Germany and to a much lesser extent France that benefit from a level playing field in terms of trade with other countries that usually devalue in order to make their products, be it property, cars, debt or olive oil, cheaper.

Lets take a brief look at Spain, a country I have lived in for many years and have a huge fondness for. This country has unemployment well above twenty per cent and youth unemployment above 50%. It as a property market that has crashed due to several reasons. Over development is of course a key factor, but so is the global downturn and a recession that few economies have failed to avoid.  Spain has a currency that does not reflect its economy, its plain and simple and this can never be good in periods of weakness. With the cost of exports fixed across euro members, it was always going to be the strongest exporters, especially those graced by generally high quality products, that reap the benefits. So you can see why Germany is prepared to do as much as it can to keep the Euro together.

So what happens next?. There are several possibilities. The least likely and credible is the Euro carries on in its current state. The markets, as in stock and currency markets, are rarely wrong and incredibly strong. Look at the failed Exchange Rate Mechanism (ERM). The strength of the markets and speculators forced the break of this ill thought out system. In this crazy world, when a system with some variance is proven not to work they still go ahead with a fixed system, in the form of  a single currency!. Look at the basics. A single currency cannot work when you have different economies in different stages of economic strength and weakness. How can economies with a high dependence on tourism like Spain and Greece have the same currency as strong export based manufacturing economies like Germany? Simple answer, they cant. Well they can, but then every business cycle we will get a situation like we have now. The situation was only made worse by a series of non truths along the way, and some shoddy economy management by countries wanting to get in.

Another way of sorting out this problem is a two tier Euro, where the strong economies use Euro A and the weaker ones Euro B. However, we believe this is unlikely to happen as the weaker countries wanted the strength of the euro which they will not get and Germany and France will not be able to export to the weaker Euro users as their products will be too expensive.

What we think will happen is this. There are certain countries that will drop out of the Euro. Probably some or most members of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) will leave the currency. First we, and many others, think that Greece will leave very soon. We think within the next six months. This gives opportunity, great opportunity which will be explained later. There will be big write offs by private and public lenders probably in excess of 50% by bond holders. The Drachma will replace the Euro in Greece and it will probably halve in value comparably. Greece will then be in charge of its own destiny. Its exports, albeit not extensive, will be very cheap for Europe and tourism will take off as it will be so much cheaper than other Mediterranean countries. The value of Greek property will be half what it was when it was in the Euro and the savvy investor will be snapping up property in the country buoyed not only by the value that they will see but also a burst of tourism and in turn opportunity to rent out in this now great value market. With the surge of tourism and property buyers, the economy will recover much quicker than it would be able to within the Euro. Spain will see what has happened and also bail out, and its back to the Peseta. Another great buying opportunity in property arises. The taxes bought in from the surge of property buyers in Spain would be significant before the long term effect of all the other added benefits kick in.

Ok, so it may not be that simple, but plodding through really isn't an option. S&P downgraded these countries because they were going no where. The scare mongers claim a break up of the Euro will be catastrophic for the UK. We doubt it, if it happens as suggested above and not just a break up of the whole thing. Our exports to the PIIGS isn't extensive and will have limited damage.. We managed before the Euro was with us, we will manage again.

What if I want to buy property now.? Our view is not set in stone and may not be correct,. We may have rose tinted glasses on as a break up of the euro in the way explained would be greatly beneficial to our business in overseas property as some of our most buoyant market places suddenly become much cheaper and attractive to buyers. However, remember that these falls in value are currency related. If you have already purchased make sure you have a mortgage. The reason is two fold. Firstly, mortgages are really cheap, and effectively free if you take into account the effect of inflation. Secondly, you reduce the currency risk if you have borrowings in the country that is or isn't in the Euro, assuming that the conversion rate out of the Euro is realistic. All mortgage payments after this event are then a fraction of what they were when it was in Euros, assuming you are paying for the mortgage in sterling. If these countries stay in the Euro as it is, you have neither gained or lost anything.
It should also be remembered that recent weakness in the Euro could be an excellent opportunity to gain entry into the countries that are likely to remain within the Euro such as France and Germany


These views are our own, and are not guaranteed. We will advise you on your property purchase in any way we can and we have have range of repossessed property and great deals. Just CLICK HERE to see a selection and contact us at info@lydnemproperty.co.uk and tell us what you are looking for if you do not initially see it. We will find it for you at the right price,

Spain: Costa lot less for holidays

Costa lot less! Holidays in Spain on the rise as prices at resorts drop by 40%

By SEAN POULTER.

 Spain could attract a new wave of British holidaymaker following evidence that resort prices have crashed by as much as 40% since five years ago. A fall in local prices on everything from a restaurant meal to suncream has combined with the fact that the pound is at a two year high against the euro to make the Costas more affordable.

The claims come from an annual survey conducted by the Post Office, which measures the prices of eight items in resorts across 33 destinations around the world.

Spain comes out as the second cheapest destination with a price of £37.72 for the eight items, while Sri Lanka, which has seen serious political unrest, was the best value at just £27.95.

At the other end of the scale was Australia at a staggering £115.69 for the same items, together with Barbados, Singapore and New Zealand.

The number of visits by Britons to Spain has slumped by more than three million over the past five years, coming down to less than 10.5million.

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High prices, the cost of living squeeze and a desire among Britons to try new and more exotic locations have all played their part in the fall.

However, the Post Office research suggests Spain will now become more attractive, particularly at a time when people are desperate to save money.

The firm’s Holiday Money Report concluded: ‘Resort prices in the Costa del Sol are now 40per cent lower than five years ago, when we conducted the first price barometer.

‘The cheaper cost of travel to Spain will make it a compelling choice for bargain hunters. So does the rising value of the UK pound - up 6.4 per cent against the euro in the past three months.’

Getting cheaper: Falling prices mean the Costa del Sol is a more affordable option for families looking for some sun

The eight items included in the price comparison are a cup of coffee in a bar or café; a bottle of local beer; a can of Coca-Cola; a 1.5 litre bottle of mineral water from a supermarket; a bottle of suncream; insect repellent; a pack of cigarettes; and a three course evening meal for two adults, including a bottle of house wine.

The fact that the selection of items is small, while they are not bought from exactly the same outlet every year, suggests the figures can be skewed. However, they give a general indication of the shift in prices.

The researchers found resort prices have risen in two-thirds of the destinations it surveyed. The biggest rises were recorded in Kenya, where the basket was 52 per cent more expensive than a year ago, and Portugal, where the increase found was 39 per cent.

However, the report found that sterling is stronger against 29 other major currencies than a year ago, which should help offset higher resort prices.

Tourist boom: Turkey has become a popular holiday destination, but research showed it was 60 per cent more expensive than Spain this year

Turkey has seen a tourism boom in recent years on the basis of its perception as a cheap option. This year, it only placed 17th in terms of the cheapest option, while it was 60per cent more expensive than Spain.

The Post Office head of travel money, Sarah Munro, said: ‘Given that sterling is worth around 20 per cent more than a year ago against the Turkish lira, we expected to see a lower barometer cost for Turkey, especially as the country had a disappointing 2011.  

‘However, we were surprised to find that local costs have actually risen by 21 per cent and it is only the strong sterling exchange rate that is masking that increase.

‘It will be interesting to see how Turkish resorts respond to the challenge presented by Spain and Portugal. With Greek tourism also facing a fight for survival, we could see a price war  between the eastern and western Med in 2012.’

Italy came out as the most expensive European destination with the basket of items costing £89.03.

Miss Munro said: ‘The message that came out clearly from our holiday budgeting research was that 2012 will be all about affordability.  Holidays may still be a priority but they are not a necessity and people will not knowingly get into debt to fund them.  

‘The winning destinations will be those that offer good value not just for flights and accommodation, but for tourist staples like meals out and drinks.” 

‘However, it will pay people to keep a watchful eye on exchange rate movements as well as considering easy ways to save money.’ 

Source Daily Mail

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