9719 The crunch?

[quote=Nielo;90951]The big crunch is coming.

Credit and mortgages are hard to come by, fuel costs have rocketed, cheap airfares are likely to be a thing of the past, the exchange rate has fallen, the property market is in freefall, food costs are spiralling.

With all of this[B] [I]and [/I][/B]the knock on effects how is it influencing your Italian dream?[/quote]
Nielo, whilst I see where you are coming from, The UK is far more dependent upon credit and mortgages than we are here in Italy, where you can rent for what is often a pittance and a lot less than you'd pay on a mortgage. Yes, there will be a knock on effect here but it should be no worse than the UK

Fuel costs are the same in both countries and food costs could represent a big opportunity for anyone buying now. Yields from land are now up to 20% p.a from cereals, also land prices and incomes are likely to increase in line with food demand and yields.

The airfares were always too good to be true- but are still far better than they were before the travel market was monopolised in the past. For us, this and the risk of flights being stopped were always the biggest concern in moving here. However, it can be mitigated slightly by choosing an area that is well served by local airports.

Finally, there's the exchange rate and the economy. Italy and Euroland cannot afford the current strength of the Euro and this will surely change. The economy is another matter entirely, anyone moving here needs their eyes opened to the poor wages, the beaurocracy, inefficiency, corruption and the difficulty in foreigners finding a job. If you are considering a move, you need portable skills or a business plan that will isolate you from, or, allow you to work in tandem with, the local economy.

Perhaps the ideal situation would be to have sold your English home at a good price, to be retired to have no mortgage, a small pension that is enough for your modest needs, to have an orto and some land with fruit trees and olives, to buy food locally and in season.
If this was your plan then the "dream " is still a reality for you, and if you have finally got used to your Italian life style and have overcome your nightmare builders and all the paperwork, and still retained your ideal then this is still the life you envisaged when you first set out.
A

[quote=Nielo;90951]The big crunch is coming.

Credit and mortgages are hard to come by, fuel costs have rocketed, cheap airfares are likely to be a thing of the past, the exchange rate has fallen, the property market is in freefall, food costs are spiralling.

[COLOR="red"]With all of this[B] [I]and [/I][/B]the knock on effects how is it influencing your Italian dream?[/COLOR][/quote]

I'm perhaps in a better position than many who are 'incomers' like me... I'm fortunate in-as-much as I no longer need to rely on earning a living. As my final move here was completed after many years of careful planning and saving, I am now - despite the current economic situation - in a fairly safe position.

I have no mortgage and no debts. But having said that, I don't have a deluxe lifestyle. I'm careful with my spending, and always ask myself if I [I][U]need[/U][/I] something (twice) before I buy it, and I make things last as long as possible before replacing them. Yes I have a car. It was my company car and I bought it at a discount when I retired. I've had it since new (1999) and it has done almost 100,000 miles. It is still maintained according to the manufacturers reccommended service programme and gives me trouble free motoring and approx. 44mpg on fuel consumption. Living so close to Switzerland (28 miles) I can profit by the (slightly) less expensive petrol there. If and when I have to change it - I'll be looking at a small car that runs on LPG (had one before and they're OK for what I want from a car).

My houseold bills are, as they are for us all, dominated by gas and electricity and I have to budget carefully for that. I've lived in cold houses before and nowadays that is [U]not[/U] something I find aceptable. But other bills here are more than manageable. My local comune taxes are really affordable and compare MORE than favourably with the British Council Tax 'rip off' that I had to pay before. Fresh food is more than affordable here if one shops carefully and there is little incentive (or need) to fall back into the expensive pre-packaged 'fast food' habits of my life back in the UK...

The current exchange rate does, of course, affect the value of my company pension which is paid over here. My small state pension is paid in the UK and so does not suffer from rises and falls in value against other currencies. But for the time being I just have to be even more careful that usual with my expenditure here in Italy as this pension is the income on which I have to live over here.

Airfares no longer affect me personally - I don't think (healthwise) I will ever be able to return to the UK - so the only adverse effect may be fewer visits from friends and family to stay with me for holidays... that is sad! But hey - it was good while it lasted. At least such inititatives as Skype have saved the day to some extent by allowing us to keep in touch at little or no cost.

No - all in all, with careful planning and a sensible, sustainable lifestyle, I really can't complain at my lot - recession or not!

It must be going to have a massive effect on anyone considering buying a house abroad, and particualrly the further afield you are looking. Those cheap properties in Bulgaria are probably less attractive now it's likely to cost an arm and a leg to get there.
Downsizing and moving out permanently probably makes no difference, though you've still got to find someone to buy your UK property!
Seems to me the "corrections" which now have to take place will be a good thing in the long run as the cowboys will no longer be licking their lips at the quick profits available.

And of course there's always the train.....

[quote=damiano;90952]Nielo, whilst I see where you are coming from, The UK is far more dependent upon credit and mortgages than we are here in Italy, where you can rent for what is often a pittance and a lot less than you'd pay on a mortgage. Yes, there will be a knock on effect here but it should be no worse than the UK
[/quote]

The biggest effect on the market is the spin by the media. I have been watching the Itlain media and they are not really spinning it that much at all compared to other nations. As quoted above, the credit crunch has less impact in Italy. A big part of this is that the Italian house deposits are so large, on average, that the banks have very little exposure (if the house was repossessed it would still acheive more then the loan in most cases?). 100% mortgages only exist where the mortgage is guaranteed and the guarantor has tp have assets and income that tick the boxes too.

(For the record, I thought that UK banks giving 100% mortgages to someone who could not save a penny and already had mountains of credit card debt were a joke. To me it was giving them enough rope to hang themself)

That being said, I have mixed feelings and opportunities about the crunch and my version of the Italian dream.
On the plus side: 1) I feel it was neccessary as things had gone out of control. I hope that the exchange rate will improve and allow me to obtain another property.
2) I also hope to have children one day and this might make it possible for them to have a house too.

On the negative: 1) Italy is more expensive for driving as you have toll fees to pay as well. I won't reduce my trips, but might budget on something else.
2) I have seen the food bill increase, but luckily Italian cooking is designed for this. I will adjust which recipes to use and still eat great food.
3) The real negative for me is that some of my Italian friends are really feeling the pinch and will be less available for meals in restuarants. Eating in restaurants with friends is one of my favourite things.

The big problem in Italy is ARMs. Adjustable rate mortgages. People got conned into thinking they would always go down. I have to admit I can't understand how thick people are at times. You'd think their parents would have told them that interest rates can go higher then 5% :eeeek: But no . Many people are hurting now. This week [last?] whats his name the new left wing finance minster has got a deal with the banks to deal with the mortgage problems. He's also pushing for windfall taxes on the oil companies. All I can see with both issues is unintended consquences. :no:

But I don't think the OP was really asking about Italians or even the Italian economy.

Personally I wouldn't mind if diesel was cheaper but thats the only real issue I have. The only processed food I eat is dried pasta. :laughs:

I am still in London. had 3 offers on my house here, and all have fallen through due to the buyers not being able to get a mortgage offer.
Plus with the Pound dropping against the Euro, anything I do get from (hopefully) selling my Uk house, will not be worth as much to buy an Italian property with.
I had been hoping to be in Italy by the Summer. With the latest buyers dropping out today, due to the credit crunch, it looks like it could be a long long time till I can join my Italian fella there.
So thank your lucky stars,all you already settled there. My dream is still not happening.

Hi

Not really sure where to start on this one... but hasn't there always been bubble and burst.
The Boston Tea Party, South Sea Bubble and Black tulip craze in Holland (?300 years plus ago). We don't seem to learn, its all so wonderful on the way up, but it couldn't be right that my house 'earned' more just sitting there every day of the week than I did as I spent hours planning and teaching etc. etc. The difficult thing, and one that keeps economists in business is when is the Up of Jack's hill the real top and when will everything come tumbling down - Jill included.

Over the five years we have been here we like others wondered just how can the UK property market continue, it cannot be right for the average house to be 9 - 10 times the average annual salary. That makes absolutely no sense.

There's greed as well, unscrupulous money lenders, agents etc who lent money to people who could not afford the debt. Britain seems to think that owning a house is a human right but its not for everyone. Lives change and the 'millstone' of a mortgage is not for everyone.The most morally obscene being those ads. on sky. for loans to 'free' you from the hassle of managing so many debts - 'put them all in one basket - our basket and we will make life easier for you' the problem is so many people seemed to believe it.

I also noticed how rarely credit cards are used by italians, in the UK people seem to use them for the most minor purchase - on a recent trip saw cards being used for £2 purchases. So many people in the UK also seem to juggle their finances by getting another card/shop card and then going to the limit before going to another one. No wonder it gets difficult.

Yes, it is more difficult now here in Italy with fuel, energy etc. but I think Italy and the Italians will cope better because of their more responsible attitude to money (probably because they generally have less of it and it is much more difficult to borrow here). This is obviously a bit of a generalisation but being still more family orientated there is a 'fall back' for many which the more fragmented UK economy/society now lacks.

So like others on the forum, we hope we can ride this out, our prices are in pounds,,,,, might just have to go Euro.

BUT, life here is so so much better, our health is better, we're less stressed, we eat and drink like kings for much less than the UK, we have great neighbours and friends, a lovely house, wonderful views and delightful guests. (Fingers crossed!!) The stories our UK guests tell us just reinforce our gratitude that we are HERE.

[quote=Aretina;91008]

I also noticed how rarely credit cards are used by italians, in the UK people seem to use them for the most minor purchase - on a recent trip saw cards being used for £2 purchases. [/quote]

Last week this was blamed for the large number of bank robberies and pick pocketing.

Personally I'd rather use a credit card and get a monthly bill. I can pay it online. No hassles with ATMs not working [Which drove me NUTS today] No dealing with a kilo of small change in your pocket.

I'm not suggesting carrying a balance but using the card like cash.

Hi NickZ

You must be one of the minority who uses a card like this, and very unpopular with your card provider to boot. I recall that ?Egg card recently 'cancelled' thousands of cards from people who used their cards just like you. They make no money like this. We do the same with credit and charge cards but you can often get much much better deals if you deal in cash!!! When in Rome etc.

Also Itailians have nowhere near the level of personal debt that is affectling the UK. The UK is caught by the
b***s, cannot reduce taxes anymore because the government has already borrowed way over the level allowed, the Bank of England controls interest rates and one its responsibilities is to control inflation. So no spending the way out of the 'recession' because the credit cards are full and purses and wallets are hurting.

We haven’t lived in the UK for over 20 years but couldn’t help noticing whenever we visited during the last 6 or 7 years just how much cash there seemed to be around. (And I write that as someone who lives in a relatively wealthy area here in Italy.) Cars are the first thing that strike you when you land at Heathrow or wherever, the number of new, expensive cars around and they’re parked up in every suburban drive. People shopping like it was going out of fashion, my London friends’ clothes and their kitchens crammed with every conceivable gadget and convenience. People eating out so often, drinking so much too (when it’s so expensive compared to Italy). People travelling and not just nipping on the cheapies for a week in the sun but regular weekends away in Europe and holidaying long haul too. (A girlfriend of mine who’s a teacher reckons she’s the only person in the staffroom who hasn’t been to Dubai.) And, of course, everyone buying a house in France. The thought occasionally crossed our minds that we’d have been far better off financially if we'd stayed and worked at home.
Don’t get me wrong, I think it’s great that people prosper and are able to afford all these things that were once only available to the very rich. (We’re in the same boat.) But now I look back and think perhaps for some people it wasn’t actually their own money they were spending but the bank’s or building society’s. And as frustrating as it must be for people wanting to buy their own home now that the goalposts have been moved so much, I look at young Italians – most of whom I know are still living with their parents – and wonder if in the long term they’re not better off without the burden of a mortgage and all those lines of easy credit.
Being purely selfish what bothers us most, I guess, are oil prices and the effect on ticket prices. I also feel for people here and my many friends in France with businesses reliant to some extent on tourists taking advantage of the cheap flights. And holiday home owners too in the UK possibly won't be able to spend as much time at their place as they used to if airfares keep on increasing. What are analysts saying about companies like Ryan Air and Easy Jet, do they reckon they're going to see this difficult period through? V

[quote=Aretina;91050]Hi NickZ

You must be one of the minority who uses a card like this, and very unpopular with your card provider to boot. I recall that ?Egg card recently 'cancelled' thousands of cards from people who used their cards just like you. They make no money like this. We do the same with credit and charge cards but you can often get much much better deals if you deal in cash!!! When in Rome etc.
.[/quote]

Well they make enough off the merchant fees. It needs to be a good discount for me to go with cash. The card gives me back a bit every year. Plus the safety factor of disputing bad transactions.

I live in the UK and I totally agree with the earlier posts unfortunatly I don't see a way out for many families unless the government intervenes and writes off people's debt. During my studies I would head into town on a normal week day afternoon and find shops full, restuarants doing a roaring trade at lunchtime. I know many people who have brand new cars, sky around the house, two games consols and a hd tv to play them on, the latest clothes from next, river island and top shop, the latest cd's and an i-phone and i think to myself is that what people in the UK judge themselves on is that how people define leading a good life?
I feel that the government will probably have to write off chunks of debt to kick start the economy but at the same time I feel that's not fair to people know the value of money and went without so not to have huge credit debts.
The Italian economy has great potential because i get the impression that politicians and citizens alike both agree that no price is to high to pay for kick starting the economy. I feel the government needs to fight waste and corruption, that paying tax is not optional and finally liberlisation promotes wealth unfortuantly to resolve these problems it will take time. Whatever happens I can't see Italians flocking to their 24 hour conad or coop or buying Sisley, Upim and Coin out of clothes.

[quote=fab1985;91100]I live in the UK and I totally agree with the earlier posts unfortunatly I don't see a way out for many families unless the government intervenes and writes off people's debt....

....I feel that the government will probably have to write off chunks of debt to kick start the economy but at the same time I feel that's not fair to people know the value of money and went without so not to have huge credit debts.
[/quote]

This is a fascinating insight into a (youngish?) UK philosophy. One could argue that 'the government' should have acted in the past to dissuade people from taking on a lot of debt - but heck, they were all Friedmanists weren't they. Open market rules. Look at the international (aka UK/US) press disparagement of the Italian 'planned economy' model - no, I don't like it either - but to come up bleating for governments to write off personal debts....I don't think so. That is against every economic philosophy ever penned.

Hi

Why the **** or ++++ (you chose) should the government write off personal debt. The only way that debt would be written off is by using taxes, your money and mine to let 'less than prudent' or downright stupid people off the hook. Yes, it is difficult but why dont people see that nothing and I mean nothing is for free... If you borrow 100% or 125% towards a house and are not 100% secure of your income and outgoings then you are in the lap of the gods and now the gods are throwing down their thunderbolts. Yes I do think that financial advisors and banks bear a good deal of the blame but with reference to my earlier post - 'bubbles burst' housing bubbles included.

There are many children's stories, fables etc. about one character that works and saves (Squirrel and Little Red Hen) and the other which enjoys the good life and then when winter hits comes cold and bleating for help.

This probably sounds very hard, but we are in the same boat here, the pound has fallen, Italian costs have risen etc. but we will have to learn to live within our budget.

Oh how true... why should everyone else hav to pay off the debts these people incur?

I saw on UK tv that there was a system whereby if you sought help then you're debts could be [I]slashed by [B]75%[/B][/I] :eeeek:..... Fine, but then [U]who[/U] repays the money to the poor s*ds who lent it to you in the first place? They're unlikely to get back more than a few pence in the pound on what they lent you!

And how about these damned stupid ads encouraging people to consolidate their loans and pay much less every month? Yeah, right! But come [I]oooooon [/I] - do that and debts that would/could/should have been repaid within 3/5/10 years [I][U]will[/U][/I] be repaid, but will be a mill stone round the borrowers neck for at least 25 YEARS! Are people really so stupid? Or do they just not care?

And that other one :yes:....
"We would like to borrow £25,000. How much would that cost per month? Oh is that ALL????? WOW" (thumbs up sign to partner :jiggy: ). [B]BUT[/B] the small print example in the ad says the loan will be for 180 months (15 years). Doesn't take a rocket scientist to work out how much these chumps will be re-paying, does it? no: Around £45,000 I think... ::wideeyed:

I'm not one of those people who say I've [I]never[/I] had debts... I've had mortgages, hire purchase, bank loans, but all carefully considered before putting pen to paper to accept them. I've always tried to 'cut my coat according to my cloth' - and now I'm - if not reaping the benefits - am in a reasonably safe financial position. But maybe that's because I've never been greedy or felt the need to 'keep up with the Jones's'...

[quote=Aretina;91135]Hi

Why the **** or ++++ (you chose) should the government write off personal debt. .[/quote]

It's the financiers who have got us into this mess by dealing in tortuous "financial instruments" dressed up to disguise the subprime lending that lay behind them. But they are being bailed out by the Government. Personally, I'd rather see my money spent to help fab1985 with her/his studies than on the fatcat perpetrators

Hi Annec

I can see your point of view but IMO the main responsibility for personal debt is - personal.
No one forced people to take on large loans etc. I do sympathise with people on fixed incomes, pensioners, the long term ill etc. they are at the mercy of the global markets and have little influence on their incomes.

I've been there, been a nurse, raised children, studied in my mid-years (while do a max. part-time job)and then teaching at a FE collage. My students, generally, those that had been excluded from school etc. So, I am not speaking, while trying to avoid the silver spoon in my mouth!!

Banks don't bail out people because they've had a visit from the ghost of Christmas past. Or was it the future :bigergrin: They do it for their own good.

Taking a house back costs money. Worse odds are it's not worth the mortgage or it wouldn't be going back to the bank. So the banks do well by redoing the mortgage.

Any sensible bank factors in some bad debts. Problem is sense has been lacking the last few years. Throw in some strange rule changes and we've got :wideeyed::eeeek:

For a very brief while, it looked as if Italian banks were becoming less stringent in their lending rules. Even I managed to get a mortgage, and I'm a freelance teacher on a less-than stellar income. But with the problems in the US and now in the UK, it seems likely that Italian banks will draw in their horns again. I asked my bank manager recently how the crisis would affect them, and he said they'd continue to be "careful" when lending money. Personally, I don't think that easy credit is a good idea, and maybe Italian banks have been right all along.

I'm afraid I personally think they have, and the Italians I know certainly don't appear any the worse of for it. Quite the contrary.
Aretini mentions these 110% mortgages. I never knew they existed until I read recently that several banks were withdrawing them. In fact, I naively assumed that in order to obtain a mortgage you had to save a deposit ideally with the same bank/building society you wanted to borrow the money from. I hate to sound old fogeyish but around our dinner table last night a small bunch of Brit expats (aged between 45-60) were swapping notes about just how hard it was for us to buy our first flat or house in England. Those of you in similar age group look back to the late '70s/early '80s, think of inflation (still in double figures?), think of interest rates (well in to double figures, weren't they?), think of that fat deposit you had to somehow save for. It was b difficult to get on the housing ladder then but somehow people managed. I'm reluctant to say it's been far too easy recently to borrow money in the UK - HUGE sums of money - but it does look that way from here.

From todays Telegraph ...........
[url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/13/cneuro113.xml]Support for euro in doubt as Germans reject Latin bloc notes - Telegraph[/url]