Trying Times For Expats: Property Values Plummet While Living Costs Soar And Bank Transfers Waste Millions

by Mark Benson on July 16, 2012

  • Post Office Expat Payments Index reveals rise in living costs for expats abroad at almost four times the UK inflation rate
  • House values fall for more than half of expat homeowners in Europe: by over 25 per cent for 2-in-5 in Spain and two-thirds in Cyprus
  • Confidence levels low: 75 per cent making cutbacks and lifestyle changes
  • But international bank payments estimated to cost expats £217 million

Post Office Expat Payments Index

At a time of continuing uncertainty for the eurozone, a new report by Post Office International Payments has revealed that many UK citizens living abroad may be facing even more testing times than their UK-based counterparts.

Against a backdrop of falling property values and low confidence levels, the Post Office Expat Payments Index found that the cost of living abroad has risen by an average of 11 per cent since 2011 in destinations worldwide – rising closer to 15 per cent for those based in the eurozone. However, the report suggests that people transferring funds abroad via UK banks are collectively paying an unnecessary £217 million¹ in transaction charges when these international payments can be made free of charge.

Post Office consumer research among members of ExpatForum.com²  living abroad or with holiday homes overseas reveals that their living costs are almost four times the 3 per cent UK inflation rate (April 2012). Only 3.5 per cent of over 900 people surveyed had seen no increase in costs over the past year but almost half (48.4 per cent) said they had paid out more than 10 per cent extra on household expenditure, motoring and meals out. Nearly two-in-five (18 per cent) said they felt that these prices had risen by over 20 per cent (survey result breakdown in Appendix I).

The surge in prices was even more marked in the most popular European countries for expats, according to the Post Office report. Spain, Cyprus and Portugal were particularly hard hit with food and fuel prices named as the key issues:

  • Spain: two-in-five expats said the cost of eating out had risen over 15 per cent, while 71 per cent reported an increase of over 10 per cent year-on-year for fuel.
  • Cyprus: All of the Cyprus-based respondents said that prices had increased with 30 per cent saying prices had risen by over 20 per cent and a quarter reporting a rise in the cost of food of more than 20 per cent.
  • Portugal: two-in-five people reported year-on-year rises in living costs of over 20 per cent. 85 per cent said food and household bills were up by over 10 per cent.

While living costs were rising, almost three-quarters of respondents worldwide (72 per cent) reported that the value of their property had either remained static or fallen in the past 12 months – one-in-ten by over 20 per cent. With confidence at a low ebb, more than two-thirds (67.5 per cent) said that the price rises had already impacted on their lifestyle and would mean making significant cutbacks this year.

In Europe the position was worse: 70 per cent of homeowners in Spain said that their property had fallen in value since 2011, two-in-five (21.4 per cent) suggesting falls of over 25 per cent. More than two-thirds of those living in Cyprus reported a drop in the value of their home and 22 per cent said the fall exceeded 20 per cent. In Portugal more than three-in-five homeowners said their home had lost value in the past year: over one-third (35.5 per cent) by 10 per cent or more.

UK expats owning homes in France fared better. Only 16.4 per cent of respondents believed that the value of their property had dropped over the past year, with over half (52 per cent) saying their home was worth the same as 12 months ago.

The Post Office Expat Payments Index found that over half (51 per cent) of expats transferring funds from the UK did so via their bank. Despite many expats saying they needed to make cut backs, they potentially waste an average of £158³ each a year by paying bank charges on these transactions rather than using a fee-free International Payments specialist like the Post Office. This figure rises to as much as £300 for those banks making higher charges.

The £158 wasted would be enough to pay for 130 litres (28.6 gallons) of petrol or a pair of return flights between the UK and the Costa. Alternatively £300 would buy 12 meals out for two with wine in the Algarve (4).

With 1,375 million UK expats estimated to be transferring funds via their bank, this means that an average of over £217 million is wasted annually on high cost transfers. According to 42 per cent of respondents, convenience is the main reason for using their bank. Only a third (36.5 per cent) had chosen their provider because no fees were charged.

However, when the Post Office survey compared the euro rates offered and charges levied by six UK banks and two specialist providers (Moneycorp and Post Office International Payments), it found that all six banks levied charges and that these increased for higher value transfers in the case of some banks. Furthermore, none of the banks offered improved exchange rates for higher value transactions.

As a fee-free provider, Post Office International Payments was cheapest for transactions in the three price categories surveyed (£500, £2,000 and £10,000) – saving expats as much as £329.69 on a £10,000 payment (full breakdown of prices in tables found in Appendix II).

Michael Gibbon, Head of Post Office International Payments, said: “With rising prices and falling property values overseas, it is no wonder that confidence is low amongst the expat community. However, many expats are sending hard-earned cash down the plughole simply by paying charges to transfer funds via their bank. Depending on which bank they use and how much they transfer, they could lose hundreds of pounds every year that could help offset the higher prices for food, motoring and household necessities.

“With sterling experiencing a four year high against the euro, people who send funds in larger amounts once or twice a year might want to transfer smaller amounts more frequently to take advantage of the improved euro exchange rate. If they do that through a bank they will pay hefty bank charges but with Post Office International Payments it will not cost them anything.”

Ends

For more information, please contact:

Christine Ball CBPR 01798 874177/07976 285997

cball@cballpr.co.uk

Ruth Barker Post Office Press Office 0207 012 3456/ 07435 769020

Ruth.x.barker@postoffice.co.uk

Notes to Editors:

¹ The total of £217 million wasted on bank charges was calculated by taking the mean average (£13.17 per transaction) of charges levied by the six banks surveyed by Post Office International Payments. This transaction charge was multiplied by 12 to allow for monthly transfers, the average payment frequency cited by survey respondents, and the resulting figure of £158 was multiplied by 1.375 million to reflect the number expats transferring funds via their bank. The latest published figures (2006) suggest that there are 5.5 million UK nationals living abroad. From this, the figure of 1.375 million was calculated on the basis that 50 per cent of expats (2.75m) transfer funds from the UK and 51 per cent of this group do so via their bank (source: Expat Payments Index).

² 918 worldwide members of ExpatForum.com, a leading online forum for UK nationals based overseas, took part in the Expat Payments Index.

³ Average charge of £158 was calculated as per footnote 1 above. The higher figure of £300 was based on the higher bank charge made by Nationwide of £25 and multiplied by 12 to allow for monthly transfers, the average payment frequency cited by survey respondents.

4 Post Office Holiday Costs Barometer research (April/May 2012) found that one litre of unleaded petrol in Cyprus costs €1.368; a three-course evening meal for two with wine in the Algarve costs £24.55 and easyJet return flights between London and Alicante in October cost £62.98.

www.postoffice.co.uk

{ 1 comment… read it below or add one }

Tony. July 17, 2012 at 9:43 am

So the Post Office doesn't charge. I'm in Thailand today and will get a rate of 49.0 baht to the pound. What will the PO give me?

Reply

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