Euro Moves Send British Pensioners Packing

A few years ago, the pound was strong, and Graham Knight was busy helping his countrymen settle. For Brits dreaming of more sun-drenched shores, the exchange rate favored buying property overseas, and fueled a British invasion of Southern Europe.

"At the time, I thought there couldn't be anyone left in the United Kingdom," says 61-year-old Knight, who settled in Torrevieja, where his city-hall job includes helping the 13,000-strong British population of the Spanish resort.

Back then, even a pensioner in London with modest savings was able to afford a villa with a pool in Costa Brava or a sprawling farmhouse amid the vineyards of the Loire Valley. Spain alone became home to 800,000 Brits—more than half of them over 50.

Today, the euro has reversed the flow, sending disappointed pensioners back to the dreary gray skies of Britain. One survey this month found that more than half the Brits with holiday homes in the euro zone were planning to sell their property this year.

"Bringing them back is keeping me in business, but I can't help thinking that it's all going to expire," says Mark Brett, who, as the owner of Anglo French Removals, used to do a brisk trade moving Brits abroad. This week, he's relocating six families back to Britain from France.

"Quite frankly, the golden period of emigration and buying property abroad is over," says Tim Finch of the Institute for Public Policy Research in London, which last year published a study of the "British diaspora."

It's a change of fortune that is almost as abrupt as it is unwelcome. Barely three years ago, £1 traded at €1.35, not far below the rate when the currency was launched in 1999, and an exchange rate that could fund the good life in France or Spain, the two most favored expat destinations.

Since then, the pound has gotten weaker, declining to near parity with the euro in early 2009. Although it has since edged upward, standing at £1 equaling €1.18 last week, the fluctuations have unnerved the already recession-rattled British.

Pensioners and holiday-home owners, who must convert cash to pay mortgages or local taxes, are badly hurt. So, too, are the many who hoped to finance their lifestyle through holiday rentals—cash-strapped British vacationers are staying at home in greater numbers.

Worst hit, though, are those who depend on the interest of savings invested in the U.K. "Through no fault of their own, they have seen a 15 to 20 percent fall in their income," says Tim Smith, who, from his home in a converted barn in the Dordogne region of France, bets on currency movements. One out of every six inhabitants of Eymet, the quaint medieval town close to where he lives, is British. (Smith helps run the local cricket club.)

To compound the misery, the euro's rise has coincided with the collapse of the Spanish property market. The prices of homes on Spain's Mediterranean coast have fallen by more than 40 percent from their 2006 highs. "It's Catch-22," says Eileen Dry, a pensioner who lives on the Costa del Sol, working with the British charity Age Concern. "Some would like to go back to Britain, but their properties here just aren't selling." And as incomes dwindle, those remaining must tighten their belts. "They have to think about the electricity, and the heating bills, and how much they can afford to use the phone."

However, as is their wont, real-estate agents remain optimistic, some reporting an uptick in sales in southern Spain. Like the Brits, a high proportion of the new home buyers are Europeans outside the euro zone. But unlike the Brits, they have a sturdy economy and a currency backed by oil.

Prepare for the Norwegian invasion.