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Overseas Money Transfers for Overseas Property

21st November 2017 Print

Up until recently, overseas property sellers had to cope with the exorbitant fees taken by banks for overseas money transfers. It’s not  the actual wire fees that make this process expensive - it’s the that ultra-wide markup on the exchange rate which is completely unproportional. Let me show you what I mean.

An average apartment in Manhattan costs more than $2m. If you were to sell it and transfer the money overseas, say to your British account in Pounds, you are likely to get a rate which is about 1-2% worse than the “real rate”. In other words, you will be paying an astonishingly high dollar figure of $20,000-$40,000 to your bank for performing this transaction. The costs for your bank will be close to nothing!  

The Solution for Overseas Transfers

Currency transfer companies are the best way to transfer money abroad. These companies are much smaller than banks, with less overheads and costs which are rolled on to customers - thus, they are able to offer better rates while providing superior services to banks, with a particular affiliation to overseas transfers by property buyers and sellers. 

Some of these companies have been around since the 1970’s but until the 2000’s they all focused on small internationally trading business (which still make up a significant amount of their clientele and majority of their trading volumes). Nowadays, all sort of private clients are welcomed to use commercial for all sorts overseas money transfer, not necessarily even large transfers like property. It could be sending money to a relative abroad, buying a small ticket item, repatriating funds after a relocation, etc.

An added value some of the best companies would have is hedging, which can prove particularly useful for overseas property sellers or buyers, for the following reasons:

1. The amount of money transferred is significant enough to protect it against unexpected exchange rate fluctuations. 

2. Buying and selling property is normally done in installments which are months apart from each other, in that time period it makes sense the exchange rate will move.

The most popular (and recommended) way to protect your funds from future fluctuations and make sure your overseas money transfer will be precisely what you are expecting it to be, is to use a Forward Contract. This hedging instrument locks in today’s rate for a period of up to 12 months. In exchange, you will pay a small premium and deposit 10% of the money upfront.

Overseas Transfers - Popularity

Overseas property buying as an investment or as a holiday home is getting extremely popular, and particularly in the UK. Britons are buying homes in France, Spain, and since 2008 - also in the U.S. Aussies are also going down that path, but there is only one nation which turned overseas property into a genuine crazy. Chinese businessmen are buying whatever they can put their hands on - Texas, Thailand and Malaysia are only a few of the locations they are interested in.

With each year passing, there are more people from across the world who consider buying overseas property, and there are also more people who have these ability of buying a second home. You don’t have to be a royal family member to buy overseas property anymore. Bulgaria offers a wealth of opportunities for less than 100,000 Euro.

With the rise in overseas property as a whole, we expect overseas money transfer providers to narrow their margins. In 2020, we expect international money transfers would cost no more than 0.1% on average (for large transfers), making overseas property investments even more accessible than it is today.