Trading into multi currencies to buy property overseas

Baydonhill PLC, the FX, overseas property and international mortgage specialists, have highlighted the risk involved in trading Sterling into other currencies in order to buy property abroad. Purchasing property in Europe and US is currently fraught due to the depreciating pound. There has been a flight to quality in money markets meaning international investors are now choosing to have their funds in US dollars rather than Sterling or Euros.

The result is that the dollar is 22-25% more expensive to purchase with Euros or Sterling. Additionally, Sterling is down 23% from its peak last year against the Euro. As a result, many investors have asked whether trading from one currency to another will help them save money when purchasing overseas property.

Bruce Borrie, Head of Private Client Foreign Exchange at Baydonhill says: “Given the recent volatility in currency markets, trading into multi currencies to gain an edge is an extremely risky option and you could end up being the wrong end of two adverse currency movements or losing out due to pricing spreads charged by banks and brokers.”

“Instead, property buyers should be seeking proper advice on the options available to them and looking to manage their risk and conserve their costs. This can best be achieved by fixing the rate of exchange to a point into the future by way of a forward contract, and so remove the risk of negative movements in the value of the pound and blowing apart that purchasing budget.”

“For example, Sterling lost 5% of its value against the Euro last week and the Euro lost 22% of its value against the US dollar over the last four months. Property purchasers who fixed their rate of exchange by buying a forward contract have been protected from these recent downward moves. Property prices maybe falling in European and American cities but the potential attraction of falling real estate values to investors or second homers could be offset by the continued depreciation of Sterling and its loss of buying power.”

For further information, visit baydonhill.com