Stellar pound makes property around the world less expensive

Sterling has just reached its highest level against the US Dollar since September 1992. At $2, the pound is currently about 20% above its 20-year average of $1.65. The UK independent currency specialists HiFX are recommending that British holiday homers and property investors who are planning to buy property in the USA (and other countries where the Dollar is the currency of choice) seek advice now on how best to take advantage of the current favourable rate.

Mark Bodega, Marketing Director of HiFX explains more, “Speculation that the US will be forced to cut interest rates to stimulate the economy has weighed heavily on the Dollar. There has been a lot in the news about the benefits of shopping stateside, but people looking to buy property in the USA, Caribbean, China Malaysia, Belize and a whole host of other emerging markets, should also look at financing their purchase now. “It’s worth remembering that the last time the pound traded consistently above $2 was in 1975!”

So what does this mean for buyers?

Buying a property abroad is a significant investment. For many Brits it will be the first time they’ve bought large amounts of foreign currency. As a result they’ll probably be unaware of the impact fluctuating exchange rates can have on the final cost of their holiday home or overseas property investment.

Many of HiFX’s customers are taking advantage of the current very favourable rates by locking the rate in a forward contract. In essence, a 'forward contract' means buying the currency now (locking into a favourable rate) and paying for it later. To do this, all clients are required to pay is a 10% deposit upfront and the 90% balance upon the maturity of the contract (up to two years into the future).

Bodega continues, ““Most property purchases abroad take between 8 and 12 weeks to complete, so people need to think about currency fluctuation between the time of signing the contract and the final payment actually being sent. It’s even more important if you’re buying off-plan as the average purchase time rises to between 6 to 24 months. Forward contracts are a great way for people looking to buy overseas to take advantage of the current favourable exchange rate.”

For example, for someone who wants to buy £50,000 worth of Dollars but who doesn’t need to send them for 3 months, a forward contract means agreeing the exchange rate now, placing a £5,000 deposit and then paying the remaining £45,000 balance off in 3 months. If the exchange rate moves at all in that 3-month period then this will have no effect on the money that has been locked in as the currency was bought at the originally agreed rate.

Bodega concludes, “We always remind people that they would never agree to buy a property in the UK if they did not know how much it was going to cost them. If they agree to buy an overseas property without fixing the exchange rate at the outset, that's exactly the gamble they are taking. For those planning to take the plunge and buy in a Dollar country, now is a fantastic time to get the most for your money.”