by Simon Hilton, senior foreign exchange consultant at World First and official Expat Focus foreign exchange partner
If you’re thinking of moving abroad, one of the main considerations is what kind of house you’ll be able to get for your money. This is determined obviously by the value of the house you’re buying, but also by the exchange rates, which can have a significant impact on what kind of property you’ll end up in.
If, for example, the pound is strong against the euro, you’ll get more for your money, and you may be able to afford more than you thought. The exchange rates can fluctuate dramatically in the space of just a few weeks or even days, so it’s always worth keeping your eye on the markets.If you’re purchasing a house in France, and you were transferring £200,000 to pay for it, you’d get around €243,000 based on the current GBPEUR exchange rate. If you were transferring the same amount one year ago, you’d have got €13,000 less for your money. That could be the difference between a good home and a great home, and demonstrates the importance of keeping abreast of what’s going on in the currency markets.
The figure below shows you how the exchange rates have moved in the last year and how right now looks like a strong time for British buyers looking to purchase property in France.
· End of February 2014 – GBPEUR was at 1.2147. £200,000 was worth €243,000
· Start of 2014 – GBPEUR was at 1.1982. £200,000 was worth €239,500
· Six months ago – GBPEUR was at 1.1718. £200,000 was worth €234,500
· 1 year ago GBPEUR was close to 1.15. £200,000 was worth €230,000
Sterling has recently hit a one year high against the euro. So, exchange rates are in your favour if you’re buying in Europe, but a look at the French property market also shows that house prices there have fallen across the country, which may give you another reason to move there.
According to recent data from the FNAIM, the national association of French estate agents, house prices outside of Paris fell by an average of 3% in 2013. That may be hard to believe for those us who are used to the seemingly inexorable rise in UK house prices, but it represents a great opportunity to be able to snap up a bargain, at least compared to what we’re used to back in the UK.
The three regions that have seen the biggest decline in house prices are Franche-Comte (down 6%), Brittany (down 5.7%) and Languedoc-Roussillon (down 5.3%). Only the Haute-Normandie (1.1%), Picardie (0.1%) and Aquitaine (0.2%) regions saw an increase in house prices over the last year. The country’s total house sales fell as well, down 5.1% to 668,000.
Banks in France are now asking buyers to stump up a bigger deposit, which may prove a stumbling block for some, but if you are in the position to make a purchase, it’s worth taking advantage of the current lack of demand. That said, according to the FNAIM, 2014 could see house prices fall once again – by up to 4%. However, the main estate agent chains in France are more hopeful – they predict a fall in house prices in 2014 of closer to 2%. Either way, this could be good news for expats who are willing to wait a while before taking the plunge.
So the pound is strong against the euro, and it’s a similar story for GBPUSD, which has hit its highest level since November 2009. At the end of February 2014, GBPUSD was at 1.6675, which means when transferring £300,000, you’d get around $500,000. At the start of February, the same amount would be worth $494,000 – $6,000 less in just a few weeks. Go back a year, the GBPUSD rate was at around 1.55, with £300,000 getting you $465,000. That’s a difference of $35,000 in a year.
It’s clear to see that the exchange rates are in your favour if you’re looking to buy a property overseas, but no-one knows when the markets might move and sterling lose its current strength. With this in mind, it’s advisable to use a specialist currency exchange company, who will allow you to fix an exchange rate in advance for a future purchase. That way, if the market moves against you between the time of the agreement and the date of the transfer, you won’t lose out, having already agreed the exchange rate. This also helps you budget, giving you peace of mind, as you’ll know exactly what you’ll pay on the day. You may also need to set up regular transfers for mortgage or maintenance payments, and you might wish to send money back home – currency exchange companies can help.
By keeping your eye on the markets, and striking while the iron’s hot, you could end up getting more property for your money.
Simon Hilton is a senior foreign exchange consultant at World First specialising in assisting private clients and companies with their foreign exchange transactions. Simon is authorised by the FSA to offer foreign currency options. Contact Simon today for a free, no-obligation currency transfer quote.
World First transacted over £4.7bn for their 40,000 clients in 2012 and have a 3A1 credit rating from Dun & Bradstreet – the highest possible rating for a company their size. As well as tailored hedging solutions designed to protect you from adverse market movements, they also offer excellent service. Winner of the Client Focus Award at the 2012 National Business Awards, they provide personal service with a dedicated dealer, and a regular transfer service, which is perfect for mortgage or rental payments.