by Simon Hilton, senior foreign exchange consultant at World First and official Expat Focus foreign exchange partner
In the first month of 2015, we’ve seen the rise and rise of the pound against the euro, with GBPEUR hitting its highest level since March 2008. At the start of February, the rate was at 1.334; at the start of January it was down at 1.2824. In just a month, the euro has lost over 4% against the pound.
But why? Well, part of the reason is that while the European economy continues to grapple with extreme levels of unemployment and fears over deflation, the UK economy had become one of the fastest growing in the G10. Euro uncertainty around the Greek election, and fears of a possible Greek exit from the single currency hardly helped matters either.Here’s what all of this actually means to you – a year ago, a pound bought you €1.20. At the time of writing, it’ll buy you €1.33 – that’s an increase of 10.8% and the highest it’s been in nearly seven years.
When we talk about the sums involved in buying a property overseas, the savings you could make when you compare the exchange rates of now with those from a year ago could make your eyes light up. Last year £300,000 would buy you a €360,000 home; now you could buy something worth €39,000 more.
It’s really good news for expats, for whom the current strength of sterling means prospective buyers will be able to get more for their money. Anyone looking to buy property in Europe would be advised to think about fixing their exchange rate now to take advantage of the pound’s strength against the euro.
This is really useful if you’re planning to set up a purchase but are worried that the exchange rate may move against you. So by fixing a rate now, you won’t be affected if the value of sterling falls between now and the time the payment goes through.
In addition to good exchange rates, house prices in some of the destinations preferred by British expats aren’t exactly setting the world alight. In Spain, house prices went up by 0.3% in the year up to December 2014, and in France and Italy, actually fell 1.2% and 3.8% respectively in the same period. Additionally, homes in Ireland, Greece and Portugal are described by the OECD as undervalued.
It’s not just those buying property that will be pleased with sterling’s strength against the euro – for those studying abroad, their money will go further transferring money to pay for tuition fees and day-to-day maintenance costs. Those who have retired overseas and are getting their pension payments sent to their bank account in their new country of residence will also benefit.
As we’ve seen, the euro has been through a tough spell, enduring a rocky start to 2015. It could continue to be a volatile year, with elections aplenty in the EU – Estonia, Malta, Finland, the UK, Poland, Denmark, Portugal and finally in Spain. Throw in a Catalan referendum on independence and we have the makings for some serious ballot box driven volatility in the coming months. And that could mean more good news for British expats buying property in Europe.
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.