Buy now? Buy later?
The Property Guides company has issued some great advice for those who have their heart set on a place in France. Here's how to deal with a fluctuating exchange rate.
What’s happened to the pound!? Well, we know why the pound has weakened, the more important question is what we should do about it! Spanish home owner and property writer Richard Way explains why buyers shouldn’t wait for the pound to recover, but how to protect themselves from future losses.
Has the weak pound dampened your enthusiasm to buy abroad? Has it perhaps made you re-consider whether to do it at all? Here are seven reasons you shouldn’t let the exchange rate put you off realising your dream of overseas home-ownership.
You may wait a long time
After the global financial crisis the pound fell from being worth over 2.10 US dollars. It never recovered. After the Brexit referendum the pound fell around 20% from being worth near €1.50. It has never recovered. Today’s exchange rates could potentially settle in for years to come. While there is uncertainty surrounding Brexit, analysts believe there is little chance the exchange rate will swing back in favour of the pound. And even after the UK’s scheduled departure from the EU at the end of October, who can say if or when it will begin to recover against the euro and dollar?
The increasing likelihood of a no-deal Brexit is equally harmful. It triggered the pound to hit two-year lows against the euro and dollar in recent weeks. Is there any reason to postpone plans to buy or move abroad in the hope the pound will strengthen? Not really, especially as things could get worse. And remember, you’ll never get back those weeks, months or even years you spend waiting with crossed fingers. All you’ll get is less time to enjoy your new home abroad. Think long-term!
Can you wait or is it now or never?
Most people are able to buy or move abroad only when they reach certain key points in their life or their personal circumstances provide for it. They might have been left money or property in a will, received an unexpected windfall, downsized their UK home after the kids have flown the nest, reached retirement age, the cat may have (sadly) passed away, they might have got divorced! Miss this opportunity and the caravan may move on…
All things considered, even the recent fall in the exchange rate moves the pound within a fairly narrow margin of 5 to 8%. Should that be a deal breaker if the rest of the stars are aligned for your purchase abroad?
The health benefits are priceless
The pain of a poor exchange rate will be short-lived and soon disappear once you start spending time under the Mediterranean or Caribbean sun. The health benefits of the continental lifestyle are well documented; a healthy diet, minimal stress, slower pace of living, active outdoors lifestyle and climate.
If you would love to buy in the sun but don’t have quite enough money, check out some innovative financing options, including equity release and mortgages, in Spain, France, Portugal, Italy, USA, Canada and other countries, in our new guides, How to Pay for a Property Abroad.
Consider buying with a euro mortgage
Buyers of holiday homes, especially those who intend to rent out their new property, should consider purchasing with a euro or US dollar mortgage. This way you won’t take a hit on the poor exchange rate for the entire value of your purchase. Instead you can borrow euros or dollars to pay for your property, with the option of paying off your mortgage at a later date, ideally when the pound has strengthened. Minimal redemption penalties with many European mortgages make this especially attractive.
At the same time, conditions for overseas mortgages are very favourable. Not only is the European Central Bank’s Euribor rate, to which euro mortgages are pegged, lingering in negative territory, but European banks are keen to lend to foreigners again. In Spain mortgage conditions are becoming increasingly favourable for borrowers with banks there moving towards paying many of the application costs that clients previously paid. In fact, since last November Spanish banks have been obliged to pay the stamp tax (AJD) incurred on all mortgage applications.
Negotiate with British vendors
British owners in the Eurozone, Florida and other British favourites and returning to the UK are benefiting from the strong euro and dollar. They are getting around 8% more pounds than three months ago. They know they’re making an extra 8% profit, and they know that you know they’re going to make an extra profit! If you’re buying from one of them this leaves room for negotiating the purchase price. Maybe split the difference?
Buy where prices are rising
If you delay buying, the pound might go up. It might even regain the 5 to 8% it has lost, although it might not. But in the meantime, prices in many of our favourite regions, such as the Spanish costas, are already rising by that amount, so even if it does recover it won’t benefit you. With the UK’s property market slowing and overseas booming, waiting doesn’t really make financial sense.
Use a currency specialist
You may well be worried that if you agree to buy a property abroad that the pound could continue to fall and leave you unable to complete on the property. Indeed, you should be worried about this! The good news is that it’s easily solved by overseas property specialist Smart Currency Exchange. As soon as you commit to purchase you can lock in that day’s rate with a Forward contract. It won’t cost a penny more. Smart have given peace of mind to thousands of overseas property buyers and will offer you reassurance when you make currency transfers. They are ranked one and two on Trustpilot for currency exchange and money transfer.
Courtesy of propertyguides.com