The pound edged away from a multi-year high at the end of last week as investors engaged in some profit taking.
If you’re planning to make the fantasy of a property abroad a reality this year, what do you need to take into account? And how can you start managing costs to ensure you’re able to afford your ideal purchase?
The elephant in the room – Brexit
Depending on the country the requirements for a non-resident to purchase property can differ massively.
Purchasing property in countries outside the European Union, such as America and Australia, can be slightly more complex because of visa requirements.
However, the most popular destinations for UK residents searching for their perfect holiday home are still largely European hotspots.
While the recent Brexit developments may have been putting some people off purchasing for the last three years, the persistent uncertainty and adjusted deadlines mean that many are adopting a ‘now or never’ attitude and pushing forward with a purchase before the situation changes.
The process has caused significant shifts in the market – British people are increasingly selling up and returning home as a result of Brexit uncertainty.
With a number of British ex-pats looking to sell as a result of this uncertainty, now may well be the ideal time to pick up a bargain – depending of course on your chosen location and the size of your budget.
Location, location, location
The most popular location for Brits to purchase second homes is Spain – the country offers a number of great options for those looking to make an overseas property purchase as an investment, with a healthy holiday rental market.
But why not look a little further afield, other locations across Europe are worth investigating especially in countries which may give you a little more bang for your buck.
For example Bulgaria is becoming increasingly popular with foreign buyers because of comparatively low costs. The average price per m² to buy a property in Sofia, Bulgaria, is £875.45 compared to £2458.83 in Malaga, Spain.
One important thing to bear in mind when planning a foreign purchase is that exchange rates are extremely volatile. If you want to cut costs, monitoring exchange rates can be very beneficial.
Again, due to the Brexit stalemate the pound has been feeling the pressure.
That said, the market is very aware that any breakthrough that looks likely to get a deal over the line is likely to lead to a sharp rebound in the pound. A deal scenario is likely to push the pound up by circa 6%. On the flipside a no deal outcome would lead to a sell off of around 10%.
If you’re considering a large currency transfer for the purchase of an asset such as an overseas home then it’s essential that you consider the impact of the exchange rate.
When buying overseas the completion of the purchase is normally in stages over a period of time. Therefore the exchange rate can move during this period and affect the overall price of the property.
For example, in March 2019 the GBP/EUR exchange rate had strengthened to €1.17. This means a £185,000 transfer would have been worth €216,450.
However, by July the rate had fallen to €1.10 – making the same £185,000 transfer worth £203,500 - €12,950 less!
It’s key to speak to a specialist and discuss the exchange rate when navigating a larger transfer. Fortunately, specialists like Currencies Direct offer services which allow you to fix the exchange rate for a future date or target an exchange rate higher than the current market level.
A currency specialist can also help to monitor the rate for you and keep you updated with the latest market movements.
By being flexible with your destination and taking important factors like the exchange rate into account, it’s possible to make significant savings and turn your dream of owning an overseas holiday home into a reality.
Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.