Buy or sell? The conundrum for foreign property investors in the US

When you buy an investment property in the US you’re probably motivated by a number of reasons.

Perhaps you want a destination for family vacations, maybe it gives you an additional income from rentals and – of course – there’s always the likelihood of your property increasing in value.

Buying a property in the US is, in effect, an investment in the US economy. That’s why Wednesday’s Federal Reserve announcement of the first interest rate rise since the birth of the iPhone is not necessarily a bad thing.

With economies all over the world in turmoil, the US dollar continues to be a safe haven. The decision to raise rates was data dependent, and that data has been positive enough to bring about this change: Compare that to the Europe, Canada, Brazil or China where troubles in the respective economies have been well reported.

If you want to buy an investment home in the US, it means you should be keeping a close eye on not just the fluctuating property prices, but also on the strength of the US dollar. The US economy has gone from strength to strength over the last 18 months, especially when compared to the countries of some other major currencies.

Take this example:

In the last 18 months, property prices in the vacation property haven of Polk County in Florida have gone up 8.6%. For a realtor this is an excellent selling point to attract new international clients.

It means that a property bought in June 2014 for $200,000 is now worth around $217,200. Typically, expectations are that property values will continue to rise steadily.

The currency rates are far more volatile. They can go in your favor or just as easily move against you. Look at the difference of major currencies in the same time frame (June 2014 – November 2015):

Great British Pound Sterling

US$200,000 in June 2014 was worth around £117,647. Today, it’s worth about £133,333 – an increase of 12%.

Canadian dollar

US$200,000 in June 2014 was worth in the region CA$216,000. Today, it’s worth approximately CA$268,000 – an increase of 20%.

Euro

US$200,000 in June 2014 was worth roughly €146,000. Today, it’s worth around €188,000 – an increase of 22%.

Brazilian real

$200,000 in June 2014 was worth somewhere around R$440,000. Today, it’s worth about R$830,000 – an increase of 53%.

This data could be great for those realtors who want to attract listings, and could also be an indicator to those of you who are foreign property investors that now is an excellent time to sell.

However the same data, coupled with continued uncertainty in the rest of the world, may also be a persuasive argument for now being the right time to invest in a property in the US.

David Nixon is based in our Florida office: david.n@currenciesdirect.com