Important currency considerations when you buy property abroad
Many people dream of owning an overseas property - whether it’s a special place in the sun for family holidays, a rental property to generate income or an addition to your investment portfolio.
Recently, weak economies and plummeting property prices in some European nations have fuelled further interest and purchase of overseas properties. Many Britons are jumping on the opportunity to pick up a Greek or Spanish home or investment property while prices are low. For many young people, it’s also becoming increasingly difficult to climb the UK property ladder at home, and overseas property purchases are increasingly seen as an attractive way to enter the market.
But buying property abroad can be a complex process. There are a number of important things to take into consideration, such as local market knowledge, and the different laws, taxes and policies that apply to foreign land owners in your country of interest.
Perhaps the most important consideration, however, is cost. Because you will be buying a property in another currency, you must consider currency exchange, and how the exchange rate will influence the actual cost of your new property. Two important questions to ask are ‘How you will manage foreign exchange risks?’ and ‘Who will facilitate your payments in foreign currency?’. Here is some guidance on how to answer those questions and ensure you understand how to get the best value from your money when transacting internationally.
Managing foreign exchange risk
The actual cost and return on an overseas property will be determined and swayed by fluctuations in the exchange rate, so it’s important to think about when you buy and how you make your payments overseas. Rather than leaving it to chance or going with the exchange rate you are given, there are ways to reduce currency risks and ensure your money goes further.
There are a number of foreign exchange risk management tools that shelter you from the risks of an unpredictable Forex market, whether you are making regular payments on a mortgage or just transferring funds into a foreign account to pay local bills and property fees.
By using these risk management tools, you can give yourself some protection when exchange rates are in flux.
Managing your foreign payments
Historically, Brits who owned property overseas had to bear the poor exchange rates and expensive transfer fees offered by their banks when making international payments. Today, property buyers can look to online foreign exchange companies, such as UKForex Ltd, for competitive exchange rates and more flexible and inexpensive international money transfer options.
Using online foreign exchange services is a smart alternative to traditional banks. Generally, foreign exchange companies offer private customers the same exchange rates that banks might reserve for corporate customers. Furthermore, foreign exchange services transfer funds quickly. Often, the beneficiary will receive the funds on the same day that you transfer. This can be helpful when you need to put down a deposit quickly when you find your dream holiday house abroad.
Make sure that when you shop around for the lowest exchange rates you turn to foreign exchange services – you could save thousands of dollars on your international payments. If you’ve dreamed of a Spanish villa or want to invest in the property market abroad, taking the time to understand currency exchange and how it will affect both the purchase price and the future resale value of your property will help make it a smart investment, not a liability.
This information is brought to you by UKForex Foreign Exchange Services. It is not intended to constitute financial advice of any kind.
As part of the OzForex Group, UKForex is a strategic investment of Macquarie Bank, Accel Partners and the Carlyle Group. Since its launch in 1998, the Group has grown to become one of the world’s largest online foreign exchange providers by offering super competitive exchange rates, great technology and superb service.
The OzForex Group completes over 300,000 fund transfers every year on behalf of our 100,000+ transacting customers globally.
UKForex is authorised and regulated by the Financial Services Authority (FRN: 521566) for the provision of payment services. UKForex is also regulated by HMRC (Her Majesty’s Revenue and Customs as a Money Services Business (MSB): 12219180.