When you are buying a property abroad it's a dream come true for most of us, but this dream can easily turn into a nightmare if not done rationally. How does currency price change affect your overseas property buying?
Let's take an example, you are a British resident and are buying a new villa in Spain. You will normally pay a 10% deposit and then the balance maybe a few months later. You have agreed on a price for the Villa and all the payments will have to be made in Euros.
However, the actual cost of the villa (in Sterling) will be dependent on the time you actually buy the Euro to pay the developer. Now, if Pound Sterling strengthens during the next few months, the actual cost will decrease but if the Euro strengthens then your costs will increase. Either way your price in Sterling will fluctuate as does the exchange rate.
Just to give you an idea of the damage it could do to you, the price of Euro was 1.2703 on November 1st 2008 and at the end of December 2008 it was 1.0211. If the property price is €200,000 and you agreed to buy it in November and settle the balance in two months, then your cost would have increased in Sterling from £157,443.12 to £195,867.20. This means that you will have to find an additional £38,424.08 to achieve 200,000 Euros!
RationalFX however has a solution… We can secure your exchange rate for up to 2 years in the future. You have complete peace of mind as you remain in control and can budget for your costs in Sterling or whatever base currency you are working from. Our experienced team at RationalFX will help you identify such risks. We are determined to save you money and protect you against any such risks.