September currency review
5 October, 2017
What connects a new Mercedes with our French property?
Another month has passed us by and now is the time to look back, to see how the exchange rate has performed and what impact it had on others buying their properties last month, in our September currency review.
September was a big month rate wise. We saw the Pound drop to an 8-year low at 1.08 right at the beginning of the month. This was the weakest the Pound had been since October 2009 where, similar to this year, the previous twelve months had failed to see any meaningful moves above the elusive 1.20 mark. Almost immediately however, we did see the start of a steady recovery back above 1.14, finally surpassing 1.14 in the final days of the month.
This significant weakening of the pound to 1.08 had, in hindsight, been a gradual process since the three months previous where it had sat, proudly but temporarily, at the 1.20 or 0.83 (inverse) cents mark. Most of the tail end of this disastrous run can be attributed to the abysmal performance U-turn by the Conservative government’s snap election results, that the current Prime minister called earlier in the year.
But what effect did this have on property prices? I want to look at two average properties. One in France and one in Spain.
A 3-bed villa in Agua y Sol in north Costa Blanca.
Price – €195,000Cost range in Sterling during September – £171,052 – £180,555
Cost difference – £9,502.3
5 bed renovated mill in the Pyrenees.
Price – €580,000
Cost range in Sterling during September – £508,772 – £537,037
Cost difference – £28,265.
We have taken two average properties and looked at what the actual cost in Sterling would have been at the months highest and lowest points. We are assuming, for the benefit of this article, the asking price was the agreed price, to keep things simple.
Those paying for their properties at the beginning of the month would have paid far more than those who completed and paid just two weeks later. Those who were fortunate enough to be sending their international currency transfer midway through September would have seen their cost decrease by an average of £2,000 (France) and £678 (Spain) from the beginning of the month when the exchange rate was at its lowest.
Of course, this article is written with the benefit of hindsight but demonstrates the significant factor that exchange rates can have in a very short space of time. Too few people register with expert currency organisations in the months leading up to their purchase, which is a must for anyone serious about buying international property.
The example above, on our fairly ordinary French property, demonstrated that those buying the property just 2 weeks later compared to those at the start of the month would have had enough money leftover to buy a brand new Mercedes-Benz C Class compared to those buying 14 days previous.
The advantage of using a currency broker such as Currency Index, who are trusted to deal with thousands of clients each year by UK based overseas experts, aplaceinthesun.com, is that you can avoid the pitfalls of sudden rate drops and unexpected adverse rate swings by spending the time in getting to understand what effects the rate, how these moments are changing your budget and what this may ultimately mean to your ability to go through with the purchase in the event of a repeat of the previous month. Currency Index can freeze the exchange rate many months in advance, meaning your cost can also be frozen, protecting you and your finances from being stretched, or worst case, stretched too far that it is no longer a viable investment to go through with your purchase.
In our example above, the cost of the 5-bed renovated mill in France changed by as much as your average UK salary in just 14 days. Just imagine what this can do over longer periods of time, many months before you even set foot on foreign soil in search for your new overseas home.
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