Exchange rates play a very significant part in the process of buying and paying for an overseas property (assuming the purchase capital is held in a different base currency) and will directly affect the final cost of an overseas property.

This is important to remember as the vast majority of properties sold overseas will be priced in the local currency. It is also worth noting that the price of the property is very different to the cost of the property. The "price" of the property will be in the local currency whereas the "cost" of the property will be how much of the buyer's own currency will be needed to pay for the property. The exchange rate achieved can be a significant factor in minimising total costs.

Shifting Rates of Exchange

Exchange rates move frequently and by large amounts. Most rates move by the second depending on the supply and demand for each currency. Following these rapid rate changes generally requires an in-depth knowledge of the market and hour-by-hour awareness of the trends that drive it.

Rate changes, while less important when buying a small amount of holiday money, can be of great significance when needing to find a much larger amount to pay for property. For example, for buyer based in the UK, every 1 cent movement in the Euro (the difference from EUR 1.47 to EUR 1.46 for example) will add or reduce GBP 1,000 to the cost of a property priced at EUR 150,000. Given that the Euro exchange rate moves an average of 3% every month, it is not difficult to see the financial impact that exchange rates can have on an overseas property purchase.

Transferring Money for Overseas Property Purchase

High street banks have traditionally been the main suppliers of consumer foreign exchange services. 

However, there are also a growing number of specialist foreign exchange dealers - currency dealers - providing services to buyers of foreign property. In many cases currency dealers can provide financial, time and administrative advantages when compared to a normal branch of a high street bank.

Due to the highly volatile nature of exchange rates it is to a buyer's financial advantage to make an early call to a bank or currency dealer during the property purchase process. 

• The financial institution should make sure buyers are given all the help necessary and explain the options best suited to their personal requirements. 
• They should also provide an easily understandable explanation of the currency market in general and how a buyer can maximise the saving from a currency transaction. 

Further Information

• AngloINFO INFOrmation Page on Foreign Exchange Converter
• AngloINFO INFOrmation Page Glossary of Foreign Exchange Terminology
• AngloINFO INFOrmation Page on Foreign Exchange – a guide to how the money markets work

Page contributed to by Sophie Stride, FX Consultant
Halo Financial Ltd, a specialist foreign exchange company.
Tel: +44 (0) 207 350 5474 / Fax: +44 (0) 207 350 5475 / e-mail
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