The coronavirus pandemic has caused damage in many ways, and as we come out of lockdown and measures are being eased, the true extent of the damage that has been caused is likely to become clearer. A bleak financial outlook is on the cards for most countries following the strain covid19 has and continues to put on the global economy. It is understandable then why some people may be concerned about their investments, particularly investments that are overseas.
With market volatility being very much a concern for the coming months, it is important to understand where your investments are most exposed. In this article, we will highlight some of the key things to consider for those who may have property overseas already or for those who were considering buying abroad post-lockdown.
My existing property
There will have been many people that were considering or even in the process of buying a property abroad when the coronavirus outbreak started. For those that were in the process of purchasing a new property, they may now be in a situation where they have lost funds, or the property is no longer available. This could be for a variety of reasons such as changes in exchange rates causing your funds to be worth less than before or people changing their minds about buying or selling due to the financial implications of covid19.
You may also find yourself in a scenario where your overseas property is no longer viable as an investment as the income received from rent is what makes it profitable. The travel sector has suffered worst than most throughout the last few months and although countries are opening up their borders once again, it may be some time until we see a full return to normality.
There will be many people deliberating over the next few months whether to try and cash in on their rental properties or suffer the initial loss and wait for the market to recover to what it once was.
Am I vulnerable?
If you have a property abroad, whether it be a holiday home or a rental property that brings you additional income, you are always exposed to fluctuations in the FX market.
Post coronavirus, if you are planning on keeping your overseas property your vulnerability lies as we know with there being a significant reduction in income due to lack of holiday rentals. This vulnerability can also be magnified further by your outgoings increasing due to movements in the currency market.
Likewise, if you are planning on selling up overseas and bringing your money home you are vulnerable to movements in the market resulting in your foreign currency not being worth as much when exchanged and brought home.
For example, if I had sold a property in Spain in March 2020, the GBPEUR rate fell to as low as 1.0607. Therefore if I had received 180,000 euros from my property it could have been equivalent to £169,699 depending on when in the month I exchanged it.
If however I had sold the same property, for the same amount, but had sold it in February 2020, during which time the GBPEUR rate reached highs of 1.2044, my 180,000 euros could have been worth only £149,452.
Essentially in this scenario factors outside of the seller's control would see them lose up to £20,000 if they had sold a month earlier when the rate plummeted. This is why it is crucial to work with an FX provider who can lock in exchange rates for you, allowing you to exchange currency when the market is in your favour and keep your profits safe even when the market moves against you.
Is now a bad time to buy?
Now is not necessarily a bad time to buy or to be considering buying. There are still restrictions to some extent in place in most countries and there are also limitations of international travel, so you may find your options of where you can go and look at potential property limited.
However, many people have been impacted financially by covid19 and some as a result find themselves in a position where they have to sell. This could mean for you the opportunity to get a better deal on overseas property, depending on how quickly sellers want to move the property on.
Like our advice to those who already have property abroad, having the financial protection in place, to ensure you get the most foreign currency for your money is crucial.
By working with a foreign exchange specialist such as Currency//UK you can avoid currency uncertainty and lock in your profits early, leaving you confident in your finances when buying or selling property abroad.
If you would like to find out more about how we can support you when buying or selling property abroad call us today on +44 (0) 20 7738 0777 to speak to one of our FX specialists or click here to open a personal account with us.
Posted in Personal Resources on Jul 7 2020