News and Events

Forex and some things to consider

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So just 3 weeks into the year and it’s clear that Brexit is not only dominating the headlines but also the ‘headspace’ of those looking to purchase or sell overseas and will for some time to come. No longer are we just looking abroad for political and economic events that might influence our decisions, ironically, it’s decisions made on our own shores that have and will be creating ripples. Perhaps one thing that has taken everyone by surprise is the speed in which decisions and major policy is being written up leaving us little time to strategize. Yesterdays Supreme Court Ruling is case in point, with no sooner was the verdict delivered, were we then hearing that a “Straight forward” Brexit Bill would be published on Thursday. Fair to say then that even if neither the House of Commons nor The House of Lords have much appetite for blocking the process, Theresa Mays is cutting it rather fine to meet her self imposed Article 50 deadline by the end of March.

As you might imagine, when announcements of this magnitude are made the phones at the Judicare offices light up. Of course, when speaking to any purchasers I’m often asked how I believe the market will behave over the coming years and more relevantly now; what effect Brexit will have on any potential property they buy?

For anyone who has spoken to me or read any of my articles or interviews, you’ll know that I tend to shy away from long term predictions in the property market and the political snakes and ladders of last year in both the UK and The US have only served to underline this stance. For those in the know, one can only assess the likely impact of particular political and economic events in the short term, for example, with a vote for Brexit, it was commonly perceived that Sterling would take an initial swan-dive against the Euro and USD thus making Prime UK property look good value again and ultimately putting the brakes on many UK purchasers looking to buy overseas in the initial few months. These however are predictable knee jerk reactions to a form of investment that has many other facets worth considering. That in many ways seems to be the issue - big news events that one should quite rightly take into account, are proving to be overbearing and are now clouding people’s objectives.

In some ways we are starting to get a flavour of how the pound reacts to big news events and announcements.

The truth is that nobody yet fully knows what the UK and European economic landscape will look like not if, but when, the government invokes Article 50. But that's the point - we know exactly what it looks like right now. But that doesn’t seem to be the main concern for potential purchasers.

The conversations I’m having are all based on the reduction in the value of sterling against other currencies - mainly the Euro and the Dollar. This has been a long-term thorn in my side as the amount of buyers I've advised to purchase currency in advance of a property purchase, and haven't done so, continuously astonishes me.  Well, at least this currency movement should have served as a valuable lesson and a reminder to take a position over the coming months.

The problem is that many buyers now think that they've missed the opportunity to buy overseas as sterling has dropped so far from the heady heights of a year or so with their budgets for buying abroad now 15-20% lighter than they were back in the spring. But let's just stop there for a moment. As I’ve been quoted before, I believe Sterling was over valued and was due a correction. The trouble is that some buyers only remember those weeks when £1 would get you up to €1.42. This, as we know didn’t last and very few people locked into this amazing price although everyone seems to remember it now – experts after the fact! The reality is that the value of currency is rarely the main reason for buying abroad- it's always more aspirational. Sure, if you get more foreign currency for your pound you ostensibly get more for your money but this is a very fluid market.

If you do nothing else today then pick up the phone to a couple of currency experts. Generally speaking you can get a better deal of up to 5% by using a currency specialist instead of your bank. Furthermore with so much news and the markets so volatile, timing is everything. For example, last week, the rate was £1 - €1.15 so £200k would have bought you €230k. Today (25th January) with the rate now £1 - €1.17, the same amount in sterling would give you €234k. As you can see the markets reacted well to the Supreme Court verdict yesterday and at this level would reward savvy investors with an extra €4,000, enough to cover your legal fees. Well, as they say, a week is a long time in politics! Either way, for both Euro and Dollar deals, there is going to be a lot of movement up and down in the months ahead and you will want to take advantage of this, or at the very least, safeguard your position.

If you’d like to chat this through at any point, feel free to give a member of our team a call.