How do Currency Exchange Rates Affect Foreign Real Estate Markets?
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Real estate investment has hit the headlines recently, despite a recent 0.3% decline in UK house prices during the month of January.
This is because international real estate has become a key profit realisation target for Bitcoin investors, particularly as the value of this coin has broken through the £50,000 barrier and continued to force its way into the consumer mainstream.
When buying property abroad, however, even Bitcoin purchases are subject to a range of factors including exchange rates, demand and the devaluation of fiat currencies. We’ve discussed impact of exchange rate on foreign real estate market in detail below, so that you can hopefully make more informed decisions over time.
Impact of Exchange Rate on Foreign Real Estate Market
Currency Value Movements and its Impact on Prices
One of the key factors to consider is currency price movements, with some currency pairs known to fluctuate wildly and trade within a wide and sweeping range.
In simple terms, a strong currency that continues to appreciate in value will trigger a sustained increase in property prices, particularly when the market is supported by increased demand and a shortage of supply (which has defined the UK market in recent years).
If you’re UK-based and want to buy a property in pounds, for example, you’ll have to pay more if the currency of the country in which you want to invest has strengthened against the GBP.
With this in mind, it may be better to sell rather than buy property overseas when the nation’s currency appreciates against your own. Not only could this enable you to optimise profits, but it may also make property maintenance more expensive over time.
And if you are planning for investing abroad, then this article is a must-read for you.
Devalued Currency – A More Complex Factor which Affect the International Real Estate Market
While it would make sense to suggest that overseas currency devaluation against the pound would create a more favourable climate for property buyers, this assertion needs to be treated with caution.
While there’s some truth in the idea that a devalued foreign currency will enable you to buy property more affordably with your pound, instances where the currency depreciates markedly could prompt huge demand in the marketplace.
This could ultimately send prices considerably higher, particularly if the area or nation in question already boasts a strong foreign investor presence.
This may also pose a challenge to landlords from an income perspective, primarily because it reduces their revenue when it’s converted from an overseas currency into pounds (whether they ultimately look to sell for a profit or use the property to generate a monthly rental yield).
The Last Word
Each currency price movement is underpinned by real-time exchange rates, with the USD central to this as the world’s most popular reserve currency and involved in up to 88% of all forex trades.
It’s therefore important to monitor live exchange rates through a reputable forex brokerage, so that you can time your purchases in a bid to achieve the optimal value in relation to your investment.
You can use other resources to monitor live exchange rates if you don’t have access to a forex brokerage, but these entities are generally considered to be the most trustworthy.
Hopefully, this blog on impact of exchange rate on foreign real estate market will help you to make proper decision.
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