How do international currency exchange rates affect you as a homeowner?
Many home sellers do not realize how currency exchange rates can affect them in a property market that has a large number of international buyers. Who often think of this being something that relates to banking or big business and only notice its effects on monthly pensions or the cost of goods from their home country. However, it does have a big impact when you’re selling your property to foreign buyers.
So how do exchange rates affect your property? Well let’s take for example UK pounds to euro rate? In the year 2000 the pound was very, very strong against the euro in fact it peaked at 1.752 euros to the pound that meant that if you came to Spain with £100,000 to spend you could buy a property here worth 175,000 euro. £200,000 became 350,000 euros and £300,000 became 525 000 euros! This meant that the brits were getting extraordinary value for money.
The worst pound to euro exchange rate was in 2008 the global financial crash had far-reaching effects and in fact, on the 30th of December 2008 the pound was down to 1.02 euros almost one for one but what does that mean for you as a property owner, well that meant that any purchases and buyers who were coming from the UK suddenly that £100,000 was now only worth 102,000 euros £200,000 was only worth 204,000 euros and £300,000 was only worth 306 000 euros. Now brits are keen to buy after the 2020 pandemic restrictions there’s been a pent-up demand from Brits wanting to come over to Spain and buy property here once again. There has certainly been no evidence in this area of brits leaving in droves as are often reported in the UK press. In fact, the demand is likely to increase even more in comparison as people want to escape the feelings of confinement and are keen to take the bull by the horns nowadays.
If you need to sell your Spanish property, the good news is there’ll be no shortage of interest. The better news is that if you bought your Spanish property for say 175 000 euros in the year 2000 you might, for example, after we had the big crash from 2018 prices, say only get 117 000 euros for it today some people will think they’ve lost 60 000 euros but,if you’re going back to the UK with 117 000 euros in your pocket you’ve actually got the £100 000 that you bought the house for in the first place back in 2000. So if you need to go back to the UK there’s no better time to sell now in order to maximize the return on your Spanish property sale. How can that be? Well after Brexit the pound’s value fell by 16%, for example, on the day of writing this, the pound was at 1.17 to the euro so £100,000 was worth 117 000 euros £200 000 is worth 234 000 euros and so on.
When the pound was very very strong against the euro that helped to fuel the rise prices and in particular in European house prices however when the pound became weaker against the euro spending power was reduced for UK buyers and this buying power was reduced by the fact that UK buyers are still spending the same amount in pounds. It’s just that the amount they can spend in euros is fluctuating according to the rates.
So what are the brits still spending their money on? Well, properties in town that have a more northern European style are currently appealing to a much wider audience of buyers who like larger rooms, open spaces, and more of the open-plan style living than they used to in northern Europe.
Country properties are certainly receiving the most inquiries at the moment and it’s important to have all of your legal paperwork in place, which is something we can help you with. We are certainly seeing some movements and shifts in demand from the brits at the moment
I’ve used the brits as an example but this works perfectly well with the dollar both the US dollar and Canadian dollar where a number of our buyers come from also the Australian dollar which again, is where quite a large number of our buyers are coming from.
The euro to euro rate, of course, doesn’t change across northern Europe but there is still a big impact that’s had when currency rates shift so it’s something to consider if you bought a property a while ago and you’re thinking of selling now.
Don’t hesitate to get in touch and we can calculate the exchange rates and work out what the difference is for you, in particular, if you’re returning to it to your home country.