Could now be a good time to sell your overseas property? What impact are weak sterling, the Brexit vote and Trump having on the market? And, where are the best places to buy-to-let in Europe? Find out the answers to these questions and more in World First’s quick guide to European property.
1. What’s going on with sterling?
On the day of the EU referendum, the pound peaked at around 1.46 against the US dollar but then began a slow and steady downward trend. At the time of writing, sterling sits around 15.5% lower against USD than it was the day before the Brexit vote and almost 18% lower than this time last year. The sterling story is similar against the euro. The day before the vote, sterling peaked around €1.30 and the day after, it plunged to around €1.17. It is now around €1.24, about 17.5% down on this time last year.
2. What does a weak pound mean for property owners and seekers?
For those hoping to buy their dream home in the sun this winter, the fall in the value of sterling is certainly not welcome news. In fact, purchasing a property in America now (versus this time last year) could run you 18% more and 17.5% more anywhere within the Eurozone.
However, the positive property story sits squarely on the flip-side. Should you already own an American or European home and choose sell at current rates, that 18% and 17.5% respectively now become a potential increase in profits once cash is repatriated. For example, if you had sold your beachside home in Florida for $500,000 on Nov 30th 2015, it would notionally have been worth around £332,000. However, sell it for the same price in dollars now and it could notionally be worth around £400,000 – that’s notionally about £70,000 more simply as a result of recent exchange rate movements.
3. What impact are Brexit and Trump having on the UK property market?
Jeremy Cook, Chief Economist of World First explains, ‘We have seen a slight correction in property values since Brexit. Taking into account income derived from these investments both retail and office property are down around 1 percent on the year with industrial properties yielding about 2 percent year-to-date. Brexit may have damaged prices but much like many things to do with the UK’s decision to leave the European Union there is a huge amount of investment uncertainty about what comes next.’
‘Similarly, Donald Trump is still a long way from showing his hand on trade, commerce, immigration and investment and a world of trade wars could easily see a desire for property increase as investors drive into perceived havens.’ Find out more about Brexit and UK property here.
4. Where are the current hotspots in the buy-to-let market?
According to World First’s latest European buy-to-let league table, Ireland has become the number one European destination for returns on offer for buy-to-let investors in November 2016, overtaking the Netherlands from first place in April. The average rental yield in Ireland has now reached 6.54 percent, up from 5.34 percent earlier this year. The Netherlands and Portugal have emerged as the next European hotspots with average yields of 6.35% and 6.33% respectively. Belgium and Hungary round out the top five list. Meanwhile, at the bottom of the table, Sweden, Italy and France provide the lowest returns on buy-to-let due to high property prices and rents that fail to make the investment worthwhile. Check out the full league table here.
5. How can you manage the impact of currency fluctuations and global instability on your property investments?
Whether you’re buying-to-live, buying-to-let or selling a property abroad, don’t leave it to luck to find out how many pounds you’ll pay or ultimately take home. Property transactions take time, so there is plenty of scope for sterling to rise and fall.
Using a forward contract is one way to help manage currency fluctuations. You can fix a contract duration for up to three years and it allows you to lock in a rate at a level which you are comfortable, and then to budget accordingly. World First offers these at competitive foreign exchange rates, alongside its exceptional customer service. Our dedicated dealing team will talk you through every step of the process.
For help with a payment or repatriation of cash from your next international property transaction, speak to the team at World First.
Further reading: Ask the expert—Top tips from Nutmeg on saving for a property abroad