|
|
It’s all about money
Article submitted by: Schneider FX and Tradinginthesun.com
Tradinginthesun.com was the first tailor made trading arcade on the costa del sol and occupies prestigious offices in Centro Plaza .
Traders can rent a fully equipped desk daily weekly or monthly.
For general enquiries contact Dick Matthews on 952 817986. dick@tradinginthesun.com
Schneiderfx is a Currency specialist dedicated in helping the individual come to terms with the complexities of the foreign exchange markets.
For general enquiries contact 952 817986 . info@schneiderfx.com
For many people, buying a home in Spain is a realization of a life-long ambition. We all dream of that place in the sun, along the Costa or perched high up in the Sierra Nevada. In reality, the process of buying overseas can be stressful. Let’s face it, such a purchase is no doubt one of the biggest investments most of us will ever make. This huge financial transaction often means you have to convert from one currency to another. This exchange of currency poses risks, potentially changing the cost of your dream home…for the worse!
Foreign exchange markets are amongst the most volatile in the world and speculating on the movement of currencies is only really the game for institutional foreign exchange dealers or the most investment savvy individuals. In September 2004, the number of euros to the pound stood at 1.49. Less than 3 months later, the pound had weakened considerably, and the number of euros to the pound stood at 1.42 – that’s a change of almost 5% in less than 3 months.
When buying your dream home it is essential to know the effect that a sharp currency movement could have on its price, as at some point you will need to make a currency transaction and more than likely a series of them.
The following example shows how an overseas property purchase, using the real exchange rate scenario above, can end up costing far more than initially anticipated.
In September 2004 Mrs. Beech from the UK finds her dream home in Spain. She agrees a price of 200,000 euros for the property. At the time of the agreeing the purchase price the exchange rate is 1.49 euros to the pound, meaning Mrs. Beech needs to convert £134,228 (200,000 / 1.49) into euros.
However, completion on the property is expected to be about 3 months later, in November, and as always such a process is in the hands of solicitors! The price of Mrs. Beech’s home in the sun is only just within her budget of £135,000.
Over the next 3 months the exchange rate moves from 1.49 euros to the pound to 1.42 euros to the pound.
What does that mean for Mrs. Beech ? Well, in September she expected to have to convert £134,228 pounds into euros so that she can purchase her dream home for 200,000 euros; however on completion she now has to convert £140,845 (200,000/1.42) into euros in order to come to the same purchase price – exceeding Mrs. Beech’s budget by over £5000.
This is an extremely unfortunate but not uncommon scenario and can be avoided by utilising the services of a currency broker.
It is a widely held belief that moving to a foreign country can bring about a change in one’s fortunes. For the lucky ones amongst us, this may turn out to be true. But for many others, things may not turn out as expected; the pound weakens against the euro, meaning their purchase price starts to rise – and then to cap it all, it starts to rain!
investing-in-spain
|
|
