Many people considering buying property abroad are starting to lose their bottle, according to foreign exchange provider HIFX.
However, there are various simple ways of working around challenging market conditions when buying a property abroad
, the company claims.
The company said that fluctuating property prices and currency changes have proved off-putting to a number of prospective buyers. For example, it reports that a European property worth €200,000 eight months ago will now set UK buyers back an extra £24,677.40 because of worsening exchange rates.
Nevertheless, the HIFX advises potential property investors that there are ways of using the exchange rate to drive a hard bargain. Director, Mark Bodega, says: “Most buyers work to a budget and changes in the Euro/Sterling exchange rate has therefore led to people reviewing what properties they can afford.
"Rather than assuming that because costs have gone up, preferred properties are out of reach, buyers should remember that a drop in demand will mean vendors are also feeling the pinch. This leaves buyers in a position to negotiate prices. If buying a European property from a Brit, use the rate fluctuations to renegotiate the price of the property."
HIFX's second suggestion is that buyers implement a forward contract. This means they can effectively "buy the currency now and pay for it later". A 10 per cent deposit is payable when the contract is implemented, with the remaining 90 per cent due when the contract reaches maturity.
“We always remind clients that they'd never agree to buy a property in the UK without knowing the final cost. If you agree to buy an overseas property without fixing the exchange rate at the start that's exactly the gamble you’re taking.
"But some people become greedy and despite our advice they think they’ll hold out for a better rate. While exchange rates could go in your favour, they are just as likely to go against you and we strongly recommend that people who are working to a tight budget fix the rates at the outset to protect themselves and ensure they can afford the property when it comes to completion."
The firm's third piece of advice is to ask for professional help as it claims using a currency broker to transfer money to buy a property rather than a high street bank could save consumers thousands of pounds, a difference of around four per cent on average. High street banks may also charge other percentage fees including commission fees and bank receiving charges.
Finally, HIFX points out that if buyers move into their overseas property, they will still need to make regular currency transfers, for example for overseas mortgage
payments, pension transfers, the repatriation of rental income, salary transfers, and school fees. It advises buyers to use a regular payments abroad service to do this, allowing them to pay by Direct Debit and to fix exchange rates for up to two years so that rates remain stable.
© Fair Investment