How Can Currency Exchange Rates Impact Your Real Estate Investment?

Posted On Friday, August 16, 2019

These days, people agree it's a small world, and decades of globalisation have resulted in the increased ability of real estate investors to own property anywhere on the globe. Despite ups and downs on the world economic stage - in particular the 'credit crunch' of 2008 and the years following - real estate continues to be an attractive sector for all types of investors, corporate and individual. 

When considering buying real estate abroad, canny investors pay keen attention to several key factors which include sales trends in residential and commercial property, current interest rates and taxes in the target market. Exchange rates are of specific interest when buying property abroad, and fluctuations can have significant influence on the real estate market.

So if you're considering buying your piece of paradise in Saint Lucia, how can exchange rates impact your dream purchase?

• Stronger currency equals increased property prices. For example, if a country's currency strengthens against the US dollar, the buyer has to spend more dollars to purchase property in that country. That means the best time to buy property in another country is when your home currency strengthens against the foreign country’s currency.
• Where a currency is growing, it's better to sell than buy foreign property. If exchange rates against the international investor’s home currency are falling, maintenance becomes more expensive which reduces property yields, making it more profitable to sell than to buy property. 
• When considering buying a condominium or timeshare, exchange rates will affect property management costs. For example if your home currency is the British pound, operating expenses such as utilities, homeowner association fees, and taxes will effectively reduce in periods when the pound is strengthening. When the same currency weakens, property management costs increase in pound terms.
• If you plan to spend a significant amount of time in your property abroad, the exchange rate will impact your cost of living. A weak home currency will increase your cost of living because it purchases less of the foreign currency you are using. On the other hand, a stronger home currency lowers your living costs.

In these ever changing times, considering exchange rate fluctuations is a very good strategy when planning to invest in foreign property . Whether a buyer is planning a long-term real estate project abroad or a personal dream home for annual vacations, it’s clear that exchange rates affect not only the purchase price but also management costs, the cost of living and ultimately the property’s yields.

Talk to us at Blue Reef Real Estate if you have questions about Saint Lucia's currency and international exchange rates.

Graphic from IPF Report: "Managing Currency Risk in International Real Estate Investment".